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Corporate Sustainability Reporting Directive (CSRD): understand its requirements, the companies concerned, its implications and how to align with the new sustainability standards.
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The Corporate Sustainability Reporting Directive (CSRD) marks a milestone in European sustainability regulation.
This European Union initiative, which came into force on January 1, 2024, applies from fiscal year 2024.
Its aim is to introduce standardized non-financial reporting throughout the European Union, thereby increasing transparency and corporate responsibility in terms of sustainable development.
In this article, we answer these questions:
The Corporate Sustainability Reporting Directive is a European directive that came into force on January 1, 2024 to encourage corporate responsibility in terms of sustainable development.
The CSRD replaces the Non-Financial Reporting Directive (NFRD) and goes further in terms of requirements, emphasizing transparent and detailed communication of companies' sustainable performance.
This European Union directive modernizes and strengthens the rules governing the social and environmental information that companies must report.
One of the main aims of the CSRD is to provide investors and other stakeholders with reliable and comparable information for assessing companies' sustainable activities. The directive also promotes the assessment of financial risks and opportunities arising from climate change and other sustainability issues.
By standardizing reporting across Europe, the CSRD aims to facilitate "sustainable" investments and thus encourage carbon-neutral finance.
In France, the former NFRD directive was translated into the Extra-Financial Performance Declaration (DPEF) dating from 2014.
Unlike the NFRD, which applied only to certain large companies, the CSRD extends to all large companies and all listed companies in the European Union. This represents a significant expansion of the directive's scope.
Here are some key differences between the Non-Financial Reporting Directive (NFRD) and the Corporate Sustainability Reporting Directive (CSRD):
The NFRD applied to large public interest companies with more than 500 employees.
The CSRD considerably extends this scope to include almost 50,000 companies, including all large companies (according to certain criteria), listed companies, listed SMEs and certain non-European companies(see the section on companies concerned for more information).
Unlike the NFRD, the CSRD requires mandatory, accredited verification of sustainability reporting standards. This verification will take the form of an audit by a statutory auditor or an independent body.
The CSRD calls for the adoption of European Sustainability Reporting Standards (ESRS), developed mainly by the European Financial Reporting Advisory Group (EFRAG).
The CSRD is changing the way companies share their sustainability reporting information. They are now required to share their reports in digital format.
The CSRD introduces more detailed reporting requirements than the NFRD. In particular, it introduces the notion of "double materiality".
The new CSRD directive introduces the concept of "double materiality", requiring companies to publish information on :
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This principle of double materiality is a central element of the European Sustainability Reporting Standards (ESRS). The aim is to place financial information and sustainability information on the same level of importance, and to enable transparency of information at this level.
One of the key points to have evolved with this new directive is the number of companies concerned. The new CSRD now applies to almost 50,000 companies, compared with around 11,600 for the NFRD.
This includes all large companies meeting certain criteria, as well as all listed companies, including listed SMEs and certain non-European companies.
So what are the specific criteria for CSRD?
The companies concerned are :
It is also important to note that the CSRD applies not only to companies based in the European Union, but also to companies located outside the EU that carry out significant commercial activities within the EU (for those with sales in excess of 150 million).
This extension of the scope of the CSRD is intended to ensure that sustainability reporting is not just a compliance exercise for large multinationals, but becomes widespread practice for the majority of companies.
The new CSRD will be applied from fiscal year 2024 for companies already subject to the NFRD. It will then be applied progressively from fiscal year 2025.
Companies with more than 500 employees that are already covered by the NFRD and meet 1 of the 2 criteria:
Companies with more than 250 employees that meet 1 of 2 criteria:
All listed SMEs that meet 2 of the 3 criteria:
All non-European companies that fall into one of the following two categories:
The Corporate Sustainability Reporting Directive (CSRD) has far-reaching implications for the companies concerned. CSRD is not just about reporting information, but also about integrating sustainability into corporate strategies and reporting processes.
The European Sustainability Reporting Standards (ESRS) mark a significant change in the way European companies report their sustainability information.
Adopted by the European Commission on July 31, 2023, the ESRS comprise 12 standardized norms covering environmental, social and governance (ESG) issues.
These standards constitute the European reporting criteria for CSRD. They make reporting more transparent and, above all, more easily comparable.
They include two transversal standards and three ESG standards: environmental, social and governance:
Within the framework of the European Sustainability Reporting Standards (ESRS), the Disclosure Requirements (DR) represent a set of information obligations, both qualitative and quantitative, that companies must comply with. These disclosure requirements, as defined by the European Commission, require companies to collect and analyze relevant data for CSRD reporting.
There are 5 environmental criteria:
This standard focuses on identifying a company's greenhouse gas (GHG) emissions and drawing up a plan to reduce them. This involves a precise assessment of the impact of the company's activities on GHG emissions, an approach in which a tool like Waro can be useful.
It aims to identify the main pollutants emitted by the company, the sources of these emissions, and to develop strategies to reduce them, moving towards a zero pollution objective. This may include specific measures for each type of pollutant emitted.
This standard focuses on the company's water consumption and its impact on the pollution of water and marine resources. It requires the monitoring of average water consumption and the implementation of measures to reduce water pollution, where relevant.
This standard assesses a company's impact on biodiversity and local ecosystems. Given its complexity, external expertise may be required to help assess and properly frame this impact.
It examines the resources used by the company and assesses how it fits into a circular economy approach.
Faced with the challenges posed by the Corporate Sustainability Reporting Directive (CSRD), companies are looking for solutions to effectively comply with the new requirements. Here's our advice on how to best anticipate compliance with this new directive:
On December 6, 2023, the French government introduced the ordinance transposing the Corporate Sustainability Reporting Directive (CSRD). This ordinance led to the official publication of the text in the Journal Officiel on December 7. In particular, it details the responsibilities assigned to ESG (environmental, social and governance) data auditors.
As the implementation of these regulations continues to evolve, so do the reporting obligations and requirements for the companies involved. We therefore advise you to keep abreast of the latest developments, so that you're ready for the day when you have to report on CSRD.
Finally, ESG (environmental, social and governance) criteria are an integral part of CSRD reporting. These criteria enable you to assess your company's CSR strategy by analyzing the social and environmental aspects of your activities. To prepare for the arrival of CSRD, you can now monitor these key indicators to prepare the data required for your non-financial report.
In many sectors (notably textiles and furniture), the environmental impact of companies is essentially due to their products.
Whether you're improving your company's CSR strategy or preparing for CSRD reporting, measuring the environmental impact of your products is a key step!
The most widely used method for doing this islife-cycle analysis, which enables us to analyze the impact of our products from end to end, from their place of production to their end-of-life, via raw materials, supply transport, manufacturing and distribution.
Waro's approach, centered on the precise measurement of environmental impact, is perfectly in tune with the spirit of CSRD. By providing companies with key information on the impact of their products, Waro helps them identify areas for improvement and develop more effective sustainability strategies.
This goes beyond mere compliance with reporting standards, and enables companies to actively engage in a sustainability approach, aligned with the long-term objectives of the CSRD.
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