Driving ESG Excellence: How the CSRD Will Shape the Future of Your Emissions Reporting
In the ever-evolving landscape of corporate sustainability, the European Commission's Corporate Sustainability Reporting Directive (CSRD) stands as a pivotal milestone. Introduced in January as part of the European Green Deal, the CSRD is set to impact approximately 75% of companies in the European Economic Area (EEA). As your company may fall within this purview, understanding the intricacies of the CSRD becomes imperative.
In this blog, we break down the CSRD, how it could impact your business, and how ACT, in partnership with Green Project Technologies, can support your organization in navigating the CSRD landscape with our industry-leading expertise and innovative solutions that can help you meet your compliance obligations.
What is the CSRD?
The directive replaces the Non-Financial Reporting Directive (NFRD) and introduces 12 comprehensive standards that redefine disclosure requirements through the European Sustainability Reporting Standards (ESRS), encompassing 1,144 potential data points. Notably, the CSRD's compliance requirements are expanded to include companies of various sizes and operating locations.
While the CSRD significantly amplifies disclosure mandates on "material" sustainability matters, a double materiality assessment is included to streamline the data points. According to the double materiality concept, a sustainability matter can be considered ‘material’ based on its environmental impact and/or its potential risks and opportunities. While the CSRD offers guidelines on this matter, the final determination of materiality rests with the organization itself, so the organization needs to substantiate its decisions regarding whether a subject is deemed material or not. Ultimately, this assessment identifies and excludes irrelevant data, ensuring a focused and relevant reporting framework.
This transition aims to foster transparency and standardization in sustainability reporting, driving companies towards greater accountability and environmental stewardship.
Upcoming timelines and reporting applicability
The CSRD outlines phased reporting requirements for companies in the European Economic Area (EEA), aiming to enhance sustainability disclosures.
In Phase 1, companies previously under the NFRD must report if they meet two of the following criteria: 500+ employees, 40 million Euros net turnover, or 20 million Euros in assets. This report is due in 2025, reflecting data from 2024.
Phase 2, applicable in 2025/26, extends to large companies, including non-EU listed entities, meeting the same financial criteria, but with 250+ employees.
Listed Small and Medium-sized Enterprises (SMEs), including non-EU-listed ones, enter Phase 3 in 2026/27, following the same criteria.
The final phase, starting in 2027/28, encompasses EU and non-EU listed companies with a net turnover of 150 million Euros or more and at least one subsidiary or branch in the EU. Each phase mandates reporting on the previous year's data, aiming to standardize sustainability disclosures across diverse companies in the EEA.
Focusing on sustainability measurement
Five out of the twelve reporting standards associated with the CSRD focus on Sustainability Standards, emphasizing emissions measurement. Correctly measuring emissions, both primary and supplier data, becomes paramount as CSRD data will be publicly available. Each Member State will define penalties for non-compliance, underlining the importance of robust emissions measurement frameworks that track, assess, and address environmental impacts.
Organizations can leverage CSRD measurements to enhance the quality and relevance of their emissions reporting through platforms like CDP. This not only ensures compliance but also aligns with global standards such as the Greenhouse Gas Protocol, fostering transparent business practices to address environmental challenges.
Long-term implications & impact
The CSRD represents a significant step forward in the journey towards sustainable business practices within the EEA. By introducing comprehensive standards and expanding reporting requirements, the CSRD fosters transparency, accountability, and environmental stewardship among companies of varying sizes and operating locations. Compliance with the CSRD not only aligns with global sustainability standards but also unlocks economic and ESG benefits for organizations.
As companies navigate the CSRD landscape and prepare for upcoming reporting phases, conducting thorough ESG (Environmental, Social, & Governance) double materiality assessments, implementing scalable data collection processes, and establishing cross-organizational controls are crucial steps toward meeting compliance obligations. However, this journey doesn't have to be navigated alone.
What should my organization do next?
With the first CSRD report based on data for the 2024 calendar-year, and due in 2025, the next steps that companies should look to prepare include:
Conducting thorough ESG double materiality assessments.
Implementing scalable data collection processes.
Establishing cross-organizational controls to engage all relevant internal stakeholders and data holders.
Simplify your emissions reporting journey by partnering with ACT and Green Project
ACT and Green Project offer a collaborative partnership to simplify the emissions reporting journey for companies. With our cutting-edge emissions measurement platform and seamless integrations for various ESG reporting frameworks, we empower organizations to unlock a straightforward and precise approach to sustainability reporting. Our industry-leading expertise and innovative solutions propel companies toward meeting compliance obligations while driving long-term sustainability and success.
Looking ahead, the CSRD promises enhanced standardization in ESG reporting, facilitating cross-industry and geographical performance assessments. This empowers companies to identify key ESG-related risks and opportunities, integrating ESG risk management into broader business strategies effectively. Embracing the CSRD not only ensures regulatory compliance but also positions companies for long-term growth and resilience in an increasingly sustainability-focused business landscape.
Take control of your emissions accounting, managing, and reporting, and begin your CSRD compliance journey by contacting us today.