June 21st, 2023
How CSRD can help you engage and inform your consumers about your sustainability efforts and impact
Sustainability is no longer a niche topic, but a mainstream concern for consumers, investors, regulators, and other stakeholders. Companies that want to succeed in the 21st century need to demonstrate not only their financial performance but also their social and environmental impact. However, reporting on sustainability can be challenging, as there is a lack of common standards, metrics, and frameworks to measure and communicate sustainability performance.
This is where the Corporate Sustainability Reporting Directive (CSRD) comes in. The CSRD is a new EU legislation that aims to enhance and standardize sustainability reporting requirements for companies operating within the EU. It replaces the previous Non-Financial Reporting Directive (NFRD) with more ambitious and comprehensive rules that cover a wider range of companies and topics.
In this article, we will explain what the CSRD is, who needs to comply with it, how it can benefit your business and how you can prepare for it.
What is the CSRD?
The CSRD stands for Corporate Sustainability Reporting Directive. It is a proposed European Union (EU) legislation aimed at enhancing and standardizing sustainability reporting requirements for companies operating within the EU. This landmark legislation replaces the Non-Financial Reporting Directive (NFRD) with impactful updates.
The CSRD requires all large companies and all listed companies (except listed micro-enterprises) to disclose information on what they see as the risks and opportunities arising from social and environmental issues, and on the impact of their activities on people and the environment. This principle is called ‘double materiality’.
The CSRD also requires companies to report according to European Sustainability Reporting Standards (ESRS), which are being developed by an independent body called EFRAG. The standards will be tailored to EU policies while building on and contributing to international standardization initiatives.
The CSRD will be rolled out in a phased approach from 2024. The first companies will have to apply the new rules for the first time in the 2024 financial year, for reports published in 2025.
Who needs to comply with the CSRD?
Almost 50,000 companies are expected to be impacted by the CSRD, making up some three quarters of business in the European Economic Area. The CSRD will apply to all:
How can the CSRD benefit your business?
The CSRD is not only a legal obligation, but also a strategic opportunity for your business. By complying with the CSRD, you can:
How can you prepare for the CSRD?
The CSRD is a significant change for many companies, especially those that have not reported on sustainability before or have done so in a limited way. To prepare for the CSRD, you can:
Ways to engage consumers with CSRD data
One of the main objectives of the CSRD is to provide consumers with reliable and comparable information on the sustainability performance and impact of companies. By complying with the CSRD, you can not only meet your legal obligations, but also engage and inform your consumers about your sustainability efforts and impact in various ways, such as:
Streamlining and transparency in reporting
The CSRD requires companies to report according to European Sustainability Reporting Standards (ESRS), which are being developed by an independent body called EFRAG. The standards will be tailored to EU policies, while building on and contributing to international standardisation initiatives.
By reporting according to the ESRS, you can streamline and simplify your reporting process, as you will have a clear and consistent framework to follow. You can also increase the transparency and credibility of your reporting, as you will have to disclose information on both the risks and opportunities arising from sustainability issues, and the impact of your activities on people and the environment.
By providing streamlined and transparent reporting, you can engage and inform your consumers about your sustainability performance and impact in a comprehensive and understandable way. You can also help them make informed decisions and actions based on reliable and comparable information.
Reducing the risk of greenwashing
Greenwashing is the practice of making misleading or unsubstantiated claims about the environmental or social benefits of a product, service or company. Greenwashing can damage your reputation and trust among your consumers, as well as expose you to legal risks or penalties.
The CSRD aims to reduce the risk of greenwashing by requiring companies to report according to the ESRS, which will be based on rigorous and evidence-based criteria. The CSRD also requires companies to have their sustainability information assured by an external auditor.
By reducing the risk of greenwashing, you can engage and inform your consumers about your sustainability efforts and impact in an honest and authentic way. You can also demonstrate your commitment and accountability to sustainability, and build trust and loyalty among your consumers.
