The EU Corporate Sustainability Reporting Directive: how does it affect business globally?

The EU Corporate Sustainability Reporting Directive (CSRD) came into force in January 2023 and is set to have a significant impact on businesses operating within the European Union.

The directive aims to improve transparency and consistency in sustainability reporting across the EU and will require companies to report on a wider range of sustainability issues than under previous regulations.

EU Corporate Sustainability Reporting Directive

The CSRD will not solely apply to large companies but also to some SMEs as the new directive broadens the scope – involving many more businesses than previously included in NFRD (Non-Financial Reporting Directive) standards – estimated to be in the region of 50,000.

New directives affecting companies worldwide

The new directive with directly affect any company if they have securities listed on EU regulated markets. The directive is not exclusive to these and will also apply to companies that;

  • Generate more than 150 million Euros net turnover in the EU (for each of the last two consecutive financial years)
  • Also having at least one EU subsidiary (large or listed on an EU regulated market) or EU branch (more than EUR 40 million net turnover in the preceding financial year)
  • It also applies directly to EU subsidiaries of businesses who are not based within the EU.

Reporting deadlines are just around the corner

Over the next 12 months, EU member states will have to adopt the new directives into their national legislation, with a deadline of 6th July 2024. This means larger groups already subject to the NRFD will need to have this in place from 1st January 2024. The directive will require companies to report on a range of sustainability issues, including environmental, social, and governance (ESG) factors. This will include information on greenhouse gas emissions, resource efficiency, human rights, employee diversity, gender pay gap, and more. The CSRD will also require companies to report on the impact of their activities on society and the environment. Making it mandatory for companies to have an audit of the sustainability information that they report.


The cost of compliance

For businesses, complying with the CSRD will require significant resources and effort. Companies will need to gather data on a wide range of sustainability factors and ensure that this information is accurate and reliable. They will also need to invest in systems and processes to collect and report this information in a standardised way.


Investment benefits and longer-term savings

Overall, the EU Corporate Sustainability Reporting Directive is likely to have a significant impact on businesses globally. Although the implementation process may seem costly, there are also potential benefits to complying with the CSRD. Companies that are transparent about their sustainability performance may be viewed more favourably by investors, customers, and other stakeholders. This could lead to increased trust and loyalty, as well as improved access to finance.

To find out how to ensure you are fully compliant with carbon emission reduction goals and recording and reporting on carbon throughout your supply chain, register for a free Carbon Consultation today.


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