Almost 50,000 EU-based companies were initially mandated to disclose their environmental footprint under the Corporate Sustainability Reporting Directive (CSRD).
However, recent amendments through the Omnibus Directive have adjusted the scope, exempting many smaller entities and delaying compliance deadlines. These changes aim to balance corporate sustainability transparency with reducing administrative burdens on businesses.
While some companies now have more time to prepare, ESG reporting remains a critical aspect of long-term business strategy and regulatory compliance.
What is CSRD?
The CSRD replaces the Non-Financial Reporting Directive (NFRD) and represents a significant step towards improving transparency, comparability, and reliability in corporate sustainability reporting. This directive aims to ensure that companies provide comprehensive and standardized information regarding their sustainability impacts, thereby fostering accountability and responsible business practices.
Key Updates from the Omnibus Directive
- Reduced Scope: Originally covering nearly 50,000 companies, CSRD now applies primarily to businesses with over 1,000 employees, exempting about 80% of previously included entities.
- Delayed Implementation: The reporting deadlines have been postponed by two years, meaning the second reporting wave will now begin in 2028, followed by the third wave in 2029.
- Simplified Supply Chain Reporting: Companies will focus mainly on direct suppliers in their sustainability assessments, with supply chain reviews now required every five years instead of annually.
Key Aspects of CSRD
- Expanded Reporting Obligations: Despite the reduced scope, CSRD still applies to listed entities, large unlisted companies, and public-interest entities.
- Enhanced Reporting Requirements: Companies need to report on a wider range of environmental, social, and governance (ESG) factors, including disclosures on climate change, environmental impact, diversity, human rights, and anti-corruption efforts.
- Digitalization of Reporting: CSRD emphasizes the modernization of reporting processes, encouraging companies to adopt digital tools for efficient, standardized, and accessible reporting.
- Quality and Assurance Standards: New measures strengthen the reliability of sustainability data, ensuring that reported information is useful to stakeholders.
- Double Materiality Principle: CSRD requires companies to assess both the financial impact of sustainability issues and their broader societal and environmental effects.
Implications for Companies
- Compliance Requirements: Companies will need to adjust their reporting practices to meet the expanded requirements set forth by the CSRD. Organizations should invest in digital reporting tools to facilitate compliance and improve efficiency.
- Opportunities for Companies: Compliance with CSRD presents an opportunity for companies to showcase their commitment to sustainability and responsible business practices. Transparent reporting can enhance trust among stakeholders, including investors, consumers, and regulators.
Steps to Prepare for CSRD Compliance
- Assess Current Reporting Practices: Evaluate existing sustainability reporting processes and identify gaps relative to CSRD requirements.
- Develop a CSRD Compliance Strategy: Create a roadmap for implementing necessary changes and allocate resources for new reporting processes.
- Enhance Data Collection and Management: Implement robust systems for collecting and managing sustainability data to ensure accuracy and reliability.
- Invest in Digital Reporting Tools: Explore and adopt digital solutions that align with CSRD requirements.
- Engage Stakeholders: Communicate changes to internal and external stakeholders and gather input to ensure comprehensive reporting.
- Seek Expert Guidance: Consider partnering with sustainability reporting experts to navigate evolving CSRD guidelines.
Stay Informed. Stay Compliant.
Join Fellow Future and ensure compliance with the CSRD to demonstrate your commitment to sustainability, enhance stakeholder trust, and contribute to the EU's broader sustainability objectives. Let our in-house experts and partner solutions support you in navigating CSRD requirements and transitioning to robust sustainability reporting practices. Contact us today to take the first step.