The Corporate Sustainability Reporting Directive (CSRD)
The Corporate Sustainability Reporting Directive (CSRD) is a legislative act from the European authorities that aims to improve the quality, consistency, and comparability of sustainability reporting among EU companies. The CSRD entered into force on 5 January 2023 and modifies the existing rules enhancing the disclosure requirements for companies, with the ultimate goal of supporting the transition to a more sustainable economy.
Overview of the CSRD
The CSRD builds on the existing reporting requirements and introduces new ones for companies in terms of their environmental, social, and governance (ESG) performance. Under the CSRD, large companies and listed SMEs will be required to provide standardized, comparable, and auditable sustainability information in their annual financial reports. The new rules will ensure that investors and other stakeholders have access to the information they need to assess investment risks arising from climate change and other sustainability issues.
Implications for Companies
The CSRD represents a significant change in the way companies report on their sustainability performance. The new reporting requirements are expected to increase the transparency and accountability of companies’ ESG performance, which could in turn enhance their reputation and attract more sustainable investments. However, the CSRD also represents a significant compliance burden for companies, especially those that are not yet reporting on sustainability issues. Companies will need to invest in new systems and processes to ensure that they can collect, analyze, and report on sustainability data in accordance with the new standards. The information provided should be both retrospective and forward-looking, covering the current state and the future account for improvement.
The new rules will apply in 2024 for companies that have been subject to such reporting before and in 2025 for those that are not currently subject to them.
Environmental data requirements call for reporting on the LCAs of purchased products, credible information on footprints and improvement monitoring as well as assessing social consideration in your value chain in the social aspect of reporting. This information is to be published digitally and made easily accessible to investors and stakeholders.
The CSRD represents a major step forward in the EU’s efforts to transition to a more sustainable economy. The new reporting requirements are expected to increase the transparency and accountability of companies’ sustainability performance and support the shift towards more sustainable investments. However, the CSRD also represents a significant compliance burden for companies, which will need to invest in new systems and processes to meet the new reporting requirements. It remains to be seen how the CSRD will be implemented in practice, but it is clear that sustainability reporting is set to become an increasingly important aspect of corporate reporting in the coming years.
Read more here: Europa.eu
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