CSRD Reporting: 2024 Comprehensive Guide to Corporate Sustainability Reporting Directive and Requirements

The Corporate Sustainability Reporting Directive (CSRD) marks a transformative shift in how companies within the European Union report on their sustainability practices. It is a significant milestone in the EU’s journey toward a more sustainable economy.

This reporting policy not only enhances the quality and consistency of sustainability disclosures but also seeks to prevent practices like greenwashing, where companies may misrepresent their environmental efforts.

By mandating that companies disclose comprehensive information about their ESG practices, the CSRD aims to bridge the gap between corporate activities and societal expectations.

This directive is particularly important in light of the increasing scrutiny from investors and consumers regarding corporate sustainability commitments.

The implications of the CSRD are profound, as it encourages organizations to integrate sustainability into their core strategies, thereby driving positive change across industries.

In this guide, we will delve into the intricacies of the Corporate Sustainability Reporting Directive (CSRD), exploring its key features, also CSRD reporting requirements, and implications for companies operating within the European Union (EU).

What is CSRD Reporting?

The Corporate Sustainability Reporting Directive (CSRD) is a significant legislative framework established by the European Union (EU) meant to enhance corporate transparency and accountability regarding environmental, social, and governance (ESG) matters.

This directive, which came into effect on January 1, 2020, expands upon the previous Non-Financial Reporting Directive (NFRD) by broadening the scope of organizations required to report on sustainability issues and introducing more rigorous reporting standards.

CSRD represents a pivotal shift in how organizations in the EU report on sustainability. It aims to align corporate practices with broader societal goals of sustainability and accountability. It mandates companies to disclose detailed information on their impact on the environment, social issues, and governance practices.

This includes reporting on topics such as climate change, biodiversity, human rights, and anti-corruption measures. The directive aims to provide investors, consumers, and other stakeholders with comprehensive, comparable, and reliable sustainability information, fostering responsible business practices and informed decision-making.

CSRD Key Reporting Requirements

The Corporate Sustainability Reporting Directive (CSRD) establishes comprehensive reporting requirements for companies operating within the European Union (EU) to enhance transparency regarding their environmental, social, and governance (ESG) impacts.

This directive significantly expands the scope and depth of sustainability reporting compared to its predecessor, the Non-Financial Reporting Directive (NFRD).

Double Materiality Assessment

A cornerstone of the CSRD is the double materiality concept, which requires companies to assess both:

• Impact Materiality: How the company’s operations affect the environment and society.

• Financial Materiality: How sustainability issues may impact the company’s financial performance.

This dual perspective ensures that companies provide a holistic view of their sustainability practices and risks.

European Sustainability Reporting Standards (ESRS)

The CSRD mandates the development of the European Sustainability Reporting Standards (ESRS), which set out specific disclosure requirements. The ESRS framework includes:

• General Requirements: Applicable to all in-scope companies, covering governance, strategy, and risk management.

• Topical Disclosures: Companies must disclose information related to specific ESG topics, including climate change, human rights, and diversity.

• Sector-Specific Standards: These are currently under development and will be tailored to address unique impacts and risks pertinent to different industries, expected to be finalized by June 2026.

Reporting Structure

Sustainability information must be included in the company’s management report rather than as a standalone document. This integration emphasizes the importance of sustainability in overall business strategy and operations.

Assurance Requirements

The CSRD introduces mandatory limited assurance for reported sustainability information, which may evolve to require reasonable assurance over time. This ensures that the reported data is credible and reliable.

Implementation & Reporting Timeline

The phased implementation of the CSRD is as follows:

2024, Jan 1st: Large companies already under the NFRD must publish their first CSRD-compliant reports for the 2024 financial year by January 1, 2025.

2025, Jan 1st: All large companies not previously covered by the NFRD will need to comply with reports due in 2026.

2026, Jan 1st: Additional requirements will apply to smaller listed companies.

2028, Jan1st: Non-EU companies meeting the specified thresholds will also be required to report.

CSRD vs. NFRD: Key Differences in Reporting Requirements

The transition from the Non-Financial Reporting Directive (NFRD) to the Corporate Sustainability Reporting Directive (CSRD) represents a pivotal evolution in corporate sustainability reporting within the European Union.

