CSRD: who is concerned?
Summary
More than 50,000 EU companies will be directly impacted, and must prepare for future compliance. The criteria for applying the CSRD vary according to the size of the company and its activity on the European market. Many companies will also be indirectly affected, including suppliers and financial partners, who will have to meet sustainability reporting requirements.
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Introduction
Companies can now anticipate the impact of CSRD on their business. This directive directly affects more than 50,000 companies in the European Union. They need to prepare for future compliance and understand how to comply with the new standards while navigating this new sustainability-focused regulatory framework.
The CSRD will have an inevitable impact on all stakeholders of the companies directly affected. Employees, suppliers, and partners must also seize the opportunities and manage the challenges associated with this directive.
Objectives of the CSRD
Broadening the scope of the NFRD
The European Union's (EU) proposed Corporate Social Responsibility Directive (CSRD) aims to broaden the scope of companies subject to sustainability and social responsibility reporting obligations. It aims to increase transparency in non-financial information and ensure that more companies disclose data on issues such as environmental impact, social issues, and governance.
The CSRD expands the scope of the previous Non-Financial Reporting Directive (NFRD) to include more companies.
Aligning with global climate goals
The CSRD aligns with several global goals that aim to improve sustainability and corporate responsibility.
In particular, the directive is part of the global commitment to combat global warming, in line with the Paris Agreement, as it requires companies to disclose information on their greenhouse gas (GHG) emissions and reduction strategies.
The CSRD is also consistent with the United Nations' Sustainable Development Goals (SDGs), which include 17 goals to eradicate poverty, protect the planet, and ensure prosperity for all.
Companies need to commit to sustainability
Large companies have a significant impact on global warming due to their high carbon footprint resulting from their operational activities, supply chain, and energy consumption.
They need to recognise the need to report on and implement CSR (Corporate Social Responsibility) and sustainability objectives.
" Be prepared right now for the impact of CSRD on your company."
Companies affected by the CSRD
The CSRD establishes thresholds to determine which companies are affected. The criteria vary according to the average number of employees employed during the financial year and the total balance sheet of the company.
Large companies
The CSRD applies to all large companies that meet at least two of the following criteria:
Secondly, listed SMEs meet two of the following three criteria:
Listed SMEs
The CSRD applies to all listed SMEs that exceed two of the following thresholds:
- Have 10 employees (on average over the financial year);
- Have a balance sheet equal to or greater than €350,000;
- Have a turnover equal to or greater than €700,000.
Large companies active in the European market
Unlike the NFRD, which it replaces, the CSRD also applies to non-EU companies with an annual turnover of €150 million or more on the EU market. This includes subsidiaries of the groups, which will be subject to the new reporting standards and transparency obligations.
Companies indirectly affected by the CSRD
CSRD reinforces transparency and accountability throughout the supply chain. Many companies are therefore indirectly affected by this directive. This contributes to more responsible and sustainable business practices.
Suppliers
Suppliers, as stakeholders of these companies, are affected by sustainability reporting obligations. Indeed, companies subject to the CSRD can ask their partners to report specific ESG data. This can include information on greenhouse gas emissions, fair labor practices, waste management, energy efficiency, and more.
Suppliers are encouraged to improve their sustainability practices to meet their customers' expectations. This can incentivize them to reduce their emissions, adopt more ethical work practices, and reduce their environmental footprint. Companies that don't meet ESG reporting expectations could lose customers. On the other hand, investing in sustainability would be a source of new business for others.
Funding partners
Investors and shareholders have access to more detailed environmental, social, and governance (ESG) information, allowing them to more accurately assess the risks and opportunities related to a company's sustainability. This can significantly influence their investment decisions.
D-Carbonize and its carbon footprint calculation software support companies in this transition so that they can take advantage of the opportunities related to CSRD.