Providing clarity for external stakeholders
The CSRD not only affects companies, but also other external stakeholders, such as investors, regulators, civil society organisations and consumers. The CSRD aims to provide clarity for these stakeholders by creating a level playing field for sustainability reporting in the EU and beyond. The CSRD will also enable these stakeholders to access the information they need to assess investment risks arising from climate change and other sustainability issues.
By providing clarity for external stakeholders, you can engage and inform your consumers about your sustainability efforts and impact in a consistent and comparable way. You can also align with other EU policies, such as the EU Taxonomy Regulation and the Sustainable Finance Disclosure Regulation, which aim to foster sustainable investment and finance.
Conclusion
The CSRD is a game-changer for sustainability reporting in the EU and beyond. It will create a common language and framework for disclosing sustainability information that is relevant, reliable and comparable. By complying with the CSRD, you can not only meet your legal obligations, but also engage and inform your consumers about your sustainability efforts and impact in various ways. You can streamline and simplify your reporting process, reduce the risk of greenwashing, provide clarity for external stakeholders, demonstrate your commitment and accountability to sustainability, build trust and loyalty among your consumers, and create a positive impact on both people and the planet.
This is where the Corporate Sustainability Reporting Directive (CSRD) comes in. The CSRD is a new EU legislation that aims to enhance and standardize sustainability reporting requirements for companies operating within the EU. It replaces the previous Non-Financial Reporting Directive (NFRD) with more ambitious and comprehensive rules that cover a wider range of companies and topics.
In this article, we will explain what the CSRD is, who needs to comply with it, how it can benefit your business and how you can prepare for it.
What is the CSRD?
The CSRD stands for Corporate Sustainability Reporting Directive. It is a proposed European Union (EU) legislation aimed at enhancing and standardizing sustainability reporting requirements for companies operating within the EU. This landmark legislation replaces the Non-Financial Reporting Directive (NFRD) with impactful updates.
The CSRD requires all large companies and all listed companies (except listed micro-enterprises) to disclose information on what they see as the risks and opportunities arising from social and environmental issues, and on the impact of their activities on people and the environment. This principle is called ‘double materiality’.
The CSRD also requires companies to report according to European Sustainability Reporting Standards (ESRS), which are being developed by an independent body called EFRAG. The standards will be tailored to EU policies while building on and contributing to international standardization initiatives.
The CSRD will be rolled out in a phased approach from 2024. The first companies will have to apply the new rules for the first time in the 2024 financial year, for reports published in 2025.
Who needs to comply with the CSRD?
Almost 50,000 companies are expected to be impacted by the CSRD, making up some three quarters of business in the European Economic Area. The CSRD will apply to all:
- Companies listed on regulated markets in the EU (apart from listed micro-enterprises), and large companies. The CSRD classifies a large company as one that meets two out of three of the following criteria: more than 250 employees, a turnover of over €40 million and over €20m total assets. These companies will also have to take into account information at subsidiary level.
- Listed SMEs, although there will be a transitional period when SMEs can opt out until 2028. However, there are big benefits for SMEs to comply with the reporting.
- Non-EU companies with a net turnover of €150 million in the EU, and with at least one subsidiary or branch in the union.
How can the CSRD benefit your business?
The CSRD is not only a legal obligation, but also a strategic opportunity for your business. By complying with the CSRD, you can:
- Enhance your reputation and credibility among your consumers, investors, regulators, and other stakeholders. The CSRD will help you showcase your sustainability performance and impact in a transparent and comparable way.
- Improve your risk management and decision-making. The CSRD will help you identify and address the social and environmental risks and opportunities that affect your business performance and resilience.
- Increase your access to capital and markets. The CSRD will help you attract and retain investors who are increasingly looking for sustainable investments. It will also help you align with other EU policies, such as the EU Taxonomy Regulation and the Sustainable Finance Disclosure Regulation.
