CSRD Demystified: How it impacts your 2024-25 business reporting

What is CSRD and how does it affect your business reporting?

The Corporate Sustainability Reporting Directive (CSRD) marks a transformative shift in how companies disclose their sustainability performance, with more companies impacted, more data required, and more scrutiny from stakeholders. 

CSRD is designed to help investors, customers, and regulators make better-informed decisions, it covers environmental, social, and governance factors. Additional issues like climate change, biodiversity, human rights, and workforce diversity are also included.  

A key element of CSRD is the concept of double materiality. Double materiality assessments ask organisations to evaluate sustainability topics from two perspectives: how these issues impact them, and how the organisation itself affects these topics. By considering both dimensions, businesses will become more resilient and responsible.

In this article, we’ll take a look at the highlights you need to know to get started. 

Who needs to comply with CSRD, and when?

CSRD applies to both EU-based companies and non-EU businesses with substantial operations in the EU. Even companies outside the EU that exceed certain revenue or operational thresholds may be required to comply. It ensures that sustainability reporting moves beyond traditional financial disclosures to provide a full picture of a company’s impact on people and the planet.

Even if you don’t meet these criteria, you may choose to make a voluntary disclosure. Click here to read more about voluntary disclosures. 

Why is CSRD important? 

The main aim of CSRD is to drive accountability and transparency, and in turn increase sustainability initiatives and support sustainable investing. Alongside this, the requirements will cause an evolution of risk and opportunity management for many organisations that fall within the scope of CSRD. Compliance with CSRD brings several benefits: 

  • Regulatory compliance: Failure to comply with CSRD can result in penalties and damage to your company’s reputation. 
  • Investor confidence: More investors are incorporating ESG/Sustainability metrics into their decisions. Complying with CSRD ensures your company remainds attractive to these investors. 
  • Stakeholder trust: Transparent reporting improves relationships with customers, suppliers, and employees by showcasing your company’s commitment to sustainability. 
  • Operational efficiency: The process of complying with CSRD often highlights inefficiencies and areas for improvement, helping companies optimise their sustainability efforts and achieve long-term resilience. 

 

A step-by-step guide to CSRD compliance 

Complying with CSRD may seem challenging, but a structured approach can help your business stay ahead of evolving requirements and improve its sustainability impact. Here’s how you can get started: 

  1. Prepare your business for CSRD compliance: CSRD introduces the European Sustainability Reporting Standards (ESRS), which cover critical issues like climate change mitigation, human rights, and biodiversity. Understanding these standards ensures your reporting is comprehensive and consistent. 
  1. Conduct a Double Materiality Assessment: Businesses must assess their financial materiality (sustainability risks and opportunities for organisations) and impact materiality (how their operations affect society and the environment). This holistic view identifies what should be included in sustainability reports.
An orange circle with arrows between two sides. Financial materiality, an outside-in approach, covers sustainability risks and opportunities for an organisation. Impact materiality, an inside-out approach, covers impacts on environment and society.

3. Collect Accurate Data: Effective compliance relies on robust data, both within your organisation and across your value chain. Companies must track metrics such as carbon emissions, energy use, water consumption, waste generation and workforce issues.

4. Prepare Your CSRD Report: Your CSRD-compliant report forms part of your company’s annual report, covering both past performance and forward-looking risks and opportunities. For maximum impact, the report should be clear, concise, and structured in a way that external stakeholders can easily understand.

5. Strategic Review: Incorporate strategic governance into your processes to streamline disclosures, remain up-to-date with evolving standards, and potentially save resources in key areas. 

6. Secure Third-Party Assurance: Third-party assurance is mandatory under CSRD. Having an external party validate your report adds credibility and reassures regulators and stakeholders of it’s accuracy.

7. Set Targets and Monitor Progress: Establish clear targets that align with CSRD and your sustainability goals. Ongoing monitoring keeps you on track, supports transparency and provides flexibility to adapt to regulatory changes.

Get Started on Your CSRD Journey

Complying with CSRD can seem overwhelming, but we’re here to guide you through every step.  

Click below to read our full guide to CSRD, looking at each step in more detail.

Your CSRD Guide

Or, if you have questions on CSRD, book in a complimentary call with us today for personalised guidance:

Written By    Emma Lane

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