In April 2021, the European Commission presented the proposal for this Directive, which requires mandatory reporting on environmental and social impact of business activities, as well as independent assurance on the non-financial information that has been presented. The Directive aims to increase the quality of information and transparency about sustainability matters of companies, and thereby support the transition to a sustainable economy following the Paris climate agreement and EU Green Deal. For many companies, the proposed CSRD timeline means they need to start preparing in order to be ready by 2024 and meet the CSRD obligations.
The CSRD is an extension of the existing European directive on sustainability reporting: the Non-Financial Reporting Directive (NFRD). This NFRD came into effect in 2018 and requires public interest companies (such as banks, insurers and publicly traded companies) with more than 500 employees to report on how they deal with issues such as environmental pollution, social responsibility, human rights and diversity.
The CSRD significantly broadens the scope of entities that will have to report. It will capture all listed entities, as well as to large companies that meet 2 of the following 3 criteria:
Latest indications are the CSRD reporting obligations will apply to at least 50,000 companies operating in Europe, but we anticipate many companies below those thresholds will also implement these requirements. This will enable them to fulfil the expectations of their largest customers who will almost certainly be required to report under this Directive.
The format and exact criteria of what CSRD will require is still under development. However, it is highly likely the reporting must contain the following components:
In addition to substantive requirements, a limited assurance on the report by an accountant is required as well as making the report available in electronic (XHTML) format. These requirements are expected to make an important contribution to increasing the quality and comparability of sustainability reports.
In order to prepare for CSRD reporting from 2024 onwards, companies should now be familiarising themselves with CSRD and developing their sustainability strategy on how they are going to meet the reporting requirements set out in the Directive. Performing a gap analysis against the CSRD requirements to assess the amount of change that will be required will be essential to this process. Companies will need to develop and set up relevant policies and systems and develop their indicator framework, to be able to manage their KPIs, benchmarks and targets.
This Corporate Sustainability Reporting Directive (CSRD) infographic has been developed by our highly experienced team at Sinzer, part of Grant Thornton Netherlands. The graphic summarises some important timelines and steps to take to be ready for these requirements.
The infographic compiled by Sinzer provides an overview of the important deadlines and the steps to be ready for the new requirements.
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