Navigating the Corporate Sustainability Reporting Directive (CSRD)
Introduction
The Corporate Sustainability Reporting Directive (CSRD) represents a major shift in the way companies must disclose their social and environmental performance, aiming to create a standardized approach to sustainability reporting across the EU. CSRD goes beyond previous EU regulations like the Non-Financial Reporting Directive (NFRD) to ensure consistent and reliable disclosures that meet the needs of investors and societal stakeholders alike.
What is CSRD aspiring to do?
At its core, CSRD is designed to improve transparency in sustainability reporting, ensuring that companies disclose material information on their social and environmental performance.
CSRD is based on double materiality, this means companies must report on both:
Financial materiality: disclosures of information relevant to investors
Impact materiality: disclosures of information about the company’s impact on people and the environment
Who is impacted and key deadlines:
What disclosures are required?
Under CSRD, both EU and non-EU companies with significant activities in the EU must file annual sustainability reports alongside their financial statements. These reports must adhere to the European Sustainability Reporting Standards (ESRS), adopted in July 2023, covering both environmental and social indicators. Additionally, CSRD introduces a requirement for third-party limited assurance to verify the disclosed data.
Environmental Disclosures: Companies are required to report on Scope 1, Scope 2, and Scope 3 greenhouse gas emissions. Additionally, disclosures on pollution, water and marine resources, the circular economy, and biodiversity are required.
Social Disclosures: These include a company’s impact on its workforce (including along the value chain) and the surrounding communities, covering issues such as working conditions, diversity, and human rights.
How companies should prepare
Identify in-scope entities: Determine which parts of your organization will fall under CSRD reporting requirements.
Establish a baseline: Review current sustainability reporting practices and assess gaps relative to the new ESRS standards.
Perform a double materiality assessment: Conduct a double materiality assessment to identify the social and environmental issues that are material to both investors and society.
Bridge the gaps: Identify gaps between CSRD requirements and your existing data collection and reporting capabilities.
Plan for Third-Party Assurance: Prepare for the requirement of third-party limited assurance on your sustainability reports.
Our recommendation
Double materiality doesn’t need to mean double the work. The best way to prepare is to focus on establishing efficient systems for gathering and managing data across both environmental and social dimensions. Start with a materiality assessment to identify where your company has the greatest impact and risk, and build your reporting around those areas.
Don’t wait to begin developing relationships with suppliers and stakeholders to ensure you have access to the data required for full compliance. Having these systems in place early will ease the transition and allow you to focus on improving performance, not just meeting reporting requirements.
How Bespoke ESG can support
We specialize in helping companies navigate the complexities of new sustainability regulations like CSRD. With our tailored approach, Bespoke ESG is ready to guide you through every step of the CSRD reporting process, ensuring you’re not just compliant but strategically positioned for long-term sustainability success. Contact us for support on:
Double Materiality Assessments
Gap Analysis and Reporting Support
Third-Party Assurance Preparation
Supplier and Stakeholder Engagement
Disclaimer: The information provided in this document is for general informational purposes only and does not constitute legal advice. Regulatory advice is provided solely within the scope of contracts between Bespoke ESG and its clients.