Navigating the EU Corporate Sustainability Reporting Directive, also known as CSRD

Key objectives of the CSRD 

The CSRD is a crucial component of the EU Green Deal, aiming to transform the EU into a resource-efficient and competitive economy with no net greenhouse gas (GHG) emissions by 2050. The directive seeks to make sustainability reporting more common, consistent, and valuable.  

Approximately 50,000 organizations, a 300% increase from those covered under the NFRD, will fall within the CSRD’s scope. This includes: 

• Large undertakings previously under NFRD 
• Organizations with 250+ employees 
• Companies with €40 million+ in annual revenue or €20 million+ in total assets 
• Listed SMEs with 10+ employees or those with less than 10 employees but €20 million+ in annual revenue 
• Non-EU companies with €150 million+ in annual revenue with one branch in the EU   

Reporting requirements 

Companies will need to report on a variety of topics under the European Sustainability Reporting Standards (ESRS). This sounds confusing, given that we’re discussing CSRD today but bear with us. The ESRS covers Environmental, Social, and Governance (ESG) topics, and it’s a good thing – aligning closely with standards such as the ISSB and GRI to avoid double reporting.  

The key reporting elements include: 

• Preparation, governance, strategy, impact, risk, and opportunity management 
• Policies, actions, metrics, and targets related to material topics 

The EU CSRD emphasises forward-looking, retrospective, qualitative, and quantitative disclosures. Companies can omit certain data points if deemed immaterial but must disclose company-specific sustainability matters if relevant. 

Setting your business up for reporting 

To comply with the EU CSRD, businesses must conduct robust materiality assessments, focusing on “double materiality,” which combines impact and financial materiality. This involves assessing impacts, risks, and opportunities across the value chain. 

Companies are advised to: 

1. Conduct a double materiality assessment – Identify impacts, risks, and opportunities and their financial implications. 
2. Understand their value chain – Disclose material information about impacts related to workers in the value chain. 
3. Measure their carbon footprint – Calculate and report Scope 1, 2, and relevant Scope 3 emissions. 

Challenges and opportunities 

Implementing the CSRD will be challenging, especially for companies not previously aligned with international standards. However, the directive offers opportunities for businesses to build resilient futures, foster competitiveness, and engage in a just transition to sustainability. Accurate and comprehensive reporting is also a good thing when it comes to the risk of greenwashing (either accidentally or on purpose) and will also enhance investor and stakeholder confidence.