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The Corporate Sustainability Reporting Directive (CSRD) replaces the Non-Financial Reporting Directive (NFRD) and introduces stricter requirements for large and listed companies. Under CSRD, companies must disclose how they manage social and environmental challenges. The goal is to improve the quality and availability of sustainability information for both investors and society.
Key Objectives of CSRD
1. Standardized ESG reporting
CSRD unifies and strengthens rules around Environmental, Social, and Governance (ESG) reporting.
2. Enhanced data for Stakeholders
The directive improves the comparability, reliability, and relevance of sustainability data, helping investors and stakeholders make better decisions.
3. Driving positive change
CSRD pushes companies toward sustainable, low-carbon, and green business practices.
What was the Non-Financial Reporting Directive (NFRD)?
The NFRD was adopted by the European Union in 2014 and came into effect in 2018. It required large companies to disclose information on environmental, social, and governance (ESG) issues in their annual reports.
How is CSRD different from NFRD?
- Double Materiality Principle, CSRD introduces the double materiality concept, meaning companies must assess both their impacts on society and the environment (impact materiality) and how ESG factors affect their business (financial materiality).
- Extended Scope of Reporting, the CSRD requires companies to disclose forward-looking information, not just past performance. Additionally, businesses must report on sustainability issues across their entire value chain.
- Uniform Reporting Standards, companies must now comply with the European Sustainability Reporting Standards (ESRS), which contain over 80 disclosure requirements and about 1,100 data points.
- External Assurance and Integrated Reporting, the CSRD requires companies to include sustainability reports as part of their management reports, with third-party assurance. This will start with limited assurance and progress to reasonable assurance over time.
- EU Taxonomy Alignment, the CSRD expands the EU Taxonomy disclosure requirements to cover all entities subject to CSRD. Companies must disclose how their revenue, CapEx, and OpEx align with the EU’s six environmental objectives.
- Digital Tagging of Sustainability Data, sustainability reports must be prepared in digital formats to make the data more accessible, comparable, and machine-readable, with digital tagging according to ESRS standards.
Reporting Timeline
The CSRD reporting obligations will be phased in from 2024 to 2028, depending on company size and structure. See the deadline in the tabel below depending on the size of your company
What do companies have to report on?
Reports are based on double materiality assessments, which vary by company. However, organizations in the same industry will generally report on similar metrics.
What is a Double Materiality Assessment?
A double materiality assessment is essential to CSRD reporting, determining what a company must disclose. It includes:
- Impact Materiality: How a company’s actions affect external stakeholders and the environment.
- Financial Materiality: How ESG factors influence the company’s financial performance, identifying risks and opportunities.
European Sustainability Reporting Standards (ESRS)
The ESRS sets the specific sustainability information companies must report under CSRD. These standards are split into:
- Cross-cutting standards (mandatory for all companies)
- Topical standards on environmental, social, and governance (ESG) issues.
ESRS Standards Overview
How can Qarma help?
Qarma is a great tool for multiple steps of your reporting process. Qarma is a collectors tool, and you can use it to collect valuable data to be used in your double materiality as well as for reporting.
Using the audits feature, you can very simply distribute surveys and assessment to your supply chain, and gather all of them in one place. Use it to get insights and opinions for spotting your weak links or blindspots in your double materiality assessments, or to keep numerical data on supply chain actors updated.
Demonstrating due diligence is also a part of reporting on ESG, something you can do structurally and with validated data, when you use Qarma audits to look into your supply chain. Map out suppliers, discover non-conformities and create corrective action plans, all in one system.
Finally, nothing ends in Qarma. We will always make sure your data ends up where you need it to be, so you can use it for sharing and reporting.
If you want to talk more about how Qarma can help you with your reporting, please do not hesitate to reach out.
