In 2014, the legislative branches of the European Union (Council and Parliament) introduced the Corporate Sustainability Reporting Directives (CSRD). The CSRD directive covers the company’s activities in the European Union, which include economic, financial, social and environmental factors. The CSRD is intended to replace the Non-Financial Reporting Directive (NFRD).
The purpose of CSRD sustainability reporting is to establish high rules of business ethics, under which the subjects of the CSRD reporting would voluntarily (at first) or upon request make non-financial information about their activities available to the public and the EU Commission. The noble goal of this Directive is to determine the economic, technological, as well as social and environmental development of the countries of the European Union towards a circular economy, zero emissions of harmful substances into the atmosphere. Moreover, towards high standards of education, medicine, and the protection of human rights. The reporting frequency is once a year.
Who are the companies under the jurisdiction of the CSRD?
Overview:
- Large organizations whose securities are listed on the regulated EU market.
- EU credit and insurance companies.
- Subsidiaries of non-EU residents (apart from micro-enterprises) whose securities are listed on EU-regulated markets, including debt securities with a par value of less than EUR 100,000 or equivalent.
The CSRD standards are still under development and are undergoing harmonization with the national legislation of the countries of the European Union.
The directives will partially enter into force on January 1, 2024. From that day onwards, all companies (that are large undertakings or parent undertakings of a large group) listed on regulated markets that have more than 250 employees will be required to publish reports using the CSRD templates. This enables the company to improve its reporting and make its activities more transparent to the public and investors.
From 2026, the CSRD reporting will also affect small and medium companies operating in the healthcare, mining, and environmental sectors. The CSRD directives will come into full legal force in 2028, when all listed and non-listed companies will be required to publish CSRD reports. Non-EU companies with subsidiaries in the EU, with more than 150 million euros in annual turnover and at least one subsidiary or branch in the EU, will have to report as well.
Reporting subject
CSRD regulates the reporting of entities on sensitive information related to activity affecting the environment and climate change, as well as corporate social responsibility and governance issues. Moreover, according to the CSRD requirements increasing every year, companies will have to disclose information about the business processes of their activities concerning the subjects of implementing the sustainable development policy. This is necessary for investors and stakeholders to conduct appropriate analyses about the actual and potential adverse impact of the company’s activities on the factors of sustainability of its development in the future, set by ESRS standards.
How to Write a Sustainability Report – 6 steps:
- Set the company’s goals as part of the sustainability policy.
- Identify eco problems and tools to solve them.
- Select progress indicators.
- Collect and structure the received information according to ESRS standards.
- Generate CSRD reports.
- Contact audit companies accredited by the EU Commission, which issues a CSRD certificate based on the reporting results.
Although you can set CSRD goals, evaluate progress and generate reports on your company’s compliance with sustainable development standards yourself, software companies with appropriate accreditation from the EU Commission will help you do this easier and faster.
Attention
New sustainability reporting requirements in the EU, US, UK, and elsewhere are a priority for many organizations. The high requirements of the CSRD makes companies more attractive to investors and lending on more favorable terms.
How to get CSRD reporting?
Since the CSRD directives are constantly updated and supplemented to improve their effectiveness, and since their jurisdiction covers companies engaged in all spheres of human activity, it is crucial to be aware of the updates. For example, companies such as Celsia.io are already developing a software that will automate the generation of CSRD reports. Thanks to their software, it is also possible to automatically update the legislative base of ESG reporting standards.
Companies like Celsia, who develop software for generating CSRD reports are independent auditors who have accreditation certified by the EU executive authorities. To ensure that CSRD entities comply with the reporting rules, they collect relevant information, check the accuracy and lastly fill out the CSRD reports. Based on the high-performance results, the subject companies receive a CSRD certificate.
Conclusion
Starting 2024, large companies must report according to the CSRD sustainable development standards. From 2026, it affects medium and small sized companies as well. The CSRD subject activities are finance, mining, healthcare, and alternative energy. The goal of the sustainable development policy is a circular economy that does not emit harmful substances into the atmosphere. Moreover, there are high demands in the field of human rights.
Based on the experience of our partner Celsia.io, compliance with ESRS standards means these companies will be able to attract investment and obtain long-term and low-interest loans. Furthermore, they receive an image component of the company to inspire customer confidence and increase employee loyalty.
