10 points to consider when implementing CSRD in companies

CSRD replaces NFRD: The CSRD succeeds the Non-Financial Reporting Directive (NFRD), which had been in force since 2014 and affected some 11,000 companies. The CSRD expands the scope of application and sustainability reporting requirements for companies.

The CSRD affects 50,000 companies: The CSRD applies to all listed companies, as well as to all large companies (more than 250 employees or more than EUR 40 million turnover) and all public interest companies (banks, insurance companies, etc.), whether listed or not. It also applies to subsidiaries of parent companies subject to the CSRD, unless they are already included in the consolidated report of the parent company.

The CSRD imposes common standards: The CSRD foresees the development of European sustainability reporting standards, which will be based on existing standards (such as GRI or SASB) and will cover environmental, social and governance (ESG) aspects of companies' activities. These standards are to be adopted by the European Commission by October 2022.

The CSRD covers dual impacts: The CSRD requires companies to disclose information on their sustainability impacts, but also on how sustainability affects their financial performance and resilience. It is therefore a dual materiality approach, which aims to assess the risks and opportunities associated with sustainability for companies and their stakeholders.

The CSRD integrates the Sustainable Development Goals: The CSRD aligns corporate sustainability reporting with the United Nations Sustainable Development Goals (SDGs), which provide a universal framework for measuring progress towards sustainable development. Companies will be required to report on how their activities contribute to or detract from the achievement of the SDGs.

The CSRD promotes comparability and reliability: The CSRD aims to ensure that information published by companies is comparable with each other and with financial information. To this end, it provides for sustainability information to be included in companies' annual management reports and to be verified by an independent external auditor.

The CSRD encourages dialogue with stakeholders: The CSRD recognizes that sustainability reporting is not an end in itself, but a means of communicating with internal and external stakeholders about a company's sustainability strategy, objectives, actions and results. Therefore, the CSRD invites companies to consult their stakeholders on issues relevant to them and to report on their engagement.

The CSRD facilitates access to data: The CSRD envisages the creation of a single European digital platform, which will bring together all information published by companies on sustainability. This platform will allow users (investors, regulators, consumers, etc.) to easily and freely access data relevant to their needs.

The CSRD supports the green transition: The CSRD is part of the action plan to direct financial flows towards environmentally friendly activities. In particular, it complements the regulation on green taxonomy, which defines the criteria for identifying economic activities that contribute to the green transition.

The CSRD reinforces social responsibility: The CSRD encourages companies to consider the impact of their activities on human rights, decent work, diversity, equality, non-discrimination and anti-corruption. It also encourages them to respect the UN Guiding Principles on Business and Human Rights and to apply due diligence in relation to sustainability.

The CSRD comes into force in 2024: The companies concerned will have to publish their first integrated sustainability report for the fiscal year 2023 by June 30, 2024 at the latest. Voluntary SMEs will have an additional two-year deadline.