While the Corporate Sustainability Reporting Directive (CSRD) entered into force in 2023, the 2024 financial year will be the first time companies will need to submit reports for this new European Union (EU) law.
The CSRD marks a pivotal moment for corporate transparency. It’s a comprehensive regulation requiring a paradigm shift when it comes to sustainability reporting. But with the challenges of reporting, companies will also have opportunities to demonstrate a genuine commitment to sustainability and build trust with their stakeholders.
What is the Corporate Sustainability Reporting Directive?
The CSRD requires companies to report on a comprehensive set of environmental, social, and governance (ESG) information. The EU says that this will require companies 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.”
The goal of this legislation is to help all stakeholders, from investors to consumers, evaluate the sustainability of companies.
Who Must Comply with the CSRD?
Understanding the scope of compliance with CSRD is complicated, and companies that fall under the requirements may even have different reporting standards and deadlines.
Generally, CSRD will focus on large (more than 500 employees) public-interest companies. This can include publicly-listed companies, insurance companies, banks, and any other companies EU authorities designate because of their public-interest status.
CSRD Requirements
CSRD reporting will require companies to use the European Sustainability Reporting Standard (ESRS). This standard includes reporting on a wide variety of ESG factors including:
- Climate change
- Pollution
- Water and marine resources
- Biodiversity and ecosystems
- Resource use and circular economy
- Own workforce
- Workers in the value chain
- Consumers and end-users
- Affected communities
- Business conduct
While reporting these standards is subject to a materiality assessment (i.e. companies will only need to report in standards that are relevant to their activities), there are also General Disclosures that all companies will need to report on regardless of their activities.
Challenges of Complying with CRSD
The new CRSD requirements will require companies to report on a large amount of data that they might not have been collecting previously. Also, with many companies across the supply chain looking to collect the necessary data, companies will likely see a great increase in the demand for this data, both from customers and suppliers.
Here are some of the challenges you may face with CSRD reporting:
- Understanding your requirements. Depending on the size of your company and your business activities, your reporting requirements, and even the timeline of your reporting deadlines, may differ from other companies.
- Collecting data. You’ll need to collect a large amount of sustainability data that you may not have been collecting before, costing time and money.
- Communicating with your supply chain. Companies across your supply chain will be looking for this data, meaning you’ll have customers asking you for data while you are simultaneously asking your suppliers for data.
- Resource constraints. New requirements mean new demands on your resources and you’ll need to minimize the impact of resource constraints to meet CRSD requirements.
- The evolving regulatory landscape. The CSRD is a new directive, and there may be future revisions or additional regulations that could pose further challenges.
CRSD Opportunities
While meeting CRSD reporting requirements will come with challenges for companies as they shift to adapt, gathering this information and meeting these obligations will also give companies new opportunities.
The data required for CRSD will allow companies to increase their transparency, showcasing their commitment to sustainability and responsible practices to both consumers and investors. Focusing on the ESG factors involved in CRSD reporting will stimulate innovation and help companies future-proof their business practices. And by demonstrating a commitment to sustainability, companies will find a competitive edge in global markets.
Get Support from Tetra Tech
The CRSD isn’t just a compliance burden; it’s a springboard for innovation and success. While the reporting data required may feel like a headache at first, ultimately it will help companies to find more sustainable practices that lead them into the future.
For help with your CRSD reporting requirements, contact Tetra Tech’s experts at [email protected]. We have decades of experience meeting EU product compliance regulations, and we can help you map out a sustainable future and find a way to efficiently and successfully meet the new CRSD requirements.