Introduced in 2018, the NFRD aimed to enhance transparency by requiring large public-interest entities to disclose non-financial information related to environmental, social, and governance (ESG) factors.

However, its broad guidelines often resulted in inconsistent reporting practices, limiting the comparability and reliability of the information disclosed.

As stakeholders increasingly demanded more rigorous and standardized sustainability data, the European Union recognized the need for a more robust framework, leading to the development of the CSRD.

The CSRD, set to be fully applicable by January 2024, significantly expands the scope of reporting requirements, now encompassing a greater number of companies, including many medium-sized enterprises.

This directive introduces enhanced obligations, such as the concept of double materiality, which requires organizations to assess both their impact on society and the environment, as well as how sustainability issues affect their financial performance.

By establishing clearer guidelines and mandatory reporting standards, the CSRD aims to create a more uniform and transparent landscape for corporate sustainability reporting, ultimately fostering greater accountability and responsible business practices across the EU.

Who Needs to Comply with CSRD Reporting Requirements?

The Corporate Sustainability Reporting Directive (CSRD) significantly expands the scope of companies required to report on their sustainability practices, aiming to enhance transparency and comparability in corporate sustainability reporting across the European Union. Below is a detailed exploration of its applicability.

Large Companies

The CSRD applies to large companies that meet at least two of the following criteria:

• Total Revenue: Exceeding €50 million.
• Total Assets: Exceeding €25 million.
• Employee Count: More than 250 employees.

This definition marks an increase from the previous Non-Financial Reporting Directive (NFRD), which had slightly lower thresholds of €40 million in revenue, €20 million in assets, and 250 employees.

Listed Companies

All companies listed on EU-regulated markets are required to comply with the CSRD, including small and medium-sized enterprises (SMEs).

The reporting requirements for SMEs will be phased in, with the first reports due in 2027, although they can be opted out until 2028. This marks a significant change, as previously, the NFRD only covered a limited number of large companies.

Non-EU Companies

The directive also extends to non-EU companies, specifically those with significant operations in the EU.

Non-EU companies must comply if they generate a net revenue exceeding €150 million in the EU and have at least one subsidiary or branch located within the EU.

This inclusion aims to ensure that companies benefiting from the EU market adhere to the same transparency standards as EU-based companies.

How to Meet CSRD Reporting Requirements

Companies must adopt a comprehensive approach to sustainability reporting to meet the reporting requirements of the Corporate Sustainability Reporting Directive (CSRD). Below are key strategies to ensure compliance and enhance the quality of disclosures.

Understand the Reporting Framework

The CSRD introduces a standardized framework for sustainability reporting, which includes the European Sustainability Reporting Standards (ESRS). Familiarize yourself with these standards to ensure your reporting meets the required guidelines.

This includes understanding the principles of double materiality, which necessitates assessing both the impact of your business on the environment and society, as well as how sustainability issues affect your financial performance.

Conduct a Thorough Data Collection Process

Data collection is foundational to meeting CSRD requirements. Companies should implement robust systems for gathering relevant data across various departments. This includes:

Environmental Data: Collect information on carbon emissions, energy consumption, waste management, and resource usage.

Social Data: Gather data related to employee welfare, community engagement, and human rights practices.

Governance Data: Document policies and practices related to corporate governance, ethical behavior, and compliance.

Start this process early to allow sufficient time for data verification and analysis, as the CSRD requires comprehensive disclosures.

Set Clear Sustainability Targets

The CSRD mandates that companies not only disclose their current sustainability practices but also set measurable targets. Establish clear, achievable goals related to environmental impact, social responsibility, and governance practices. Regularly report on progress towards these targets to demonstrate commitment and accountability.

Engage Stakeholders

Involve key stakeholders in the reporting process, including employees, investors, and community representatives. Their insights can provide valuable context for your sustainability initiatives and help identify areas for improvement. Engaging stakeholders also enhances transparency and builds trust in your reporting efforts.

