We take you through the Corporate Sustainability Reporting Directive (CSRD) and our new suite of services.
The CSRD entered into force on January 5, 2023, to modernize and strengthen the rules concerning the social and environmental information that organizations must report. A broader set of large companies and listed small to medium-sized enterprises (SMEs) will now be required to report on sustainability.
The CSRD will:
The EU has long believed that investors and consumers are entitled to understand the ESG impact of organizations in a clear, easily comparable way.
ESG reports often omit crucial information, use confusing metrics and focus on different aspects, making it difficult to trust the data or benchmark organizations against one another. This impacts sustainable investments, one of the EU’s focal points.
With its roots in the EU’s Green Deal, the CSRD is the evolutionary outcome of the NFRD, improving and widening the reporting requirements so that they apply to more organizations.
The directive is estimated to increase the number of organizations affected from around 11,000 to 50,000.
For EU-based organizations and non-EU organizations with EU-based subsidiaries or securities on EU-regulated markets, the pathway to more sustainable practices will be unavoidable.
As well as organizations currently in the NFRD’s scope, the CSRD will impact all EU-based organizations with:
Every listed organization will also be affected, except micro-enterprises at first. The first companies will have to apply the new rules in the 2024 financial year, for reports published in 2025.
Organizations will face these facts:
The European Sustainability Reporting Standards (ESRS) set out the requirements for companies to report on sustainability-related impacts, opportunities and risks under the CSRD.
Organizations must disclose information on:
Double materiality
This focuses on two main areas and is fundamental to CSRD compliance:
Under the CSRD, organizations must disclose their impacts on the above and how they could affect the organization going forward.
The organization must undertake a double materiality assessment to identify which sustainability aspects are most material to the business and its stakeholders. This assessment:
Under double materiality, a sustainability topic can be material for an organization when it meets impact materiality and/or financial materiality criteria, hence the use of “double”.
Although the CSRD has guidelines for this, the organization must determine whether a subject is material or not, and choices must be substantiated either way. Assessing which topics are relevant/material, and thus, to include in sustainability reports, is a crucial early step toward CSRD compliance. Our CSRD Double Materiality service will support you through this.
The assessment’s outcome will determine which reporting standards, disclosures and data points should be included in the organization’s sustainability reports, and which can arguably be left out.
A double materiality-led report and strategy enhance transparency and decision-making, and ensure that time and resources are focused on the topics that matter most to the organization, stakeholders and society.
Our global network of CSRD experts can support you every step of the way.
Backward- and forward-looking analysis
Organizations must supply retrospective and forward-looking analyses. This means sharing quantitative and qualitative information.
Stricter rules on climate-related disclosures
The CSRD will call for disclosure of Scope 3 emissions, indirect carbon dioxide emissions produced by all organizations throughout the supply chain connected to the original organization.
Enforced audits
For the first time, all sustainability information in a report must be audited to verify accuracy before publication. Our CSRD Assurance service can support this.
The directive will incorporate existing EU regulations, especially:
The trio will work together to promote sustainable investments. This aims to align the requirements, helping to reduce complexity and avoid duplicating reporting requirements.
As the CSRD is more detailed than the NFRD, organizations will need to collect vast amounts of accurate and verifiable data.
Organizations already reporting under the NFRD face a learning curve while those needing to produce their first ESG report under the CSRD have a greater challenge.
The CSRD will also be incorporated into national law throughout the EU. Depending on how rigorously individual countries enforce the directive, noncompliance could result in penalties or prosecution.
As a sustainability leader for over 30 years, we can support you wherever you are on your CSRD journey.
Our experts actively contribute to developing international standards, frameworks, schemes and regulations, including the UN Sustainable Development Goals (SDGs), UN Principles for Responsible Banking (PRB) Assurance and the CSRD, so we are your perfect partner, whatever you need.
Our services:
Whatever your CSRD maturity level, we will consider the timeline and resources needed to achieve your goals, including the highest-quality disclosures and reports.
To learn more, visit our CSRD services web page or speak with your local SGS representative.
For further information, please contact:
Jason Hulbert
Associate Marketing Manager
Knowledge
t: +44 7912426878
We are SGS – the world’s leading testing, inspection and certification company. We are recognized as the global benchmark for sustainability, quality and integrity. Our 98,000 employees operate a network of 2,650 offices and laboratories, working together to enable a better, safer and more interconnected world.
