Corporate Sustainability Reporting Directive: Quick Guide
New sustainability reporting rules will apply from January 2024 under Europe’s Corporate Sustainability Reporting Directive. Here’s how to prepare.
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What is the Corporate Sustainability Reporting Directive (CSRD)?
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.
Who Needs to Comply with the CSRD?
The CSRD applies to European companies that are listed or meet at least two of the following criteria:
- More than €40 million in annual turnover
- Over €20 million in assets.
- 250 or more employees
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.
When Does CSRD Mandatory Reporting Start?
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
What Needs to be Reported under the CSRD?
The CSRD requires companies to report on a range of sustainability issues, including:
- Environmental impacts, such as greenhouse gas emissions, water use, and waste generation.
- Social impacts, such as employee diversity and working conditions, and human rights.
- Governance factors, such as the company’s board structure and risk management policies.
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 the use of sustainable materials.
What Does Double Materiality Mean in CSRD reporting?
Double materiality is a key concept underpinning the CSRD. It means that a company must consider both 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, as well as 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 may affect their revenue, costs, and profitability.
What is the Role of Life Cycle Assessment in CSRD Reporting?
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.
What are the Benefits of CSRD Reporting?
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:
- Companies: by complying with the requirements of the CSRD, companies will be better able to proactively identify and manage sustainability risks. This will improve their sustainability performance, and help them to attract and retain more customers, investors, employees and suppliers.
- Investors: CSRD reporting will provide investors with more comprehensive and comparable information about the sustainability performance of companies. This information can be used to make more informed investment decisions.
- Other stakeholders: CSRD reporting will provide other stakeholders, such as employees, suppliers, and NGOs, with more information about the sustainability performance of companies. This information can be used to hold companies accountable for their sustainability impacts.
How Does the CSRD Fit in with the EU Taxonomy?
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 provides a framework for companies to report on their sustainability performance in a consistent and comparable way.
- The CSRD requires large companies to report on their sustainability performance, including their alignment with the EU Taxonomy’s six environmental objectives
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.
How Can One Click LCA Help with CSRD Requirements?
One Click LCA offers Taxonomy solutions that span the built environment.
We support these Taxonomy-relevant sectors with the following tools:
- New building construction: One Click LCA for Buildings, EN 15978 and Level(s) tools, also with One Click LCA Carbon Designer 3D
- Civil engineering works: One Click LCA for Infrastructure and GHG Reporting
- Manufacturing: One Click LCA EPD Generator, using ISO 14067
- Renewable energy generation: One Click LCA EPD Generator, using ISO 14067
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