What is the new corporate sustainability reporting directive?

Sustainability reporting has evolved considerably in recent years and the new Corporate Sustainability Reporting Directive (CSRD) is the final step in an unprecedented process of change. Before June 6, this standard, which is part of the European Green Pact, must be transposed into the legal system of each member state of the European Union (EU). The aim is to make companies more transparent and environmentally responsible.

What is the CSRD?

The CSRD, on corporate sustainability reporting, is an EU directive that amends and extends the requirements of the Non-Financial Reporting Directive 2014/95/EU (NFRD). It introduces the European Sustainability Reporting Standards (ESRS), developed by the European Financial Reporting Advisory Group (EFRAG). These standards detail how companies should report on environmental, social and governance aspects. 

Its objectives are:

• Increase transparency. To provide investors, consumers, policy makers and other stakeholders with more complete and comparable information on the sustainability impacts of companies.
• Encourage corporate sustainability. Encourage companies to integrate sustainability into their strategies and operations by promoting responsible and sustainable business practices.
• Support informed decision making. Facilitate informed decision-making by investors and other stakeholders by improving the comparability and reliability of ESG data.
• Fulfillment of objectives. Contribute to the fulfillment of the objectives of the European Green Pact and the Sustainable Development Goals (SDGs) of the United Nations. 

What will change?

• Expanded scope. From 12,000 companies required to report under NFRD, to around 50,000 under CSRD.
• ESRS standards. These are divided into two cross-cutting standards, five environmental, four social and one governance, providing a comprehensive and comparable framework for ESG disclosure.
• Dual materiality. An analysis is required that considers both the impact of sustainability activities on the company's financial position and the impact of the company on the environment and society.
• External verification. Sustainability reports should be verified by an independent third party to ensure their reliability.
• Digital format. Reports should be presented in a unified electronic format (XHTML).  

Who is affected?

• All large companies in the EU, regardless of whether they are listed or not,
• Listed SMEs,
• Non-EU companies with a turnover exceeding EUR 150 million in the EU and having at least one subsidiary or branch meeting certain thresholds. 

Which are the key dates?

The transposition of the CSRD into the national legal system of each EU member country must be completed by June 6, 2024. The key dates for implementation are:

• January 1, 2024. Large public interest companies (more than 500 employees) must report in 2025 on fiscal year 2024.
• January 1, 2025. Other large companies (more than 250 employees and/or a turnover of €40 million and/or €20 million in assets) must report in 2026 on fiscal year 2025.
• January 1, 2026. Listed SMEs and other companies must file reports in 2027 on fiscal year 2026.
• 2029. Third country companies with subsidiaries in the EU are required to report on fiscal year 2028. 

How can CIRCE - Technology Center help you?

Due to the new CSRD requirements, it is necessary to carry out an exhaustive analysis in several environmental areas to develop sustainable strategies in companies. These strategies must take into account the entire value chain. At CIRCE - Technology Center we have a technical team and several services to help companies comply with the new CSRD:

• Dual Materiality Assessment. We perform comprehensive analyses to identify and assess the material issues relevant to each company.
• ESRS Compliance. We assist in aligning business strategies with ESRS standards by developing appropriate policies and procedures. Specifically, in E1 (climate change), E2 (pollution), E3 (water and marine resources), E4 (biodiversity) and E5 (resource use and circular economy).
• Training and education. We offer training programs and workshops on ESG data management and regulatory compliance.
• Information Systems Implementation. We develop systems and processes to collect, manage and report ESG data efficiently and in compliance with standards.
• Verification and auditing. We provide independent auditing services to ensure the reliability of sustainability information. 
   

These services are designed to help companies adapt to the new CSRD requirements and implement sustainable practices that benefit both the environment and their financial performance.

For more information on how we can help you, please do not hesitate to contact us.