Why? According to which standards? When? Where? How about current reports?

CSRD: Extending reporting from Large to All, including SMEs

In January 2023, the European Union introduced the Corporate Sustainability Reporting Directive (CSRD), which complements the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy. Under the CSRD, the EU established the European Sustainability Reporting System (ESRS), outlining the criteria and relevant indicators that organizations must utilize to fulfill their commitments for Environmental, Social, and Governance (ESG) reporting.

ESRS: the latest most comprehensive standard

The European Sustainability Reporting System (ESRS) is a framework that outlines specific criteria and indicators for organizations to meet their Environmental, Social, and Governance (ESG) reporting obligations as mandated by the Corporate Sustainability Reporting Directive (CSRD) in the European Union.

CSRD Rollout: Who Needs to Comply and When?

Companies need to comply with ESRS reporting with the timeline:

1. Start reporting in 2024 (in the 2025 annual report): Previously regulated entities under NFRD, like large listed companies, banks, insurance undertakings and large non-EU listed companies with 500+ employees.

2. Start reporting in 2025 (in the 2026 annual report): All other large companies, including additional large non-EU listed companies.

3. Start reporting in 2026 (in the 2027 annual report): Listed SMEs, including non-EU listed SMEs. Listed SMEs can delayreporting for an extra two years.

Additionally, non-EU companies making over EUR 150 millionyearly in the EU, with an EU branch exceeding EUR 50 millionturnover or having a subsidiary that is a large company or a listed SME, must report sustainability impacts at the group level from 2028, (in the 2029 annual report).

Where?

Companies are required to submit all ESRS-related data in their annual or management reports to the European Securities and Markets Authority (ESMA) using the European Single Electronic Format (ESEF) digital format. This ensures that both financial and ESG information are disclosed simultaneously, treating them as one complete set rather than separate parts.

The specific additional documents, such as verification or evidence, that might be necessary for reporting are still uncertain. To comply with regulations, all sustainability information must be presented in XHTML format for consistency and simpler confirmation.

Current reports

The CSRD replaces and expands upon the previous NFRD. Therefore all companies previously reported under the NFRD will experience a transition in reporting requirements as the CSRD takes effect, introducing the ERSR as the updated standard. Companies, that currently reporting according to GRI standards will comply also with ESRS as a part of the high level of interoperability.“Alignment between the ESRS and GRI’s impact standards provides reassurance for companies that they can utilize their existing reporting to meet these incoming requirements.”

Main difference is Double Materiality assessment

Double materiality is a concept used to determine whether specific sustainability-related topic or information should be included in a company’s sustainability report.

It considers the impact on the both, company’s operations – financial materiality and the broader impact on society and the environment – impact materiality.