Blog Post | January 18th 2023 | Lorenzo Roveda
The CSRD, or Corporate Sustainability Reporting Directive, is quickly approaching and companies with more than >500 employees subject to NFRD (>250) will have to report on it for 2024 (2025). If you are completely new to the topic we suggest you start by reading our previous blog post: CSRD - What is it?
In this blog post, we'll guide you through the most important CSRD points, covering the general structure, main requirements, and principles, so that you can get a head start and organize your efforts accordingly.
📃The main reference documents for CSRD are the latest ESRS drafts of sector-agnostic standards from EFRAG, which were approved and delivered to the EU Commission in November 2022.
📃 EFRAG is now developing sector-specific and SMEs-specific standards which will be published this spring (from April 2023).
(ESRS=European Sustainability Reporting Standards, EFRAG is the European entity writing them)
The ESRS are composed of:
💡Each standard contains multiple Disclosure Requirements (or DR e.g. ESRS E1 has 9 DRs).
When reporting on CSRD, each company has to report on disclosure requirements (DRs) and datapoints that can be either:
On top of the mandatory DRs and datapoints, the ESRS requires conducting a double materiality assessment and to report on the material DRs and datapoints.
Double materiality provides criteria for the determination of whether a sustainability matter has to be disclosed. A sustainability matter (DR or datapoint) is material under double materiality if it is material from the impact perspective, the financial perspective, or both.
A sustainability matter is material from an impact perspective if it is connected to significant (actual or potential) impacts by the company on people or the environment over the short-, medium- or long-term.
➡️ If you have anything to do with people or the environment - which every company does - there will be some impact for you😉. E.g. by buying rare earth materials from mines with child labour, you generate a negative impact on the people in that area.
A sustainability matter is material from a financial perspective if the topic could have an impact on current and future cash flows. i.e It generates or may generate significant risks or opportunities.
➡️e.g. If you use magnets sourced from areas with war, you have a high risk of price volatility → potential negative financial effects.
If a sustainability matter is considered material, it has to be reported. Here is quick schema summarizing the above to visualize that needs to be disclosed.
Based on November 22 drafts, ESRS 1 Appendix F
At ROSE, we have been working with more than 40 companies on their sustainability strategy and are building the platform our customers asked us for to navigate sustainability easily. We’d be happy to discuss how we can help you tackle the increasing complexity of sustainability requirements and even have some fun in the process! 😉
Align your sustainability strategy with the CSRD.