The Corporate Sustainability Reporting Directive (CSRD) is on course to becoming the most important sustainability standard in the corporate world. It will enter the legal framework over the next few years, with firms of different sizes having ranging timeframes for when they must begin complying with its measures. Companies under the CSRD will be obliged to present reports that disclose their impact on a range of specific areas, such as environmental impact, treatment of employees, respect for human rights and anti-corruption.
What does the CSRD mean for your company?
As CSRD regulations will pass into the legal framework at various points throughout the next few years, it is crucial for companies to know when they will begin to be affected. The first companies affected will be those with over 500 employees that are already subject to the Non-financial Reporting Directive (NFRD) from 1st January 2024, with the first reports due in 2025. You can read more about the CSRD timeline in our article here.
What are the potential consequences?
Despite an abundance of information available regarding the CSRD, it may not be very clear to companies what the consequences of a failure to comply will look like. Perhaps most importantly, there may be legal consequences associated with CSRD non-compliance, companies that do not comply with CSRD regulations will be at risk of fines and penalties.
There are also reputational risks with CSRD non-compliance, as ESG reporting becomes the norm in the private sphere worldwide. Research undertaken by the Institute of Customer Service found a clear correlation between a company’s positive social activities and customer appeal. Reputational damage could also be compounded by a loss in investment. 49% of investors surveyed by PwC claimed that a failure to act on ESG issues would deter them from investing in a company.
What can you do about it?
If your company operates in the EU, it’s important to stay up to date on CSRD developments. We frequently post updates around policy and frameworks within the ESG space, all researched, analysed and prepared by our very own ESG experts.
Collecting data for ESG reporting is complex and can be financially and logistically difficult for companies. Investing in the training and resources necessary to comply with the CSRD standards is required, we recommend taking the following steps:
- Perform a double materiality assessment
- Develop a solid understanding of the European Sustainability Reporting Standards (ESRSs) within your firm
- Research and choose data collection and reporting tool
- Put administrative measures in place – CSRD-affected companies will be required to ensure that their reports are digitally accessible and verifiable
- Set up sustainability working groups or committees, or formal departments in some cases, to examine potential strategies for reducing negative impact, tracking impact, collecting data and reporting to stakeholders
If you take the above steps, reporting for CSRD compliance will be less complex. We can assist you with all the above, just click here and talk to an ESG expert.
Look out for our next article on the CSRD, which will look at how the Directive fits into the global network of reporting standards, examining differences and similarities between them in scope, legality and requirements.