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Sustainability reporting and CSRD
From 2024 onwards, sustainability reporting for many companies in the EU will logically fall within the domain of the CFO. Failure to report on the required items could lead to a qualified audit report, or worse – reputational damage in the eyes of consumers and investors. It also requires material commentary on the ESG impact the company is leaving in its wake, in the short and medium term, plus a full analysis of how the company’s activities affect ESG matters along its value chain.
Complying with this reporting requirement will take some time to get right, and the sooner businesses start to adapt and test their capability the better. The scope of the ESRS goes way beyond the boundaries of the business itself (unlike financial reporting), to track its value chain and gauge its wider impact on society and the planet.
CSRD
CSRD is part of the Green Deal that ultimately aims to create a truly sustainable economy in the European Union.The measures go far beyond reporting: from strategy and policies to performancemanagement, technology and controls implementation to change management andaudit readiness. Furthermore, implications entail decarbonisation actions andimplementing due diligence processes. We foresee the highest impact andrelevance in the transformation of the business and we will share our differentperspectives on the complex array of aspects around CSRD.
On 21 April 2021, the EuropeanCommission (EC) adopted a proposal for a Corporate Sustainability ReportingDirective (CSRD), replacing the EU’s Non-Financial Reporting Directive (NFRD).The CSRD covers all relevant environmental, social and governance (ESG)elements, and aims to increase investments in truly sustainable activitiesacross the European Union. Three-way discussions between the EuropeanParliament, the European Council and the EC finalised the text, which waspublished on 21 June 2022.
The final text of the directiveincludes a one-year delay compared to the original proposal. Companies subjectto the CSRD will need to disclose from FY24 (i.e., reports published in 2025).
- January 2024 (reporting in 2025) for companies already subject to the NFRD (listed companies with over 500 employees);
- January 2025 (reporting in 2026) for companies that are not presently subject to the NFRD; and
- January 2026 (reporting in 2027) for listed SMEs, small and non-complex credit institutions and captive insurance undertakings.
The CSRD has changed quite significantly in scope compared to the original proposal. It now covers:
- all listed companies with over 500 employees on EU-regulated markets; and
All large companies that fulfil two of these three criteria:
- over 250 employees;
- €50 million net revenue; and
- ≥ €25 million on the balance sheet.
Phases of CSRD readiness assessment
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