What Does the CSRD Mean for Companies?

Lien De Coen:
The Corporate Sustainability Reporting Directive (CSRD) is a European directive that requires companies to transparently report on their impact on people, the environment, and society.

Lien, what exactly is the CSRD?

Lien De Coen:
The Corporate Sustainability Reporting Directive (CSRD) is a European directive that mandates companies to transparently report on their impact on people, the environment, and society. The CSRD replaces the former Non-Financial Reporting Directive (NFRD) and introduces stricter and more comprehensive reporting requirements.

Under the CSRD, companies must not only report on their sustainability impact but also demonstrate how sustainability factors influence their business operations. This is based on the principle of double materiality, which assesses both the company’s impact on people and the environment and the influence of sustainability issues on the company’s financial performance.

Which companies must comply with the CSRD?

Lien De Coen:
The CSRD initially applies to companies that were already required to publish non-financial reports. These companies must report according to CSRD standards for the 2024 financial year.

Additionally, and importantly, large companies meeting at least two of the following criteria must comply:

• More than 250 employees

• A turnover of more than €50 million

• A total balance sheet of more than €25 million

Companies that meet these criteria must report for the 2025 financial year, with the first reports expected in 2026.

What is the goal of the CSRD?

Lien De Coen:
The new rules ensure that investors and other stakeholders have access to the information they need to assess companies' impact on people and the environment. This also allows investors to better evaluate financial risks and opportunities related to climate change and other sustainability issues.
Moreover, the CSRD enables companies to better showcase and communicate their sustainability efforts to stakeholders such as investors, customers, and suppliers. Through clear and standardized reporting, companies can not only comply with regulations but also create value through transparency and long-term strategy.

Which reporting standards must companies follow?

Lien De Coen:
Companies subject to the CSRD must report according to the European Sustainability Reporting Standards (ESRS). These standards ensure a uniform and comparable reporting approach and cover a wide range of ESG (Environmental, Social, and Governance) themes, including climate change, biodiversity, employee well-being, and corporate governance.

How can companies prepare for the CSRD?

Lien De Coen:
Companies can prepare for the CSRD by first developing a clear and ambitious sustainability vision that aligns with their strategic goals. Then, they should conduct a double materiality assessment to determine relevant sustainability themes and reporting requirements.
Based on this assessment, a sustainability strategy should be developed, focusing on the most impactful areas. Additionally, data collection processes must be set up to monitor progress and ensure transparent reporting. This not only helps companies comply with the CSRD but also strengthens their sustainability impact.

Where can companies find more information about the CSRD?

Lien De Coen:
More information about the CSRD and the related ESRS standards can be found on the European Commission's website and the EFRAG website, the organization responsible for developing these reporting standards. Of course, at Sustinera, we are also ready to support companies with practical advice and guidance.