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CSRD
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Understanding the Corporate Sustainability Reporting Directive

The Corporate Sustainability Reporting Directive (CSRD) is a comprehensive framework that guides companies in reporting their Environmental, Social, and Governance (ESG) activities. Rather than dictating specific actions, the CSRD focuses on documenting a company’s current sustainability efforts related to environmental impacts, social responsibilities, and governance practices. This reporting is designed to inform both internal and external stakeholders, helping them understand the company’s position and progress on sustainability issues.
The double materiality
 
The CSRD builds on the Non-Financial Reporting Directive (NFRD) but with a broader scope, meaning that it impacts more companies than before. It also introduces the concept of double materiality, which requires companies to assess and report not only on how social and environmental factors affect their business but also on how their business impacts society and the environment. The reporting format is standardized by the European Sustainability Reporting Standards (ESRS), ensuring consistency and clarity across the board. Additionally, all reported information must be validated by an independent certified auditor, ensuring that the data provided is accurate and well-documented. The CSRD is closely aligned with the EU Taxonomy, helping to create a unified approach to sustainability reporting within the EU. 
CSRD Double Materiality

Does the Corporate Sustainability Reporting Directive affect your company?

Depending on your company's size, turnover, and balance sheet total, the timeline for CSRD compliance varies. If you are unsure what category your company is under you can check it here. The following sections outline guidance for companies based on their reporting obligations and provide recommendations for proactive preparation.

This section applies to Micro Companies, SME Companies, and Listed SME Companies that are not yet required to comply with CSRD but should start preparing. Although you’re not required to report just yet, it’s still important to start adapting now. Even as a small listed company, early preparation for the CSRD is crucial, especially considering the trickle down effect. The trickle-down effect refers to how regulations can impact even small companies, even though they aren't directly required to comply yet. This happens because small companies often do business with larger companies that are already required to report under these regulations. As a result, these larger companies may send detailed data requests to their smaller suppliers or partners to meet their own reporting obligations, meaning that small companies may need to provide extensive information even before they are formally required to report. Therefore it is important and highly recommended to be proactive, so you are better equipped to manage these requirements and smoothly integrate CSRD reporting practices into your operations.

 

This section applies to Large Companies and Listed Companies with immediate or near-term reporting obligations. By now, you should have already begun collecting the necessary data to ensure a comprehensive and accurate report. Early data collection is crucial for identifying gaps, aligning with regulatory expectations, and ensuring that your reporting process is both smooth and effective. Given your position you may already need to rely on data from your smaller partners and suppliers to meet CSRD requirements. As you prepare your own reporting, you'll likely need to request detailed sustainability data from these partners to ensure your report is accurate and compliant. This increased need for transparency and collaboration with your supply chain highlights the importance of starting early and engaging with your suppliers to ensure they can provide the necessary information.

CSRD The trickle down effect

How to work with the Corporate Sustainability Reporting Directive?

If you have to report

 

The CSRD requires that you prepare a separate, coherent report as part of your annual financial report. This report must cover the three key ESG areas: Environmental, Social, and Governance.

Start by understanding the concept of double materiality, which involves assessing both how environmental, social, and governance (ESG) factors impact your company financially and how your company’s actions affect the broader environment and society. Once you are aware of your outbound and inbound impact you can map your insights across the Environmental (E), Social (S), and Governance (G) areas to align your strategy with these key dimensions.

Since the CSRD requires a large number of data points, it is recommended that you prepare the report in collaboration with your company’s accounting firm to ensure all requirements are met. Additionally, it is important to have a clear understanding of the reporting standards, which you can learn more about here [insert hyperlink to ESRS].

If you don’t have to report?

 

If you don’t comply with the CSRD requirements just yet it is still essential to begin collecting data, both to be able to share data with your bigger partners but also to gain a broader insight into your business activities. This can be done in the following way, for example.

If you voluntarily prepare your first CSRD report, it's essential to treat this initial report as a baseline that reflects your current position as a company. Using established ESG reports or guidelines like those from EFRAG as a template can be helpful in structuring your report. To ensure a relevant and effective report, it's crucial to organize the data you’ve collected and link it clearly to the three main topics: Environmental, Social, and Governance (ESG). Remember, the report should be data-driven and well-documented, avoiding vague statements. Voluntary reporting is a great opportunity to reflect internally on your company’s practices and set future goals.

Start by understanding the concept of double materiality, which involves assessing both how environmental, social, and governance (ESG) factors impact your company financially and how your company’s actions affect the broader environment and society. Once you are aware of your relevant outbound and inbound impacts you can map and illustrate your insights across the Environmental (E), Social (S), and Governance (G) areas to align your strategy with these key dimensions.

 

How is the Corporate Sustainability Reporting Directive connected to other initiatives, regulations and laws?

EU Taxonomy, CSRD and CSDDD

The Corporate Sustainability Reporting Directive (CSRD) is closely linked to the EU Taxonomy for Sustainable Activities, as it uses the criteria and definitions provided by the Taxonomy to guide sustainability reporting. This connection ensures that companies use consistent language when measuring and disclosing environmental and social impacts across the EU, promoting transparency and comparability in sustainability reporting. 

The CSRD is also connected to the Corporate Sustainability Due Diligence Directive (CSDDD). While the CSRD focuses on reporting, the CSDDD requires companies to actively manage and mitigate their impacts on human rights and the environment. The CSRD’s reporting obligations will include disclosures on the actions taken under the CSDDD, ensuring that companies report not just on their policies but also on the concrete steps they take to address sustainability risks and opportunities.

Additionally, the CSRD is defined by the European Sustainability Reporting Standards (ESRS), which define the specific content and format of sustainability reports under the CSRD. These standards ensure that companies provide comprehensive and comparable information on their sustainability practices.