Corporate Sustainability Reporting Directive

On April 21, 2021, the European Union (EU) Commission suggested a proposal for the Corporate Sustainability Reporting Directive (CSRD). It is meant to replace the Non-Financial Reporting Directive (CSR-RUG). The purpose of the CSRD is to encourage more private investment for the transition into a climate-neutral economy.

Is your company affected by the Corporate Sustainability Reporting Directive?

The EU Commission wants to expand the application of the CSRD, which means more companies will have to report their sustainability information. Currently, about 11,000 companies do this, but with the proposed changes, it will increase to around 49,000 companies.

Under the new rules, large companies will need to start reporting in 2023, while smaller businesses will start collecting the necessary data in 2026.

Companies that are considered to be large enterprises:

• Balance sheet total: > €20M
• Annual net sales: > €40M
• Number of employees: > 250

Companies that are considered to be SMEs:

• Balance sheet total: between €4M and €20M
• Net sales: between EUR €8M and €40M
• Employees between 50 and 250

However, the Directive only applies to SMEs traded on exchange-regulated markets in the EU.

When do the new rules of the CSRD apply?

After the Corporate Sustainability Reporting Directive is adopted by the end of 2022, big companies will need to start collecting data based on the new standards from January 2023 and submit their reports in early 2024.

For smaller companies (SMEs), reporting will begin in the financial year 2026. They will start collecting data in January 2026 and submit their reports at the beginning of the financial year 2027. An easier-to-use standard is being developed specifically for SMEs.

What is in store for your company?

The EU, for the first time, is developing legally binding, concrete standards according to which reporting must take place. While drawing from widely used voluntary frameworks such as the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), and Task Force on Climate-Related Financial Disclosure (TCFD), the Corporate Sustainability Reporting Directive will maintain a distinction.

This will require companies to adapt to new criteria and questions in accordance with reporting standards. The standards also require the information gathered to reflect in the company’s annual report, as opposed to standalone sustainability reporting.

In keeping with the concept of ‘Double Materiality’, companies are expected to report not only the impact of their actions on society and the environment, but also the risks and opportunities arising from social and environmental developments for the company.

How is the quality of the reports assured?

Currently, sustainability reporting is audited using a method called “limited assurance.” This means that evidence is presented to assess the credibility and plausibility of the reported facts. However, the goal is to eventually switch to a more robust method called “reasonable assurance” as soon as auditing standards for sustainability information are developed and available.

What are the special challenges?

Now the question arises, what specific challenges does the CSRD pose for companies? Let's have a look at three upcoming special challenges:

• Broadening the scope: Companies with little or no prior experience or reporting capacity will be required to fulfil sustainability reporting obligations.
• New standards: The new standards are more comprehensive, more complex, and require more detailed information than ever before.
• Data from the supply chain: The new standards require collecting and reporting sustainability data from across the supply chain, instead of just internal data.

How do we help you?

Together with experts from large, medium-sized and small companies with experience in sustainability reporting, we have developed a software solution that makes it easier for you to implement the new directive.

• We simplify the collection of relevant data internally and along the supply chain, increasing efficiency and reducing effort.
• We allow you to oblige the information requests from your customers but allow you to protect business-critical information about your supply chain from being exposed to the data receiver at the same time.
• We explain the new standards in an understandable way and help with the calculations. In this way, we relieve you of tedious work steps and simplify data entry.
• We facilitate data exchange with suppliers and ensure that necessary information from the supply chain arrives correctly and without additional effort.
• We can help you generate your report in the correct format at the touch of a few buttons once the data has been entered.

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