The new Corporate Sustainability Reporting Directive (CSRD) is a key instrument of the European Union in implementing the goals set in the European Green Deal.
The CSRD aims to attract capital for achieving the goals set in the Green Deal by making sustainability reporting and disclosure not only standardized but also a mandatory part of the annual reports that companies submit to regulators in their respective countries.
The Directive came into effect in 2023 and is set to be transposed into national law in all EU countries in 2024.
The Corporate Sustainability Reporting Directive (CSRD) effectively replaces the Non-Financial Reporting Directive (NFRD), while expanding upon the NFRD's scope and requirements and introducing more comprehensive and standardized sustainability reporting obligations for certain companies.
Reporting Standards
Reporting under CSRD is expected to comply with the newly adopted European Sustainability Reporting Standards (ESRS) and be in a machine-readable format. The reporting is subject to audit.
Scope of Reporting
The full scope of reporting covers 12 standards and over 1100 data points.
Only a portion of the standards is mandatory. Companies are allowed to omit reporting on the remaining standards, but only if they can demonstrate that the topics are not material to their operations.
Standards that affect individual sectors have not yet been published, and reporting on them has recently been postponed until the 2026 financial year to allow companies to become accustomed to reporting under the general standards.
Link to the EU Taxonomy
The Corporate Sustainability Reporting Directive (CSRD) requires companies to report on their sustainability in accordance with the criteria outlined in the EU Taxonomy.
The Taxonomy provides a classification system for environmentally sustainable economic activities, specifying the criteria that activities must meet to qualify as sustainable.
Companies subject to reporting under the CSRD are obligated to disclose how their activities align with the European Taxonomy. This includes reporting on whether their business operations contribute to one or more of the six objectives of the Taxonomy.
Who Reports?
For the financial year 2024, reporting under CSRD is mandatory for companies with more than 500 average employees and over €20 million turnover, or €40 million balance sheet total.
For the financial year 2025, mandatory reporting under CSRD applies to companies meeting two of the following three requirements - more than 250 employees (average number), over €50 million turnover, or €25 million balance sheet total.
Starting from the financial year 2026, reporting is mandatory for listed large and medium-sized companies (with a possibility of postponement within a limited period).
From the financial year 2028, mandatory reporting applies to companies headquartered outside the European Union that generate €150 million turnover within the Union or have subsidiaries registered in the EU with a turnover of €40 million.
Why is the Directive important for SMEs?
Since the Directive covers entire supply chains, it is significant for smaller companies if they are part of the supply chain of larger companies subject to reporting.
How can we help?
Whether you are a reporting company or a small company looking to start reporting sustainability to meet customer requirements, you can reach out to us.
Contact us at info@u-impact.com.