Governments are starting to buckle down on businesses that may be contributing towards climate change by requiring them to report on their environmental impact.
The Corporate Sustainability Reporting Directive (CSRD) is a new type of legislation that requires businesses to report on their sustainability performance.
Dubbed the ‘GDPR for sustainability’ an increasing number of companies will be required to comply with the CSRD.
New to all things CSRD? The EcoSend team is here to provide you with the main points you need to know to get your business prepared.
What Is The CSRD?
The Corporate Sustainability Reporting Directive (CSRD) is a piece of legislation aimed at increasing transparency and accountability across sustainability reporting.
The CSRD is replacing the NFRD and outlines a requirement for applicable companies to disclose their ESG impacts.
If the world is to achieve its targets of climate neutrality by 2050, then economic gain must go hand in hand with responsibility. Therefore, the CSRD sets out ways to reduce pollution in the EU, protect and restore ecosystems and transition to a circular economy.
Companies that meet the CSRD eligibility criteria (which is increasing year on year) must comply or face financial and legal penalties.
Who Does CSRD Apply To?
The Corporate Sustainability Reporting Directive (CSRD) currently applies to businesses that meet at least two of the following criteria:
More than 250 employees
Net turnover of €40 million
Balance sheet assets of €20 million
However, an important point to note is that small and medium businesses are also going to be required to comply with CSRD in the coming years. At present, CSRD currently applies to around 50,000 businesses globally.
With the requirements set to expand to include smaller enterprises, this figure will likely grow substantially. Therefore, all businesses should be considering how they will need to track, measure and report on their sustainability performance so that they can get prepared.
What Are The Corporate Sustainability Reporting Directive Disclosure Requirements?
The CSRD data requirement is intensive, with 1,444 data points to choose from covering 10 key ESG topics.
Crucially, applicable businesses do not have to track and report on any data points which do not apply to them. Instead, a double materiality report will determine the requirements for each business.
For the data points which do apply, businesses must consider the entire value chain across short, medium and long-term considerations.
When Do Companies Have To Start Reporting For The CSRD?
January 2024: Companies already subject to the NFRD
January 2025: Companies who meet two of the following three criteria: 250 employees, €40 million in turnover or €20 million in total assets.
January 2026: Listed SMEs or smaller financial institutions
January 2027: Listed SMEs that requested an extension
January 2028: Non-EU companies generating net revenue above €150 million in the EU and with an EU branch or subsidiary meeting certain criteria.
What Are The Consequences Of Not Complying With The CSRD?
If a business which qualifies for CSRD doesn’t comply it may be subject to monetary penalties.
These include fines of up to:
France - €100,000
Germany - €10 million or 5% of annual turnover
Italy - €150,000
Netherlands - €900,000
Spain - €300,000
Sweden - €1 million
United Kingdom - €580,000
In addition, there can be legal implications, corporate sanctions and reputational risks for the business.
That’s because it certainly isn’t a ‘good look’ if a business which should be compliant with the CSRD fails to provide the required information. Therefore, the implications can go far beyond financial penalties and can have widespread negative impacts for the business.
There is also talk of a so-called ‘comply or explain’ approach for CSRD-applicable companies. The EU legislation states that “the undertaking should explain the efforts made to obtain the information about its value chain, the reasons why that information could not be obtained, and the plans of the undertaking to obtain such information in the future.”
In other words, if a business is unable to produce a CSRD report, it should provide clear reasons why. The statement provided must not only be approved by the board of directors but it must also be included in the company’s annual financing reporting. In addition, the statement must be audited by an independent third party to ensure it is both accurate and credible.
Why Every Business Should Be Doing Sustainability Reporting - Even If CSRD Doesn’t Apply
You will be helping the planet - If you don’t audit your business, how can you truly understand its environmental impact? Sustainability reporting can shed light on where improvements can be made and it’s all for the benefit of the planet. For instance, businesses can reduce their energy consumption by up to 10% just by switching off all of their appliances at night.
Your customers care about your sustainability efforts - A study by NielsenIQ found that 78% of customers say that a sustainable lifestyle is important to them. Reporting about your sustainability efforts helps educate customers and can also attract new ones to your business.
Getting into the habit of sustainability reporting now prepares your business for the future - The requirements for sustainability reporting continue to grow. Just because CSRD currently only applies to bigger businesses doesn’t mean smaller businesses won’t have to comply in the future. So why not get ahead now so that your team already knows what to do?
CSRD FAQs
Have any more questions about the CSRD?
We’ve answered some common queries here, but you should check out the official EU Directive if you want to read the legislation for yourself.
What Does CSRD Stand For?
CSRD stands for the Corporate Sustainability Reporting Directive. It is an acronym used to describe a new set of sustainability reporting requirements for businesses that are based in or do business anywhere in the EU.
Does CSRD Apply In The UK?
Even though the UK is no longer a member of the EU, if your business does any significant business anywhere in the European Union, your business will have to comply with the CSRD. This includes if your business has a presence in an EU country such as a subsidiary branch.
When Does CSRD Come Into Effect?
There are several notable dates within the CSRD timeline. The date which will apply to your business depends on the size of your company and its overall structure.
Since 2024, CSRD has applied to listed companies with more than 500 employees who are already covered by the NFRD.
In 2025, large listed or unlisted companies will have to comply with CSRD if they meet two or more of the following criteria: More than 250 employees, turnover of €40,000,000 or total assets of €25,000,000.
In 2026, CSRD compliance will also be required from listed SMEs, although micro-companies will be exempt.
What Is The Difference Between CSRD And ESRS?
Both CSRD and ESRS are acronyms relating to sustainability requirements.
CSRD (Corporate Sustainability Reporting Directive) requires qualifying companies to issue annual reports about their sustainability efforts.
ESRS (European Sustainability Reporting Standards) goes into detail about the ESG metrics that companies need to report on to be able to comply with the CSRD.
In other words, CSRD is the requirement and ESRS guides companies on how to meet their obligations when reporting their sustainability efforts.
Since there can be financial penalties if applicable companies don’t report their CSRD to the required standard, ESRS is designed to create a standard framework to ensure companies provide what’s required of them.
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As an EcoSend customer, you’ll also see information about your carbon savings plus the number of trees that have been planted on behalf of your business. This information can be useful for all businesses, including when submitting a CSRD report.
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Or, if you are a larger business please schedule a demo with our team.
If you have any questions about EcoSend, please drop us a message and we’ll be in touch shortly.
