The Corporate Sustainability Reporting Directive (CSRD) is set to reshape how businesses in the EU report on sustainability. Non-compliance poses serious risks, including financial penalties, reputational damage, and exclusion from tenders. As sustainability gains importance for stakeholders, failing to comply can erode trust with investors and customers, endangering long-term business success.
Why Is CSRD Being Introduced?
The CSRD builds on the Non-Financial Reporting Directive (NFRD) to address growing concerns over climate change and social inequality. It aims to enhance the transparency and reliability of ESG (Environmental, Social, Governance) data, providing stakeholders with better information for decision-making.
Who Does CSRD Impact?
CSRD impacts a wider range of companies than the NFRD:
- Large public and private companies meeting two of the following: over 250 employees, €40 million in net turnover, or €20 million in assets.
- Listed SMEs with lighter reporting requirements.
- Non-EU companies with significant EU operations. Overall, it affects around 50,000 companies globally.
When Does CSRD Take Effect?
CSRD takes effect in 2024, with mandatory reporting beginning in 2025 for the 2024 financial year. Businesses should prepare now to ensure compliance.
Key Challenges in CSRD Reporting
Businesses face challenges in:
- Data complexity: Detailed data on ESG factors must be collected and verified.
- Regulatory burden: Smaller companies may struggle with the increased reporting demands.
- Non-compliance risks: Penalties, reputational harm, and loss of stakeholder trust are key risks for non-compliant businesses.
Assurance Requirements
Initially, CSRD requires limited assurance of sustainability data, checking for consistency. By 2030, this will shift to reasonable assurance, involving deeper verification similar to financial audits. To meet these standards, businesses must invest in robust data systems and monitoring tools now. NuEnergyTek has invested in developing the monitoring systems needed for businesses to meet the assurance requirements.
Key Data Points for Reporting
Under CSRD, up to 1,052 data points will need to be reported across ESG factors, including:
- Environmental: Greenhouse gas emissions, resource use, and pollution.
- Social: Employee diversity, working conditions, and community engagement.
- Governance: Corporate structure, anti-corruption, and executive pay.
How Businesses Should Prepare
- Assess current reporting systems to identify gaps.
- Implement robust data collection systems.
- Communicate with stakeholders about compliance.
- Train internal teams on the new reporting requirements.
- Review supply chain adherence to sustainability standards.
- Seek external expertise if needed.
Greenhouse Gas Emissions: A Key Pillar in CSRD
Greenhouse gas emissions are central to CSRD reporting. Accurate carbon accounting is essential to avoid greenwashing or audits. ISO 14064 certification provides a reliable framework for measuring and verifying emissions, ensuring compliance and transparency. This applies to both overall emissions and specific projects aimed at reduction.
NuEnergyTek is certified to offer ISO 14064-compliant reporting. For more information, visit NuEnergyTek’s contact page.
