As consumers and investors increasingly demand transparency from companies related to their environmental impacts, many firms have taken up sustainability reporting to showcase their accountability to their stakeholders (investors, business partners, employees, buyers, suppliers, customers and broader society). Those that haven’t, will soon be bound to the most recently adopted Corporate Sustainability Reporting Directive (CSRD), which sets standards for nearly 50,000 companies operating in the EU market to report on their climate and environmental impact.
Given a multitude of available sustainability reporting standards (read more about them in our blog) that often do not include all sustainability impacts coherently and the challenges that companies face when deciding on factors to report on, CSRD comes at the right time to prevent conflicting reporting practices. It will increase company’s accountability, while enabling stakeholders and investors to access concrete information to assess investment risks stemming from sustainability concerns.
Replacing and building upon the Non-Financial Reporting Directive (NFRD), CSRD introduces more detailed reporting measures and expands the number of binding companies. These will need to disclose more sustainability-related information than ever before, such as the effects of their business model, strategy and supply chains on sustainability and the influence of external environmental and social actors on their activities. Companies will also be required to report on Scope 3 emissions, the indirect emissions that result from a company’s upstream and downstream activities.
Audit committees will have an enhanced role under the new directive, as they will need to monitor more internal functions of a company than solely the sustainability reporting process, for example internal quality control, risk management systems etc.
The CSRD will start to apply from:
- 1st January 2024 for large companies of over 500 employees, already subjected to the NFRD
- 1st January 2025 for large companies of 250 or more employees, a €40 million euro revenue, or €20 million euros in assets
- 1st January 2026 for listed SMEs and other undertakings (SMEs can opt-out until 2028)
- non-EU companies with €150 million euros revenue in Europe.
However, the CSRD will have a much broader scope, as the binding companies will need to include assessments also from their subsidiaries along the value chain.
While large companies have the means to ensure quality sustainability reporting and are already using many sustainability reporting standards, this is not the case for SMEs. To support SMEs in the transition to a sustainable economy, the European Commission has proposed a set of standards that non-listed SMEs could voluntarily use to report sustainability information to their stakeholders.
Although it might feel far away, the sooner your company begins to prepare for meeting CSRD requirements, the easier it will be to comply with the new rules when they come into effect. Measuring sustainability impacts is not easy, so we recommend that you get ahead and begin with the process already.
Anteja offers consulting services and digital solutions to support companies with sustainability reporting. If you’re looking for advice, assessment analyses or would like to get a demo of our digital solutions, get in touch!
This article was written by Martina Vilhar, Head of Communications at Anteja.
- European Council: Council gives final green light to corporate sustainability reporting directive, 28.11.2022. [Last visited 1.12.2022]
- EY Romania: How the EU’s new sustainability directive (“CSRD”) is becoming a game changer, 18.11.2022. [Last visited 1.12.2022]
- Normative: Will your company have to comply with CSRD?, 11.11.2022. [Last visited 1.12.2022]