Ensure Compliance with Assurance Requirements

The CSRD requires companies to obtain limited assurance on their sustainability reports, with a potential shift to reasonable assurance in the future. Engage with external auditors early in the process to ensure that your reporting meets the necessary standards and to identify any gaps in compliance.

This proactive approach will help mitigate non-compliance risks and enhance your disclosures’ credibility.

Integrate Sustainability into Corporate Strategy

Sustainability should be embedded into the core business strategy rather than treated as a standalone initiative.

This integration will facilitate a more holistic approach to sustainability reporting and ensure that all aspects of the business align with sustainability goals.

Consider how sustainability impacts risk management, operational efficiency, and long-term value creation.

Continuous Improvement and Adaptation

Companies must be prepared to adapt to new regulations and standards as reporting requirements evolve.

Establish a culture of continuous improvement by regularly reviewing and updating reporting practices, engaging with industry best practices, and staying informed about changes in legislation.

This adaptability will position your company as a leader in sustainability reporting and compliance.

By implementing these strategic practices, companies can navigate the complexities of the CSRD and enhance their sustainability reporting practices, ultimately contributing to a more sustainable future.

Best Practices for Meeting CSRD Reporting Requirements

To effectively meet the reporting requirements of the Corporate Sustainability Reporting Directive (CSRD), companies must adopt best practices that ensure compliance while enhancing the quality and transparency of their sustainability disclosures. Here are some essential practices to consider:

1. Thoroughly Understand CSRD Requirements

Begin by familiarizing yourself with the specific requirements of the CSRD, which expands upon the previous Non-Financial Reporting Directive (NFRD). The CSRD mandates detailed reporting across environmental, social, and governance (ESG) dimensions.

Companies should consult the European Sustainability Reporting Standards (ESRS) and engage with legal experts to ensure comprehensive understanding and compliance with the directive’s expectations.

2. Integrate Sustainability into Business Strategy

Sustainability should be woven into the fabric of your corporate strategy rather than treated as a separate initiative.

This integration involves aligning sustainability goals with overall business objectives, ensuring that all operations, supply chains, and decision-making processes reflect sustainable practices.

By embedding sustainability into the core strategy, companies can enhance compliance and drive long-term value creation.

3. Establish Robust Data Management Systems

Accurate data is critical for CSRD compliance. Implement a reliable data management system that facilitates the collection, storage, and analysis of relevant ESG data.

This system should be capable of handling the complexity and volume of data required for comprehensive reporting.

Consider leveraging technology solutions, such as blockchain or specialized software, to enhance data integrity and transparency.

4. Conduct Materiality Assessments

Perform thorough materiality assessments to identify which sustainability issues are most relevant to your business and stakeholders.

It will involve evaluating both the impact of your operations on the environment and society and how these factors affect your financial performance (double materiality).

Regularly update these assessments to reflect changing business contexts and stakeholder expectations.

5. Engage Stakeholders and Suppliers

Regular engagement with stakeholders—including employees, customers, investors, and suppliers—is essential for gathering insights and feedback on your sustainability initiatives.

Engagement helps to build trust and transparency while informing your reporting practices. Collaborate with suppliers to ensure they also adhere to sustainable practices, as their performance can significantly impact your overall sustainability profile.

6. Prepare for Independent Auditing

The CSRD requires that sustainability reports undergo independent verification to enhance credibility. You can prepare for this process by conducting internal reviews of your reports to identify any inconsistencies or areas needing clarification.

Engage with external auditors early to ensure that your reporting meets the necessary standards to facilitate a smooth verification process.

7. Foster a Culture of Continuous Improvement

Sustainability reporting is not simply a one-time practice but rather a continuous journey. Establish processes for regularly reviewing and updating your sustainability practices and reporting methods.

It should include mechanisms for incorporating stakeholder feedback and monitoring regulatory changes. By fostering a culture of continuous improvement, companies can remain agile and responsive to evolving sustainability challenges and opportunities.

8. Leverage Technology and Reporting Tools

Utilize technology and reporting tools specifically designed for sustainability reporting to streamline the data collection and reporting processes.

