With the introduction of the Corporate Sustainability Reporting Directive (CSRD) in the EU in January 2023, businesses that fell under its scope should have their sustainability reports in line with the new legislation. However, a VinciWorks survey found that most businesses were slow to prepare for the new reporting mandate.
This article covers the need for business leaders to report on their sustainability performance in line with CSRD. It includes what steps you can take to prepare, and the business benefits involved in being ahead of the legislative landscape.
What is the Corporate Sustainability Reporting Directive
The new Corporate Sustainability Reporting Directive provides a more streamlined image of companies’ sustainability performance. It strengthens the reporting mandates already set out by the EU’s Non-Financial Reporting Directive (NFRD).
From January 1, 2024, the CSRD will apply to businesses that are currently under the jurisdiction of the Non-Financial Reporting Directive (NFRD), before extending its scope to include large companies from January 1, 2025. Companies will have to submit reports if their workforce exceeds 250 employees and their financial status meets either of the two thresholds:
- Assets surpassing €20 million
- Revenue exceeding €40 million.
The directive introduces stricter sustainability reporting requirements aligned with the European Sustainability Reporting Standards (ESRS), enhancing corporate transparency on environmental and social impacts.
Failing to prepare
Although the regulations are already in effect in some cases, preparing to comply is still a top priority for many businesses. However, the VinciWorks survey covering 175 Environmental, Social, and Governance (ESG) reporting and strategy leaders found that 77% of businesses were failing to prepare to report in line with the new mandate. Additionally, respondents cited a main concern for failed preparations coming from friction in the supply chain when attempting to collect data on emissions, for example.
The CSRD currently affects almost 40,000 more businesses across the EU and the UK than the existing NFRD. Businesses should already be refining and improving reporting on issues like environmental impacts within their value chain to avoid potential penalities of non-compliance.
Getting ready to report
If you fall under the current CSRD threshold, follow the steps below to prepare to report:
Plan and establish your double materiality assessment.
One of the main differences between the CSRD from current legislation is the requirement of a materiality analysis using a double materiality approach. The double materiality approach consists of businesses publicly disclosing both their own impact on people and the environment and how sustainability issues affect their business. The assessment must cover all levels of your value chain meaning each stakeholder must be evaluated considering impacts on business operations in the short, medium and long term.
Get to grips with EU Sustainability Reporting Standards (ESRS)
Companies required to comply have to do so by reporting in line with EU Sustainability Reporting Standards (ESRS). The ESRS are the new reporting standards set out in the CSRD. The standards ensure all companies impacted by the new mandate can report on their ESG information in a consistent way, easily comparable to others. By familiarising yourself with the reporting standards, you will be better positioned to transition to the new legislation when your business is impacted by the directive.
Collect and Monitor Data
For the first time, the CSRD requires businesses to report on information concerning ESG information. Businesses now need to collect and provide data on their own operations across scopes 1, 2, and 3, including stakeholders in their data collection and monitoring.
To comply with CSRD, the data monitored must be both reliable and backed up with substantial evidence and figures. For the simplest and most streamlined route of obtaining this information, Positive Planet can provide a full carbon calculation of your scope 1, 2, and 3 operations. Our user-friendly processes fast-track businesses through the carbon accounting stage.
Integrate Reporting
For businesses that fall under the CSRD, management reporting must be both reliable and transparent. Guidelines and frameworks must be closely followed throughout this process. This allows affected businesses to generate substance behind their claims with trusted third-party support. This will help you comply with the directive and solidify your data.
At Positive Planet, we use the GHG Protocol as our reporting guidance for heightened accuracy in our calculations. For carbon reduction plans, we follow the Science Based Targets initiative (SBTi) framework for target setting to ensure credibility throughout the decarbonisation process.
Begin to Voluntary Report
Possibly the most important step to ensuring sustainability is embedded within your company culture is the desire to report on your operations voluntarily. By following the requirements, you are establishing sustainability as a pillar within the business. Voluntary reporting will ensure businesses not yet impacted by CSRD are well-prepared for when its scope widens. These companies can use this time to voluntarily align with CSRD, ensuring a seamless transition to sustainability reporting when the legislation inevitably impacts them.
What are the business benefits of CSRD compliance?
Positive Planet’s expert team is on hand to guide you through each step so you can enjoy an array of business benefits as a result of your compliance. Some key benefits of getting up to speed with your sustainability reporting include:
Regulatory compliance: Staying on top of regulatory changes positions your business well ahead of new reporting requirements, meaning you can transition to new legislation seamlessly.
Improved transparency: Engaging with the CSRD can demonstrate commitment to your ESG strategy to stakeholders, boosting your brand image, reputation and trust, both internally and externally.
Competitive advantage: Adopting the CSRD standards early can set you apart from rival businesses that are slower to transition to the new reporting requirements. This will increase your competitiveness within your industry.
Investment attractiveness: ESG and sustainability are increasingly taking the main priority for investors when making financial decisions. So, preparing for the CSRD early can create new opportunities for additional sources of capital and enhance your investment attractiveness.
High stakeholder engagement: Transparency in your sustainability reporting can improve trust amongst stakeholders, opening doors for conversations and engagement in your Net Zero programme. This can enhance business productivity amongst employees and business performance through customer loyalty.
Preparing for the Corporate Sustainability Reporting Directive may seem like a daunting task. However, our team of experts are ready to support you in your reporting and compliance. Collaboration is key to ensuring compliance with the new directive.
Last Updated: 17/02/2025
