A beginners guide to understanding CSRD

A beginners guide to understanding CSRD

 

The Corporate Sustainability Reporting Directive (CSRD) is a new policy from the European Union that significantly changes how companies report on their environmental and social practices. Here’s an easier-to-understand breakdown of what the CSRD involves, its goals, and its benefits.

 

 

What is the CSRD?

 

Starting January 1, 2024, the CSRD requires companies to prepare detailed reports about their impact on social, environmental, and economic aspects. These reports are based on specific standards called the European Sustainability Reporting Standards (ESRS), ensuring consistency in how companies report across three main areas: Environment, Social, and Governance (ESG).

The CSRD starts with double materiality: companies must report not only on how sustainability factors impact their business but also on the impact of their business on society and the environment.

 

 

Who needs to comply?

 

The CSRD applies to:

•    Large Companies: Both private and public large companies based on their size, turnover, or balance sheet totals.
•    Public Interest Entities: This includes banks, insurance companies, and listed companies due to their significant public and environmental impact.
•    Smaller Public Companies: It also covers medium and small listed companies to promote transparency.
•    Certain Non-EU Companies: Non-EU companies with significant EU operations and over 150 million euros in turnover, with a subsidiary or branch in the EU, must also comply.

 

The following figure clearly shows who needs to follow the rules once Belgium has turned them into national law in 2024.

 

 

In case of uncertainty, you can use B-Tonic's CSRD Compliance Assessment tool to quickly determine whether your company needs to comply with the Corporate Sustainability Reporting Directive based on your specific characteristics and activities.

 

 

Main Objectives of the CSRD

 

The CSRD aims to enhance how businesses report on their sustainability efforts, focusing on three main goals:

 

1. Reduce Risks: The CSRD encourages companies to proactively tackle big challenges like climate change and social inequalities. This means identifying and managing potential negative impacts their operations may have on the environment and society before they happen.

 

2. Guide Investments: The directive aims to influence where financial resources are directed. It encourages investments in sustainable projects and companies while discouraging funding for those that are not environmentally or socially responsible. The goal is to speed up the shift towards a more sustainable, green economy.

 

3. Increase Accountability: The CSRD wants companies to be more open about how their operations affect people and the environment. This involves detailed reporting on their activities and impacts, which promotes transparency. This openness is expected to help companies become more aware of their social and environmental footprints and encourages them to adopt more responsible behaviours.

 

These objectives help lay out a clear path for businesses to follow in their sustainability reporting, making sure they contribute positively to environmental and social issues. By integrating these goals into their operations and reporting, companies not only comply with regulations but also help build a more sustainable and fair world.

 

 

Reporting Requirements 

 

The Corporate Sustainability Reporting Directive (CSRD) imposes annual reporting requirements on around 50,000 companies within Europe, including non-EU companies with significant operations in the EU. This applies especially to large enterprises such as banks and publicly listed companies, which are now required to incorporate detailed information on their sustainability practices covering environmental, social, and governance (ESG) aspects into their annual reports.

 

For instance, non-European companies that generate more than 150 million euros in sales within the EU and operate at least one subsidiary or branch in the region are also subject to these rules. In Belgium, specific company categories need to comply with the CSRD, although some entities like associations or public sector organizations may be exempt.

 

This directive aligns with the EU's Green Deal goals, aiming for a climate-neutral Europe by 2050, by enforcing transparency and responsibility in corporate operations. The CSRD standardizes how companies report non-financial information, making it consistent, reliable, and easily accessible. This helps avoid "greenwashing"—where companies falsely claim environmental credentials—and provides stakeholders with clear and accurate information to base their decisions on. Furthermore, regular and transparent reporting under the CSRD encourages companies to adopt sustainable practices, enhancing their accountability and contribution to environmental and social objectives.

 

Overall, the CSRD not only fulfills regulatory requirements but also helps businesses demonstrate their commitment to sustainable and responsible practices. This enhances their global competitiveness and reputation by positioning them as sustainability leaders. Our innovative eSgility tool empowers your company to seamlessly achieve CSRD compliance. We provide a comprehensive solution that streamlines the entire process, ensuring you meet all the crucial standards with confidence.

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