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February 14, 2022

EU leading the way with new Corporate Sustainability Reporting Standards

EU leading the way with new Corporate Sustainability Reporting Standards

The European Commission’s Corporate Sustainability Reporting Directive (CSRD) is due to be published in October 2022 and adhered to from 2023. These new reporting standards aim to be in line with the already ambitious Sustainable Finance Disclosure Regulation and the EU Taxonomy. While closely tied to financial reporting, the CSRD will focus on encouraging broader transparency, consistency and comparability across all sectors.

These updated standards also make clear that sustainability metrics are now an integral part of not only climate action efforts, but in the economic viability of companies going forward. This article will focus only on the major need-to-knows of the CSRD, but check out our comprehensive overview of standards, frameworks, and regulations for a more granular breakdown.

CSRD increases the catchment

EU law already requires large companies—i.e. those with over 500 employees which currently number around 11,700—to disclose information on operations and how they manage social and environmental concerns. The CSRD will replace the current Non-Financial Reporting Directive which means that even more companies—around 49,000—can be evaluated according to standards that go beyond financial performance and encourages more widespread corporate responsibility. 

Companies must assess double materiality

CSRD regulations require what’s known as double materiality—i.e. reporting not only on how activities affect internal business operations, but also taking into account their broader impact on the outside world. 

Data must be assured by a third party

Companies will be required to have limited assurance of their sustainability data. This level of information review still requires an auditor, but it is not as in-depth as financial reporting. More demanding assurance processes may be required in the future, but for now limited assurance is what’s mandated.

CSRD reporting will be required from 2024

To be ahead of the game, it is a good idea to start in-depth sustainability accounting now. The CSRD will be published in October 2022 and reporting on the financial year 2023 will be required the following year. With a second set of standards due in October 2023, companies should expect more sector-specific information and SMEs can expect more time to prepare.

Sustainability data will need to be tagged

Financial and sustainability information will have to be reported at the same time and included in a transparency report. Companies will also need to digitally tag sustainability information for submission to the European single point of access database. 

You can prepare for climate-positive decisions now

Before these new EU standards are implemented, they will need to be debated and legislated for in each member state, but the urgency of the climate crisis means we shouldn’t just sit around and wait for them. Building greenhouse gas emissions accounting into company operations now, will drive internal as well as external transparency and help your team gain understanding about how to make and meet impactful sustainability and emissions reduction goals. You will not only be ready to meet reporting standards when the new regulations come in, but you’ll already have made an impactful change to the way your organisation meets the challenge of the climate crisis. 

The environmental impact of the corporate sector is enormous and there is still a dearth of good information due to patchy reporting that often leaves out major puzzle pieces. The CSRD is an exciting step towards understanding the broader picture and enabling companies and governments to take action where it is most needed. Companies can be agile and make swift changes in ways that large governance bodies simply cannot, so it’s up to each and every company to hold themselves accountable before time runs out. Get ahead of the governance and start your dynamic, climate-positive accounting today.