Double materiality and transparency: What you can expect from CSRD
The new Corporate Sustainability Reporting Directive (CSRD) is set to have a significant impact on how companies across the European Union report on their sustainability practices. CSRD will replace the previous EU directive on Non Financial Reporting (NFRD) and is expected to raise the bar for corporate sustainability reporting.
When does CSRD go into effect and who does it apply to?
The European Commission adopted the CSRD in late 2022. CSRD expands the scope of companies reporting on sustainability by over four times, from 11,000 covered by the NFRD to nearly 50,000 under CSRD. Companies will be required to adhere to CSRD at different times depending on size, but the standards will start applying between 2024-2028:
January 2024, with reports due in 2025: Large public-interest companies with over 500 employees that are already subject to the non-financial reporting directive (NFRD).
January 2025, with reports due in 2026: Large companies that are not currently subject to NFRD, i.e. companies with more than 250 employees and/or €40 million in turnover and/or €20 million in total assets.
January 2026, with reports due in 2027: Listed SMEs and other undertakings. SMEs will have the option to opt-out until 2028.
CSRD implies several key shifts in how companies perform their sustainability reporting. Below you can find some significant changes that CSRD will have on companies’ sustainability reporting.
1. Double materiality assessment
CSRD will require companies to report using “double materiality”. In a double materiality assessment companies must have both an inwards and outwards perspective on its impacts, in other words, companies will need to consider the impact of sustainability risks on their own operations, as well as the impact of their operations on society and the environment. This shift will require companies to take a more holistic approach to sustainability, by considering both the financial and non-financial impacts of their operations.
2. Consider the entire value chain
CSRD implies companies to consider its entire value chain through its reporting, which means that they will have to look beyond their own operations to report on their entire value chain. This includes suppliers, customers, and other stakeholders involved in the production and distribution of their products or services. This shift will require companies to have a better understanding of their supply chain and will encourage them to work more closely with their suppliers and customers to improve sustainability practices throughout the value chain.
3. Transparency and data
CSRD has an emphasis on transparency and data. Companies will be required to provide greater transparency on their methodology for assessing sustainability impacts, as well as third-party assurance. In addition, companies will need to expand their data capacity to include both internal and external data to report on their sustainability practices. This shift will increase the credibility of sustainability reporting and ensure that stakeholders can have greater confidence in the accuracy of the information provided.
Reporting under CSRD will be mandatory and can feel like an overwhelming task to handle on your own. We are fully aware of all current and upcoming sustainability reporting regulations, and our experts are ready to guide you through the process. By working with Ava, your listed company will not only be competitive and at the forefront of sustainability, but also save time and money in the long run. We offer tailored solutions and support to ensure your organisation is ready.
So why wait? Take the step towards a more sustainable future and let Ava be your partner in this important endeavour. Contact us today to find out more about our sustainability services and how we can help you navigate the rapid change in sustainability reporting. Together we can make a difference for both your business and our planet!