General
A new perspective on sustainability
The Corporate Sustainability Reporting Directive (CSRD), an extension of the Non-Financial Reporting Directive (NFRD), mandates enhanced transparency in sustainability reporting for companies operating within the EU. The CSRD applies to all large companies and all companies listed on regulated markets (except listed micro-enterprises), impacting over 50,000 companies in the EU.
The European Sustainability Reporting Standards (ESRS) – worked out by EFRAG - provide detailed guidelines on how companies should report on their sustainability performance, including environmental, social, and governance (ESG) aspects.
Companies are required to disclose their impact on the environment, including aspects like greenhouse gas emissions, water use, and pollution. The standards also focus on social issues such as employee rights, diversity and inclusion, and community engagement. Governance aspects like corporate ethics, risk management, and compliance with laws are also included.
The CSRD emphasizes the double materiality perspective, considering both the impact of the company on sustainability matters and the impact of sustainability matters on the company. The standards aim to ensure consistency and comparability of sustainability reporting across different companies and sectors. The CSRD introduces a 'European Single Electronic Format' (ESEF), requiring digital reporting to facilitate accessibility and analysis of sustainability information, via the XBRL format (shortly to be published after the ongoing public consultation).
Sustainability reports under the CSRD will need to be audited to ensure their reliability and accuracy. The reporting is aligned with the EU Taxonomy, a classification system establishing a list of environmentally sustainable economic activities. While focused on the EU, the CSRD will have a global impact due to the international operations of many companies within its scope. The standardization of sustainability reporting under the CSRD aims to promote transparency, enable better investor decision-making, and foster sustainable business practices.
Companies may face challenges in adapting to these new reporting requirements, including the need for new data collection and reporting systems. Resources and tools like Carbon Alt Delete can assist companies in understanding and complying with these new requirements. The ESRS and CSRD are dynamic frameworks and may evolve based on feedback and emerging sustainability challenges. Engagement with a wide range of stakeholders, including investors, customers, and regulators, is crucial for effective implementation.
The CSRD and ESRS play a significant role in the EU's broader strategy for climate change mitigation and sustainable development. The EU provides guidance documents and resources to help companies navigate the CSRD and ESRS requirements. See:
Last updated