The 10th of November 2022 marked a significant day for European corporations as the European Parliament adopted the Corporate Sustainability Reporting Directive (CSRD). The CSRD holds a clear mandate: facilitating a major shift in how companies report on their Environmental, Social, and Governance (ESG) activities.
A New Benchmark in Reporting
The ambition of the CSRD is to bring sustainability reporting to a level par with financial reporting. In doing so, the directive hopes to bolster corporate accountability and ultimately drive sustainable change.
Serving as the guiding framework for the CSRD, the European Sustainability Reporting Standards (ESRS) offer comprehensive guidelines on how companies should gather data and provide reports. These standards embrace the double materiality reporting standard, emphasizing simultaneous disclosure on both financial aspects and broader environmental and social consequences.
Who’s in the Spotlight of the CSRD?
The number is massive, 49.000 European enterprises, will come under the CSRD’s requirements. This includes every listed entity on the EU regulated market, except for some micro-enterprises. It’s not just about listed entities; the CSRD also targets large companies meeting certain revenue, asset, or employee criteria. Moreover, non-EU firms generating turnover above 150 million euro within the EU must also adhere.
A domino effect is expected from this. Companies along the value chains of the directly impacted firms will experience indirect ramifications, as they will inevitably need to support their business partners in meeting the ESRS requirements.
Companies should start preparing for these changes, with the CSRD taking effect for certain large listed entities as early as 1 January 2024. The timeline gradually cascades to cover other large businesses, SMEs, and finally, foreign enterprises by 2029.
Timeline to Adherence
Companies should brace for these changes, with the CSRD taking effect for certain large listed entities as early as 1 January 2024. The timeline gradually cascades to cover other large businesses, SMEs, and finally, foreign enterprises by 2029.
The Ripple Effect: Beyond Reporting to Real Impact
Transparent reporting will, in a much larger scale, allow consumers to champion responsible brands. Regulatory bodies, with clearer oversight, will expect firms to shift from only disclosure to meaningful action. Shareholders, now armed with detailed insights, will influence corporations towards better sustainable practices, reevaluating investment preferences.
As these reports become industry norm, companies will naturally not want to lag behind, resulting in a competitive, yet constructive, race towards genuine sustainability. Ultimately, this shift isn't just about compliance but about driving change in the corporate world, fueled by stakeholder scrutiny and expectations.
Your Trusted Partner: NIVI
Navigating these changes can seem overwhelming, but NIVI is here to assist on the journey. We provide digital sustainability management software, designed to align your emission data with the latest standards, including ESRS and CSRD. Our platform is fully capable at aggregating comprehensive data with industry databases to provide companies with clear and accurate insight empowering them to respond effectively to their ESG responsibilities.
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