What does CSRD mean?
CSRD, or the Corporate Sustainability Reporting Directive, is the EU’s new regulatory framework that is revolutionising how companies report on their sustainability work. It replaces the previous Non-Financial Reporting Directive (NFRD) and tightens the requirements for transparency and detail in corporate sustainability reporting. The aim is to create more standardised and comparable reporting that strengthens the confidence of both customers and investors, and ensures that companies’ environmental and social impacts can be assessed in a uniform manner.
CSRD reporting is becoming mandatory for more companies than before, and the content must now be included as part of the management report in the annual report. By consolidating sustainability reporting and financial data into a single document, CSRD simplifies comparisons and analyses – and strengthens sustainable development across Europe.
The purpose of CSRD – A sustainable direction for companies in the EU
CSRD is part of the EU’s Green Deal, an ambitious plan to promote sustainable economic growth and enhance the transition to a greener economy. The directive aims to:
- Strengthen transparency: Give investors, customers, and other stakeholders a clear picture of companies’ sustainability work.
- Support the financial market: Steer capital towards sustainable companies by providing standardised sustainability information.
- Focus on accountability: Encourage companies to take greater responsibility for their environmental impact, their social commitments, and their corporate governance (ESG).
CSRD helps to create a level playing field where all companies are assessed based on the same criteria, making it easier for stakeholders to make informed decisions about which companies they want to support.
From NFRD to CSRD: What you need to know about the new EU directive
CSRD – Who is covered and what do the requirements entail?
The CSRD requirements apply not only to large companies but have a broader scope than previous regulations. The companies covered are all those that meet at least two of the following criteria:
- More than 250 employees.
- A net turnover exceeding €40 million.
- A balance sheet total exceeding €20 million.
- Small and medium-sized enterprises (SMEs): Companies that are listed on a stock exchange are also covered, but with slightly simplified requirements.
- Companies outside the EU: Companies that have branches or subsidiaries in the EU may be covered from 2028, depending on the scope of their operations.
CSRD imposes stricter requirements than previous directives, meaning companies need to take a more detailed and comprehensive approach to their sustainability reporting. Here are some key areas covered by the directive:
- Double materiality assessment: Companies must report both on how sustainability issues affect their business and how their business affects the environment and society. This holistic perspective helps companies identify the most important issues to focus on.
- ESG areas: The reporting must cover environmental (environmental impact and climate), social (working conditions, human rights), and governance (corporate management and risk management) aspects.
- Scope 1, 2, and 3 emissions: Companies must report their greenhouse gas emissions, including direct emissions (Scope 1), energy-related emissions (Scope 2), and indirect emissions in the supply chain (Scope 3).
To ensure credibility, CSRD requires the sustainability report to be externally assured. The auditor must perform a limited assurance review of the report and submit an assurance report to the general meeting.
How can companies prepare for CSRD?
Preparing for CSRD is crucial to ensure compliance. Here are some steps companies can take to meet the requirements:
- Map the current situation: Identify what sustainability data is already being collected and what gaps need to be filled.
- Training: Ensure that employees and management have the knowledge required to understand and implement CSRD.
- Implement technical solutions: Invest in systems and tools that can handle the collection, analysis, and reporting of sustainability data.
- Create a strategy: Develop a long-term sustainability strategy that is integrated into the company’s overall business model.
- Collaborate with auditors and experts: Ensure that the sustainability report meets the standards and is ready for external assurance.
The key is to prepare for CSRD in good time
CSRD represents a major step forward for sustainability reporting within the EU. By standardising and tightening the requirements, the directive helps to create a more sustainable and transparent business world. For companies, it is an opportunity not only to meet the regulatory requirements but also to strengthen their brand, attract capital, and contribute to a greener future.
Starting preparations for CSRD in good time is crucial to ensure compliance and to take advantage of the benefits that come with being a leader in sustainability. Brilliant is ready to help companies in their sustainability work – from understanding what CSRD entails to developing effective solutions to meet the new requirements.