Is my company covered by the CSRD and if so, from when?
Large public-interest companies (such as listed companies or financial institutions) with more than 500 employees will have to report on sustainability issues starting from the financial year 2024. A year later, this will apply to companies meeting two of the following three criteria:
- Minimum EUR 20 million balance sheet total
- Minimum EUR 40 million net turnover
- More than 250 FTEs on average.
Small and medium-sized listed companies will have to report on sustainability issues from FY2026.
What ESG performance should I report on?
If your company falls within the scope of the CSRD, there is a lot of work to do. This is because the CSRD requires companies to report on ESG/sustainability issues relating to activities across the entire value chain, including those of suppliers and customers. Many companies do not yet have this data and have not yet rigged the right information systems for collecting this data.
Moreover, the CSRD implicitly forces you to have a sustainability policy as well as set actions and targets. For example, you have to report on what your company has done and what you are still going to do to reduce emissions. Answering this question with a ‘not applicable’ could lead to reputational damage or even liability claims.
As a starting point for ESG reporting, the principle of double materiality applies. This means that, in addition to general disclosures and information on climate change, only information that is necessary to:
- understand the company’s impact on sustainability issues (inside-out approach)
- understand how sustainability issues affect the company’s development, performance and position (outside in approach).
Sustainability reports should be structured based on the European Sustainability Reporting Standards (ESRS) prepared by the European Financial Reporting Advisory Group (EFRAG). The latest (almost final) version of the ESRS was published on June 9, 2023. The ESRS are divided into the following topics:
- climate change,
- contamination,
- water and maritime resources,
- biodiversity and ecosystems,
- material use and the circular economy,
- own employees,
- employees in the value chain,
- impact on communities,
- customers and end-users, as well as business conduct.
How do I prepare my company for the CSRD?
- It is best to start with the (double) materiality analysis. Assessing double materiality should involve stakeholders. Questions you should ask yourself first are:
- who are the stakeholders affected by the organisation
- which stakeholders can influence the organisation?
- Then ask these stakeholders what impact they think the organisation has on people and the environment, and what they think are the main sustainability risks and opportunities for the organisation. When identifying potentially relevant sustainability issues, the sectors of activity, geographical areas of operation and steps in the value chain should also be taken into account.
- It is good to put together a multidisciplinary team. This is because the ESG/sustainability topics that need to be reported on under the CSRD touch on different business areas, such as procurement, product development, production, operations, HR, finance, communication and strategy. This team can identify what is still missing in terms of information, policy and strategy, and draw up a plan for gathering this information. Moreover, this team can support the board in drafting a policy and strategy on this.
- Then the actual gathering of information starts. Many organisations experience this as a huge task because information from the value chain is not always readily available. It is therefore advisable to start in good time. Somewhat reassuringly, companies are also allowed to report over the next three years that certain information is still missing, while explaining what they are doing to obtain this information.
- Ultimately, it will have to be decided what information will be included in the report and in what way. This is best done in consultation with the auditor.
Questions or need more information on CSRD or ESG?
Feel free to contact Stephanie ter Brake or read more on our ESG platform.
