As part of the EU Green Deal and the Sustainable Finance Agenda, the CSRD aims to revise the current provisions for the Non-financial Reporting Directive (NFRD) to bring sustainability reporting on a par with financial reporting.
What does this mean for reporters?
Soon, companies will be required to issue detailed information on their sustainability matters. In practical terms, this means reporting on how their business model affects their sustainability, and on how external sustainability factors influence their activities.
Who is in scope?
- Large public-interest companies with more than 500 employees from the beginning of 2024.
- All large companies with more than 250 employees and a €40 million turnover from 2025.
- From 2026, all listed SMEs (but they can choose to ‘opt out’ until 2028).
- Non-EU companies with a net turnover of €150 million who have a branch in the EU.
Reporting under the CSRD will require disclosure under the European Sustainability Reporting Standards (ESRS), with the initial set of standards revealed previously by the European Financial Reporting Advisory Group (EFRAG). Under the new rules, reporters need to disclose issues ranging from climate change and social rights to human rights and governance factors. The new rules require a double materiality assessment, which adds the risks a company’s activities pose to the environment and society to those that it potentially faces internally. It will also require limited assurance.
Organisations should think about undertaking impact assessments to understand the requirements and identify any gaps between current reporting and what is required under the CSRD. The starting point for many companies will be to produce a roadmap, plan to align with the requirements, and start with a double materiality assessment. The good news is that for GRI reporters, the ESRS disclosures will look familiar, as there is interoperability between GRI and CSRD reports.
Need help with your double materiality assessment, sustainability reporting or other sustainability-related topics? Luminous is here to help you strengthen your understanding of impacts and non-financial disclosure. Please get in touch with firstname.lastname@example.org.