The CSRD (Corporate Sustainability Reporting Directive) is an EU directive that standardizes the sustainability reporting of companies within the European Union. It was adopted by the European Parliament on November 10, 2022, and must be transposed into national law by January 1, 2024.
We explain in this article what this means for companies and whether your company needs to be CSRD-compliant or not.
The CSRD requires large and listed companies in the EU to prepare their sustainability reports in accordance with the ESRS (European Sustainability Reporting Standards) from January 1, 2024. The ESRS are a set of sustainability standards developed by the European Commission. They are based on the GRI (Global Reporting Initiative) Standards, an international standard for sustainability reporting.
The main difference between CSRD and GRI is that CSRD is a legal obligation for companies in the EU, while GRI Standards are a voluntary tool. CSRD also requires that sustainability reports from companies be prepared according to stricter criteria than GRI Standards.
Here is a more detailed explanation of the key differences between CSRD and GRI:
Geographical scope: CSRD applies to large and listed companies in the EU, while GRI Standards can be used by any organization, regardless of size or location.
Legal obligation: CSRD is a legal obligation for companies in the EU, while GRI Standards are voluntary.
Content requirements: CSRD requires companies to report on a wider range of sustainability topics than GRI Standards.
Methodological requirements: CSRD requires companies to use a more rigorous methodology for reporting than GRI Standards.
The CSRD is a significant development in the field of sustainability reporting. It will help to ensure that companies in the EU are more transparent about their sustainability impacts.
The following infographic illustrates the relationships between the sustainability reporting frameworks applicable in the EU:
The CSRD offers companies a range of benefits, including:
Enhanced Transparency: The CSRD mandates companies to report comprehensively and transparently on their sustainability impacts. This can help build trust among customers, investors, and other stakeholders.
Improved Risk Management: The CSRD can assist companies in better identifying and managing their sustainability risks, contributing to enhanced financial stability.
Increased Opportunities: The CSRD can help companies explore new business opportunities, such as investments in sustainable technologies or products.
Companies looking to leverage the advantages of the CSRD should engage with the directive early on and develop a plan to meet its requirements.
CSRD applies to all large and publicly listed companies within the European Union. Large companies are those that meet two of the following criteria:
Balance sheet total: > 20 million euros
Turnover: > 40 million euros
Number of employees: > 250
Publicly listed companies are those that have shares listed on a public stock exchange.
CSRD-compliant means that companies are required to prepare their sustainability reports according to the ESRS (European Sustainability Reporting Standards). The ESRS is a set of sustainability standards developed by the European Commission. They are based on the GRI (Global Reporting Initiative) Standards, an international standard for sustainability reporting.
The ESRS (European Sustainability Reporting Standards) mandate that sustainability reports must meet the following requirements:
Scope: Reports must provide a comprehensive overview of the company's sustainability activities.
Quality: Reports must be of high quality and reliability.
Verifiability: Reports must be verifiable, meaning that the information must be supported by evidence.
The CSRD represents a significant step toward improving corporate sustainability reporting in the European Union. The ESRS sets a new standard for sustainability reporting, imposing stricter requirements on companies compared to the GRI Standards.
Companies required to be CSRD-compliant must adjust their sustainability reporting processes and systems accordingly. This can be a challenge, as the ESRS impose more extensive requirements compared to the GRI Standards.
Companies should engage with the CSRD early on and develop a plan for meeting the requirements. They may consider involving external consultants or service providers for assistance.
The CSRD also presents opportunities for companies. Those that are CSRD-compliant can communicate their sustainability activities more transparently, thereby gaining trust from customers, investors, and other stakeholders.
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