Understanding the CSRD
The CSRD is a comprehensive EU regulation that requires companies to disclose their environmental and social impacts. Replacing the Non-Financial Reporting Directive (NFRD), the CSRD now applies to approximately 42,500 companies, including large firms and listed SMEs. It mandates the assurance (audit) of reported sustainability information to ensure accuracy and transparency, aligning with the EU Green Deal’s goals to promote sustainable practices and combat climate change.
Key Features of the CSRD
- Expanded Scope: Includes large companies and listed SMEs.
- Double Materiality: Reports must address how sustainability issues impact the company and how the company’s activities affect society and the environment.
- Assurance Requirement: Sustainability information must undergo third-party assurance.
- Digital Reporting: Reports must be machine-readable and comply with the European Single Electronic Format (ESEF).
Introducing the CSRD Essentials Series
The CSRD Essentials series, developed by GRI, aims to simplify these complex requirements. It consists of 11 briefings covering:
- Scope and Timing: Details the expanded scope and phased implementation.
- Reporting Format: Emphasises the need for digital, machine-readable reports.
- Legal Interconnections: Aligns CSRD with other EU regulations and mandates third-party assurance.
- SMEs and Implementation: Provides simplified standards for SMEs and outlines transition periods.
- Audit and Assurance: Progresses assurance requirements from limited to reasonable by 2028.
- Double Materiality: Requires comprehensive reporting on sustainability impacts.
- Consolidation of Subsidiaries: Guidelines for consolidating subsidiary information.
- Global Impact and Compatibility: Aligns with global sustainability standards for easier transitions.
European Sustainability Reporting Standards (ESRS)
Supporting the CSRD are the European Sustainability Reporting Standards (ESRS), which specify disclosure requirements to ensure a consistent reporting approach across the EU. Developed by the European Financial Reporting Advisory Group (EFRAG), these standards are regularly updated to reflect best practices.
The Role of GRI
The GRI provides globally accepted standards for sustainability reporting. Its standards are compatible with CSRD requirements, ensuring companies already using GRI guidelines can smoothly transition to CSRD compliance. This alignment enhances consistency and comparability in sustainability reporting globally.
Impact on Non-EU Companies
The CSRD also affects non-EU companies with significant operations in the EU. Companies generating more than EUR 150 million in the EU and having an EU branch or subsidiary must comply with CSRD standards, promoting a level playing field in sustainability practices worldwide. For non-EU companies, complying with the CSRD ensures continued access to the EU market, enhances corporate transparency, and meets the growing demand from stakeholders for rigorous sustainability practices. This can lead to improved investor confidence, customer trust, and overall market competitiveness.
Implementation Timeline
The CSRD will be implemented in phases:
- 2025: Compliance for large public interest entities.
- 2029: Compliance for other companies, allowing time for adaptation.
Moving Forward
The CSRD, supported by ESRS and aligned with GRI standards, marks a significant advancement in corporate sustainability reporting. The CSRD aims to foster a sustainable and accountable corporate environment in the EU and beyond by expanding the scope, introducing stringent assurance requirements, and promoting transparency.
The CSRD Essentials series is an invaluable resource for businesses navigating this new landscape, offering clear guidance to ensure compliance and support the transition to more sustainable practices. For non-EU companies, embracing CSRD standards secures market access and positions them as leaders in global sustainability efforts.
