New sustainability reporting rules will apply from January 2024 under Europe’s Corporate Sustainability Reporting Directive. Here’s how to prepare.
The Corporate Sustainability Reporting Directive (CSRD) is a new law from the European Union (EU) that requires large companies to report on their sustainability performance.
The CSRD is a significant step forward for sustainability reporting in the EU. It will provide investors and other stakeholders with more comprehensive and comparable information about the sustainability performance of large companies. This information can be used to make informed decisions about where to invest and to hold companies accountable for their sustainability impacts.
It also applies to some non-EU companies if they have two consecutive years of net revenue in the EU of over of €160 million and a listed EU subsidiary with net turnover above €40 million in the preceding year.
There is a staggered approach to introducing mandatory CSRD reporting, depending on the size and revenue of a company.
First CSRD reports required | Size of company | Data being reported |
1 January 2025 | Companies with over 500 employees (ie those already subject to the NFRD) | 2024 fiscal year data |
1 January 2026 | Companies with over 250 employees | 2025 fiscal year data |
1 January 2027 | Listed small and medium enterprises | 2026 fiscal year data |
The CSRD requires companies to report on a range of sustainability issues, including:
The CSRD also requires companies to report on their efforts to reduce their environmental impacts. This includes measures to improve energy efficiency, reduce waste, and promote sustainable materials.
Double materiality is a key concept underpinning the CSRD. It means a company must consider impact and financial materiality when reporting on sustainability issues.
Impact materiality refers to the environmental and social impacts of the company’s operations and value chain. Companies must identify and report on these impacts and how they will be affected by environmental issues.
Financial materiality refers to how sustainability issues may impact the financial health and operations of the business. Companies must assess how these issues affect revenue, costs, and profitability.
The CSRD states that companies must report on the environmental impacts of their products and services throughout their life cycle.
Life cycle assessment (LCA) offers a scientific methodology for assessing the lifetime environmental impacts of products and services and is governed by internationally recognized standards, ensuring that it provides consistent and reliable data.
To further ensure the accuracy and reliability of the reported information, companies must also have their sustainability reports audited by an independent auditor.
Let’s be honest, no one relishes the prospect of more reporting requirements, but the CSRD offers clear benefits for companies, as well as for investors and other stakeholders:
The EU Taxonomy — or the EU Sustainable Finance Taxonomy to give it its full title — and the CSRD are complementary regulations that aim to promote sustainable investment and business practices in Europe.
The EU Taxonomy and the CSRD — together with a third component, the Sustainable Finance Disclosure Regulation (SFDR) — are helping to create a more sustainable financial system in the EU.
One Click LCA offers Taxonomy solutions that span the built environment.
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