The CSRD reporting framework
CSRD (Corporate Sustainability Reporting Directive) is a proposed European Union directive aimed at increasing the transparency and consistency of corporate sustainability reporting. The directive requires large companies and groups listed on EU regulated markets to report on their sustainability performance, including their impact on the environment, social issues, and governance (ESG).
The CSRD proposal, which was released in April 2021, is intended to replace the existing Non-Financial Reporting Directive (NFRD) that came into force in 2018. The CSRD expands on the NFRD by requiring companies to report on a wider range of sustainability topics, including climate change, biodiversity, and human rights. It also introduces more prescriptive reporting requirements, such as the use of common sustainability reporting standards.
Once the CSRD is adopted, it will have significant implications for companies operating in the EU, as it will require them to disclose more information about their sustainability performance to stakeholders.
Which companies does the CSRD target?
Under the CSRD proposal, companies and groups that meet two of the following three criteria in two consecutive years would be required to report on their sustainability performance:
- More than 250 employees on average during the financial year.
- A balance sheet total of more than €20 million.
- A net turnover of more than €40 million.
In addition to the above criteria, the CSRD would also apply to certain listed small and medium-sized enterprises (SMEs) with market capitalisation above €200 million.
Are there fines?
The CSRD is still in the legislative process, and the exact penalties for non-compliance are not yet defined. Once the directive is adopted, the penalties will be set out in the transposing legislation of each EU Member State, in the past we have witnessed a number of organisations globally be fined hefty sums for not complying with their local regulations.
Benefits of the CSRD
The following are some potential benefits of the CSRD:
- Improved transparency: The CSRD will require companies to report on a wider range of sustainability topics, providing stakeholders with more information about their sustainability performance. This increased transparency can help investors, customers, employees, and other stakeholders make more informed decisions.
- Increased accountability: The CSRD will require companies to report on their sustainability performance using common standards, making it easier to compare performance across companies and industries. This can help increase accountability and encourage companies to improve their sustainability performance.
- Better risk management: The CSRD will require companies to disclose more information about their sustainability risks and opportunities. This can help companies identify and manage sustainability-related risks, such as climate change, biodiversity loss, and social issues.
- Improved competitiveness: Companies that demonstrate strong sustainability performance may be better positioned to attract customers, investors, and employees. By providing a framework for consistent sustainability reporting, the CSRD can help companies demonstrate their sustainability leadership and improve their competitiveness.
- Alignment with global sustainability goals: The CSRD is aligned with global sustainability goals, such as the United Nations Sustainable Development Goals (SDGs) and the Paris Agreement on climate change. By requiring companies to report on their sustainability performance, the CSRD can help promote progress towards these goals.
Overall, the CSRD has the potential to increase transparency, accountability, and sustainability performance across the EU, benefiting companies, stakeholders, and the environment.
The data required for the CSRD
The CSRD requires companies to report on a wide range of sustainability topics, including:
- Environmental: companies would be required to report on their impact on the environment, including greenhouse gas emissions, water use, and waste generation.
- Social: companies would be required to report on their impact on social issues, including human rights, labour practices, and community engagement.
- Governance: companies would be required to report on their governance practices, including board diversity, executive pay, and anti-corruption policies.
In addition to these general reporting requirements, the CSRD proposal also includes more specific reporting requirements for certain topics, such as climate change and biodiversity.
To meet these reporting requirements, companies would need to collect and report on a wide range of data, such as:
- Environmental data: including energy consumption, greenhouse gas emissions, water use, waste generation, and air pollution.
- Social data: including employee demographics, health and safety, human rights, labour practices, and community engagement.
- Governance data: including board composition, executive pay, anti-corruption policies, and political lobbying.
The CSRD proposal also includes provisions for the use of common sustainability reporting standards, such as those developed by the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD). These standards can help companies collect and report on relevant data in a consistent and comparable manner.
How can Expect help?
At Expect, we launched UNA to make an organisation's decarbonisation journey simple, collaborative and profitable and with this objective in mind we continue to make it as easy as possible for customers to report on their carbon emissions as well as create an accelerated and profitable path to Net Zero. As an Expect customer, you will receive a fast and transparent view on all of your organisations Scope 1, 2 and 3 CO2e data in a format that enables successful reporting.
Get in touch with us over at email@example.com to talk to one of our experts in the CSRD, or to talk about your wider Net Zero implementation strategy.