The CSRD is a new, important piece of European regulation requiring companies to report on non-financial topics, such as environmental challenges, social impact, and corporate governance (ESG). Learn more about what your CSRD journey could look like.
The CSRD requires companies in the European Union to report on non-financial topics, such as environmental challenges, social impact, and corporate governance (ESG).
It presents numerous advantages, as it can uncover opportunities for cost reduction and foster innovation in product development. However, knowing which information you need to disclose to comply with this new legislation and how to approach reporting can be challenging.
South Pole's latest tools and methodologies will assist you in determining your level of compliance with the CSRD regulation, help you identify material topics to disclose and provide insight into where improvements are required - saving you time and resources. Once you know your material topics and current reporting gaps, you can move towards closing them, prepare for reporting and disclose your ESG performance.
Each CSRD journey is unique and requires a tailored approach to ensure it aligns with your business objectives. We can support you in the following areas:
✓ Customized Solutions Highly tailored to your company's needs and sustainability goals
✓ Efficiency and Clarity Straightforward tools and methodologies that simplify the CSRD process
✓ Actionable Insights Recommendations that guide you toward meaningful activities
✓ Collaboration and Alignment Presentations and joint discussions will ensure that all stakeholders involved are on the same page and committed to the next steps
✓ Long-Term Success A foundation that addresses immediate needs and set you up for success in the long run
We are an impartial, independent advisor that has supported clients on their climate action strategy for over 17 years.
Our experienced and committed team of passionate experts have global experience and specialised regional market knowledge.
We have a solid track record, having been trusted by 1000+ corporations.
What are the main objectives of the CSRD?
Following the objectives outlined in the Paris Agreement the EU approved the European Green Deal in 2020, which is a set of policy initiatives that aims to set the EU on track towards climate neutrality in 2050. The CSRD is one important element in this legislative package, and complements the EU Taxonomy and the Sustainable Finance Disclosure Regulation (SFDR).
The main objective of the CSRD is to make the ambitions of the European Green Deal achievable by channeling capital flows towards sustainable businesses through ensuring more transparent and harmonized sustainability information, as well as through an increased emphasis on the importance of ESG factors.
Which companies are affected by the CRSD?
CSRD will apply to:
Note that only listed SMEs will have to comply with CSRD. However, there are big benefits for non-listed SMEs to follow the CSRD requirements anyway since it will make it easier to provide information on their sustainability performance to clients, banks and investors. The EU has proposed specifically designed sustainability reporting standards for non-listed SMEs with simplified reporting requirements, that non-listed SMEs can adopt on a voluntary basis.
When will the new CSRD rules start to apply?
The new CSRD rules will apply in stages as follows:
1st of January 2024:
All companies subject to the Non-Financial Report Directive (NFRD), i.e. large public interest entities/groups with more than 500 employees (reporting in 2025 on 2024 data)
1st of January 2025:
All remaining large companies (reporting in 2026 on 2025 data)
1st of January 2026:
all listed SMEs (reporting 2027 on 2026 data). For these companies there is a possibility to opt-out until 2028
1st of January 2028:
Non-EU companies with branches/subsidiaries of a certain size (reporting 2029 on 2028 data)
What is Double Materiality?
The Double Materiality Assessment (DMA) is foundational in the CSRD. DMA has two dimensions:
In the process of the Double Materiality Assessment (DMA) companies will engage with stakeholder and assess and rate impacts, risk and opportunities from the two perspective above. This will give an overview which are the greatest impacts, risk and opportunities aswell as giving the company clarity of which sustainability matter should be reported on in the CSRD report. Material topics should be reported on and non-material may be omitted.
Double materiality can also help companies improve their risk management strategies, enhance their business resilience and position themselves more favorably in a market increasingly focused on sustainable and socially responsible practices.
Read our blog post on Double Materiality Assessment to learn more.
Where and in what format should companies report on CSRD?
The CSRD information should be included as a specific section in the company's management report.
The information should be submitted in an electronic format (XHTML format) in accordance with European Single Electronic Format (ESEF) regulation, and uploaded to the coming European Single Access Point (ESAP) database, in order to make the reported information easily accessible to investors and other stakeholders.
What happens if a company fails to disclose according to the CSRD?
Regarding non-compliance with the CSRD, it will be up to each Member State to define penalties for infringements to the CSRD.
Expectation are that they will be substantial. Additionally, there are significant reputational and commercial risks when not complying.
What are the differences between the NFRD and the CSRD?
The Non-Financial Reporting Directive (NFRD) is an EU directive that was adopted in 2014 which requires certain large EU companies (companies defined as public-interest entities, such as listed companies, banks or insurance companies with over 500 employees) to report on non-financial issues and their ESG performance. The CSRD builds on the NFRD, and increases the scope of reporting and the content of what needs to be disclosed.
For example:
What are the key benefits of reporting according to the CSRD?
Although the CSRD might seem like an increased regulatory burden for companies, reporting according to this new directive will bring about various key benefits. The CSRD presents an opportunity to companies to integrate ESG into its core business strategy.
Since complying with the CSRD will increase the degree of transparency in sustainability reporting, it will be easier for investors, clients and other stakeholders to get a clear picture of your company's sustainability performance. This could result in increased business resilience, more access to capital and financing, increased positive reputation, reduced risks of being accused of greenwashing, among others.
Furthermore, since the disclosure requirements of the CSRD are standardised and highly detailed, the degree of comparability between companies will be higher which in turn makes it easier for external investors to find the best performing companies.
