This article defines what CSRD means and its timeline, scope, and benefits
What is CSRD?
CSRD stands for the Corporate Sustainability Reporting Directive. It is a new company reporting requirement designed to enhance the quality, consistency, and comparability of environmental and social sustainability reporting by companies operating in the European Union (EU).
CSRD was proposed by the European Commission in 2021 to replace the Non-Financial Reporting Directive (NFRD). The CSRD was adopted in 2023, with the first companies reporting from 2024/2025.
It is designed to make sustainability reporting more consistent, comparable, and reliable across companies in the EU.
Related article: CSRD Reporting and CSDDD Compliance: Fewer Companies in Scope, and Why VSME Is the Answer – FSSC
Related article: What is the VSME (Voluntary Sustainability Reporting Standard for SMEs)? – FSSC
What is the Timeline of CSRD
The regulations will come into effect in four stages:
- 1 January 2024: companies already subject to the NFRD
- 1 January 2027: large companies not currently subject to the NFRD
- 1 January 2028: non-EU companies falling under the CSRD reporting obligation
The Commission will review the standards every three years to consider new developments such as international standards.
Member States can exempt companies that were previously obliged to report, but will no longer be required from financial year 2027, from the reporting obligation in the intervening years (financial years 2025 and 2026).
Who needs to comply with CSRD?
Companies that fulfil two conditions will have to comply with CSRD:
- over 1,000 employees
- over €450 million revenue
This requirement is not limited to companies based in the EU. The CSRD also applies to any business that has at least one large or publicly listed subsidiary within the EU, or that operates a branch in the EU generating a net turnover of €450 million.
What does CSRD cover? What should be covered in a CSRD report?
Companies will be required to include environmental and social sustainability disclosures within their management reports, ensuring that financial and sustainability information is released simultaneously.
This report must be submitted in a standardized digital format, making it easier to review and compare within the European Single Access Point database.
The reported data will also be subject to limited third-party assurance, meaning an external auditor must assess its accuracy.
From 2025 onward, the CSRD will require companies to adopt an emissions reduction plan aligned with the Paris Agreement, aiming to achieve net-zero emissions by 2050.
What are the Benefits of CSRD?
There are five key reasons for companies to adopt CSRD and leverage its advantages:
Stronger reputation: It demonstrates a company’s commitment to sustainability and accountability across environmental, social, and governance (ESG) areas. This can enhance credibility and strengthen relationships with customers, investors, and the broader community.
Greater investor confidence: Providing transparent and detailed information on sustainability efforts improves trust among investors. Transparency can attract more investment and potentially boost market valuation.
Competitive advantage: Companies that comply with CSRD can differentiate themselves as being proactive in sustainable practices gaining a vantage point.
Enhanced risk management: CSRD encourages companies to assess ESG-related risks more thoroughly. This enables organizations to identify potential environmental and social challenges early and implement effective mitigation strategies.
Increased innovation and efficiency: Preparing for CSRD often requires companies to critically evaluate their operations. This can uncover opportunities to optimize resource usage, reduce waste, and streamline processes, ultimately leading to more efficient and innovative ways of working.
Conclusion
The FSSC 24000 Certification Scheme comprehensively addresses the social requirements of the CSRD. Its core principles include proactively managing risks, establishing policies, implementing those policies, conducting risk assessments, following a Plan-Do-Check-Act cycle to prevent or resolve issues, and reporting.
