CSRD: when should we be ready?
Summary
The Corporate Social Responsibility Directive (CSRD) came into force in the EU on December 16, 2022, with the first reports expected from 2025.
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Introduction
The Corporate Social Responsibility Directive (CSRD) was published on 16 December 2022 in the Official Journal of the EU.
Once passed, the legislative proposals can come into force after a transition period to allow businesses to prepare for and adjust to the new requirements. The first reports are therefore to be produced from 2025 (for financial years starting on 1 January 2024) for companies previously subject to the Non-Financial Reporting Directive (NFDR).
Affected companies need to prepare to meet the requirements of the CSRD, seize the opportunities, and manage the challenges associated with this sustainability-focused regulatory directive.
Please note that, under exceptional circumstances, postponing a report may be optional.
Understanding the requirements of the CSRD
As soon as the new directive comes into force, companies will be required to provide transparent and comprehensive information on their environmental, social, and governance (ESG) performance. This includes a range of reports on greenhouse gas emissions, waste management, stewardship practices, diversity, human rights, and more.
Standardized Standards and Methodologies
The CSRD establishes several common standards and methodologies for collecting, measuring, and disclosing ESG information. This allows for comparability of reports between companies, which greatly simplifies the assessment of their sustainability performance.
Double Materiality
The CSRD, by incorporating the notion of "double materiality", highlights the importance of the financial and non-financial impact on the long-term viability of a company. This contributes to a more comprehensive and balanced accountability of organizations.
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CSRD: a crucial step for corporate sustainability. Being prepared today means prospering tomorrow.
Assess the impact of CSRD on your business
Companies should familiarize themselves with the content and requirements of the CSRD today. This will allow them to better understand how these obligations may affect them, in particular, if they fall within the scope of the Directive.
More than 50,000 companies in the EU are directly affected by the directive. These organizations must adapt to thrive in this new regulatory landscape focused on sustainability.
The companies concerned
Initially, the CSRD concerns companies that meet at least 2 of the following criteria:
- + 250 employees;
- =/+ €20 million balance sheet;
- =/+ €40 million in turnover.
Secondly, listed SMEs meet two of the following three criteria:
- + 10 employees;
- =/+ €700,000 balance sheet;
- =/+ €350,000 turnover.
Identify impacted areas
Companies need to identify areas that will be directly impacted by CSRD requirements, such as ESG data collection, reporting, governance, risk management, and more. This will allow them to adapt their strategy and make the necessary changes and investments.
Anticipating change
To anticipate and prepare to comply with the Corporate Social Responsibility Directive, companies need to equip themselves with a set of essential resources.
Evaluate data collection systems
It seems essential for companies to have robust data collection systems in place to track environmental, social, and governance (ESG) key performance indicators in line with CSRD requirements
There are solutions, like the Carbon Cockpit Expert from D-Carbonize, that make it easy to collect, track, and report ESG data transparently and efficiently. These tools can automate the reporting process and ensure data accuracy.
Analyze costs and resources
Anticipating the application of the Directive generates initial and recurring costs. These investments include:
- Data collection and verification;
- Staff training;
- Technologies (software, solutions, etc.);
- Recruitment of a project manager;
- The support of a consultant or a carbon expert.
The company must integrate its expenses into its forecast. There is a need to develop a detailed action plan that defines specific steps, responsibilities, resources, and timelines to ensure compliance with the CSRD effectively and efficiently.
If the company does not plan the directive, it may face difficulties in complying with its obligations. It is subject to financial penalties and may be excluded from public procurement or be deprived of subsidies.
These financial penalties are intended to ensure compliance with the obligations imposed by the CSRD and to encourage companies to actively engage in sustainable practices.
Get support from experts
To best anticipate organizational changes, companies can collaborate with sustainability experts, carbon consultants, or specialized consulting firms for guidance on the implementation of CSRD.
The carbon footprint calculation software of D-Carbonize is a solution that companies can rely on to build the credibility of reports and ensure the accuracy and integrity of data.