- Drive innovation and competitiveness. The CSRD will help you foster a culture of sustainability within your organisation, encouraging you to adopt best practices, set ambitious targets and seek continuous improvement.
How can you prepare for the CSRD?
The CSRD is a significant change for many companies, especially those that have not reported on sustainability before or have done so in a limited way. To prepare for the CSRD, you can:
- Assess your current sustainability reporting practices and gaps. You can use existing frameworks, such as the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB), as a reference point.
- Familiarise yourself with the ESRS and their requirements. You can follow the development of the standards by EFRAG and provide your feedback on the draft standards.
- Engage with your stakeholders and materiality assessment. You can consult with your internal and external stakeholders, such as employees, customers, suppliers, investors and civil society organizations, to understand their expectations and priorities regarding your sustainability performance and impact.
- Collect and verify your sustainability data and information. You can establish or improve your data collection and management systems, ensuring that your data is reliable, accurate, consistent and comparable.
- Communicate your sustainability story and impact. You can use various channels and formats, such as your annual report, website, social media, events and campaigns, to communicate your sustainability strategy, goals, actions and results to your stakeholders.
Ways to engage consumers with CSRD data
One of the main objectives of the CSRD is to provide consumers with reliable and comparable information on the sustainability performance and impact of companies. By complying with the CSRD, you can not only meet your legal obligations, but also engage and inform your consumers about your sustainability efforts and impact in various ways, such as:
Streamlining and transparency in reporting
The CSRD requires companies to report according to European Sustainability Reporting Standards (ESRS), which are being developed by an independent body called EFRAG. The standards will be tailored to EU policies, while building on and contributing to international standardisation initiatives.
By reporting according to the ESRS, you can streamline and simplify your reporting process, as you will have a clear and consistent framework to follow. You can also increase the transparency and credibility of your reporting, as you will have to disclose information on both the risks and opportunities arising from sustainability issues, and the impact of your activities on people and the environment.
By providing streamlined and transparent reporting, you can engage and inform your consumers about your sustainability performance and impact in a comprehensive and understandable way. You can also help them make informed decisions and actions based on reliable and comparable information.
Reducing the risk of greenwashing
Greenwashing is the practice of making misleading or unsubstantiated claims about the environmental or social benefits of a product, service or company. Greenwashing can damage your reputation and trust among your consumers, as well as expose you to legal risks or penalties.
The CSRD aims to reduce the risk of greenwashing by requiring companies to report according to the ESRS, which will be based on rigorous and evidence-based criteria. The CSRD also requires companies to have their sustainability information assured by an external auditor.
By reducing the risk of greenwashing, you can engage and inform your consumers about your sustainability efforts and impact in an honest and authentic way. You can also demonstrate your commitment and accountability to sustainability, and build trust and loyalty among your consumers.
Providing clarity for external stakeholders
The CSRD not only affects companies, but also other external stakeholders, such as investors, regulators, civil society organisations and consumers. The CSRD aims to provide clarity for these stakeholders by creating a level playing field for sustainability reporting in the EU and beyond. The CSRD will also enable these stakeholders to access the information they need to assess investment risks arising from climate change and other sustainability issues.
By providing clarity for external stakeholders, you can engage and inform your consumers about your sustainability efforts and impact in a consistent and comparable way. You can also align with other EU policies, such as the EU Taxonomy Regulation and the Sustainable Finance Disclosure Regulation, which aim to foster sustainable investment and finance.
Conclusion
The CSRD is a game-changer for sustainability reporting in the EU and beyond. It will create a common language and framework for disclosing sustainability information that is relevant, reliable and comparable. By complying with the CSRD, you can not only meet your legal obligations, but also engage and inform your consumers about your sustainability efforts and impact in various ways. You can streamline and simplify your reporting process, reduce the risk of greenwashing, provide clarity for external stakeholders, demonstrate your commitment and accountability to sustainability, build trust and loyalty among your consumers, and create a positive impact on both people and the planet.