Recently, the European Parliament has adopted the Corporate Sustainability Reporting Directive (CSRD) to promote sustainability reporting and a green economy within the European Union.
The directive applies to large companies and aims to enhance sustainable investment by requiring more detailed reporting on sustainability issues.
The CSRD (Corporate sustainability reporting – European Commission (europa.eu)) introduces the concept of ‘double materiality’, which means companies must report on how sustainability issues impact their business and how their operations affect people and the planet. This directive will have a substantial impact, with almost 50,000 companies expected to be affected, encompassing approximately three-quarters of businesses in the European Economic Area.
The new regulations require companies to provide detailed reporting on environmental, social, and governance factors, including climate change, human rights, and anti-corruption measures. Reports must be both qualitative and quantitative, covering short, medium, and long-term perspectives, and will also require independent assurance to ensure accuracy and reliability.
The phased implementation of CSRD will commence from 2024, with different deadlines for various categories of companies. The directive aims to streamline reporting, enhance transparency, and reduce the risk of greenwashing, providing companies with increased credibility and the opportunity to attract external investment.
The introduction of CSRD aligns with the EU’s broader sustainability goals, including the European Green Deal and the EU Action Plan on Sustainable Finance. It also reflects the global trend towards enhanced sustainability reporting, positioning Europe as a leader in this space.
While the new reporting requirements may pose challenges for businesses, they also present opportunities for increased credibility, comparability in the market, and the integration of climate action into everyday business practices. It is crucial for companies to take proactive steps to prepare for the new rules, including understanding the applicability of the directive, reviewing current reporting practices, and ensuring robust sustainability targets.
As companies prepare for the implementation of CSRD, it is essential to stay informed about current and upcoming European climate regulations because it’s only a matter of time before this filters down to a broader range of businesses.