These tools can help automate data aggregation, ensure compliance with reporting standards, and enhance the overall efficiency of the reporting process. Investing in the right technology can significantly reduce the burden of compliance and improve reporting accuracy.

By implementing these best practices, companies can navigate the complexities of CSRD compliance effectively, ensuring that their sustainability reporting is not only compliant but also meaningful and impactful.

A proactive approach will enhance transparency, build stakeholder trust, and contribute to a more sustainable future.

CSRD Reporting : Templates, tools and resources

To navigate these complex reporting obligations effectively, organizations can benefit from a variety of templates, tools, and resources specifically designed to support CSRD compliance. This section explores the range of aids available to companies, from standardized reporting templates and software solutions to guidance documents and expert services.

Templates for CSRD Compliance

Using standardized templates can streamline the reporting process, ensuring that companies meet the CSRD requirements effectively.

Notable templates include:

Baserow’s ESG Reporting Template: This no-code template simplifies data collection and management, allowing organizations to efficiently track and report their ESG initiatives. It supports the collection of both quantitative and qualitative data, ensuring comprehensive reporting aligned with CSRD guidelines.

Microsoft Cloud for Sustainability: This platform offers a draft CSRD template within its Compliance Manager, helping companies organize and audit their sustainability data. It facilitates the preparation of metrics and ensures compliance with evolving regulations.

Deloitte’s CSRD Accelerator Tool: This tool provides step-by-step guidance through the ESRS reporting standards, embedding quantitative KPIs and simplifying data collection and presentation. It also offers analytics capabilities for monitoring sustainability objectives.

Tools for Effective Reporting

To meet CSRD reporting requirements effectively, organizations can leverage various tools and software designed to streamline ESG data collection, analysis, and reporting processes. Here are a few great choices to help you get started.

Coolset: This software focuses on emission management, enabling companies to measure and analyze their Scope 1, 2, and 3 emissions. It is particularly suited for startups and SMEs looking to fast-track their CSRD compliance.

PwC’s ESG Reporting Tool: Designed for users of SAP, this tool automates the compliance process and integrates sustainability reporting into existing business strategies. It helps companies gather the necessary data points required for CSRD compliance efficiently.

TerGo: A B-corp-certified startup that assists businesses in measuring and reducing their carbon emissions, thus supporting compliance with CSRD requirements through effective carbon management strategies.

When selecting a tool for CSRD reporting, it is crucial to ensure compliance with the EU’s CSRD guidelines.

Look for tools that offer comprehensive data management capabilities, automated reporting features, and the ability to integrate with your existing systems and workflows.

Resources for Implementation

CSRD reporting may initially appear overwhelming, but numerous resources are available to guide organizations through the process. These resources range from official guidance documents and frameworks to expert consultancy services and online communities, all aimed at helping companies meet CSRD requirements efficiently and comprehensively.

Training and Workshops: Engaging in training sessions focused on CSRD requirements and sustainability reporting best practices can equip teams with the necessary skills.

Consulting Services: Partnering with consulting firms specializing in sustainability can provide tailored guidance and support throughout the reporting process.

Online Communities and Forums: Joining forums dedicated to sustainability reporting can offer insights and shared experiences from other companies navigating CSRD compliance.

Conclusions

As organizations prepare to comply with the CSRD, they must take a proactive approach. This includes understanding the reporting framework and integrating sustainability into their core strategies. They should also leverage available tools and resources.

The directive encourages companies to assess their impact through double materiality. This means considering both their effects on society and the environment. Companies must also evaluate how sustainability issues may influence their financial performance.

The CSRD is not just a regulatory requirement; it is an opportunity for meaningful change. It helps foster stakeholder trust and contributes to a sustainable future. By embracing CSRD principles, organizations can enhance their reporting practices. They can also position themselves as leaders in the transition to a more sustainable economy.

References

European Parliament: Corporate sustainability reporting directive (PDF)

KMPG: The Corporate Sustainability Reporting Directive – CSRD (PDF)

PWC: What US companies need to know about the EU’s CSRD

Taylor & Francis: An Overview of Corporate Sustainability Reporting Legislation in the European Union

Deloitte: EU Sustainability Regulation Outlook