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What is the CSRD and Why is it Important for You?
The Corporate Sustainability Reporting Directive (CSRD) is the latest iteration of EU’s sustainability reporting regulation. This new directive replaces the Non-Financial Reporting Directive (NFRD), which has been in force since 2018. The CSRD substantially increases the requirements, for listed undertakings residing or operating within the EU, to disclose on their ESG performance.
In total an estimated 50.000 undertakings within the EU are going to fall under this regulation, and another 10.000 undertakings from outside the EU.
Some key takeaways from the CSRD are the introduction of:
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Double Materiality
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– meaning that undertakings are to assess, not just how their operations can be impacted by external factors but also how their operations impacts the world.
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Value chain reporting
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– meaning that undertakings are to conduct due diligence and report on material subjects throughout their value chain.
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Assurance
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– meaning that all disclosures published under the CSRD are to obtain assurance from a third-party auditor. Starting with limited assurance and moving to reasonable assurance no later than 2028
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Digital tagging
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– meaning that all disclosures published under the CSRD are to receive XBRL-tagging, to become machine readable, and to be publishable and comparable through the European Single Access Point (ESAP)
Reporting in accordance with the CSRD is guided by a set of underlying reporting standards i.e., the European Sustainability Reporting Standards (ESRS). These standards are divided into two overall sections, which are the cross-cutting standards, and the topical standards. The topical standards are then further divided into 10 sub-categories under the usual Environmental, Social, and Governmental (ESG) framework and, if found material, undertakings are to report on the topics seen to the left.
To cover these topics, the ESRS outlines 82 separate disclosure requirements, with a total of 1.178 associated data points. This means that organizations affected by this new regulation are to gather vast amounts of data, that have not previously been captured, data that needs to be accurate, and verifiable, on a yearly basis.
In summary, the adoption of the CSRD and subsequently the ESRS is going to be a huge challenge for all affected undertakings, but at the same time an even bigger opportunity for getting unparalleled insights into every corner of the organization. Insights that can enable the undertakings in becoming resilient, generating more value with less impact, and position their products or services on that basis.
A Snapshot of the CSRD and What to Prepare
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More Useful Information
eBook
This e-book gives straightforward answers to some of the biggest ESG questions. Read it to find answers to:
What ESG data needs to be included in the annual report, Who needs to be involved in the ESG reporting process, How ESG is working alongside other mandates to disrupt the annual reporting process, Why it's important to future-proof your ESG reporting processes now to mitigate further inevitable change.
White Paper
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