CSRD Update - May 2022

The Corporate Sustainability Reporting Directive (CSRD) obliges 50,000 European companies to publish an annual sustainability report on all kinds of ESG-related subjects starting in 2025. This new directive replaces the current Non Financial Reporting Directive (NFRD) and should become the uniform standard for sustainability reporting in Europe. The directive comes with accompanying new European standards, which indicate the requirements the report must meet.

The European Financial Reporting Advisory Group (EFRAG), tasked with the development of these EU Sustainability Reporting Standards, published a first draft of the standards online this month.

Companies and other organisations, but also citizens, can give their opinion about the content and implementation of the standards until 8 August 2022. EFRAG will take this input into account in the further development of the standards.

 

The EU Sustainability Reporting Standards (ESRS)

11 standards have been published, which describe the information a company will have to report.

- 5 standards concerning the environment: climate change, environmental pollution, water and marine resources, biodiversity and ecosystems, and the use of raw materials and the circular economy.

- 4 standards on social topics: employees, employees in the value chain, affected communities, and consumers and end users.

- 2 standards on governance: risk management and internal controls, and business conduct.

The CSRD is not just a snapshot of the current status in a company, but also has an important future perspective. This means that in addition to reporting the requested data, KPIs and actions taken in the various areas, the new guideline also requires that targets be set and strategies be defined for achieving them.

In addition, companies must also assess the potential financial effects of climate risks. This means both physical risks (drought, floods, etc.) and transition risks (new taxes, legislation, etc.). In addition to the risks, the financial opportunities related to the green transition must also be estimated.

The topics to be reported on are very diverse and require a lot of preparation and consideration. Timely preparation is key!

 

Want to know more about the CSRD? Check out our whitepaper.

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