New developments to the CSRD: What are the implications for non-financial disclosures?

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CSRD non-financial disclosure in the EU

The EU Corporate Sustainability Reporting Directive (CSRD) aims to improve the quality and consistency of sustainability reporting throughout the EU. In June 2023, the EU Commission released a first set of the European Sustainability Reporting Standards (ESRS) as a delegated act. As part of a public consultation, which concluded on July 7th, EcoAct voiced its concerns and recommendations. We believe that by increasing the requirements of climate and biodiversity reporting, CSRD can become the efficient transformation and planetary compass tool that corporates need. Ahead of expanding mandatory reporting in 2024, EcoAct experts, Stefan Holzheuser, Jordan Hairabedian, and Juliette de Valence, review important new developments of this directive and guide us through next steps for both EU and non-EU businesses.

What is the CSRD?

The CSRD came into force in January 2023 represents a significant expansion of mandatory sustainability reporting. The current Non-Financial Reporting Directive (NFRD) applies to approximately 12,000 companies. From 2024 onwards, the new directive will impact 50,000 companies, extend the scope of the EU taxonomy and require disclosure against numerous environmental, social, and governance (ESG) indicators.

Objectives of the CSRD

The CSRD plays a vital role in the EU Sustainable Finance Strategy by directing investment flows towards sustainable enterprises, ensuring the achievement of the goals outlined in the European Green Deal:

  • Reduction of net greenhouse gas (GHG) emissions by at least 55% by 2030 compared to 1990 levels
  • Climate neutrality by 2050 (net-zero GHG emissions)

The level of sustainable investment required to achieve this can only be realised if asset managers and banks are provided with more information on the sustainability performance of the companies in which they may potentially invest. This is where the CSRD comes in, creating a comprehensive, transparent, and uniform reporting basis at EU level for corporates. This binding framework has been informed by international references, such as the TCFDCDP and the EU taxonomy, three topics EcoAct has in-depth expertise in.


Source: based on European Commission’s chart (15.06.2022)

Furthermore, non-financial information and indicators have gained significance not only in the financial markets but also among other stakeholders, including customers and civil society. As a result, robust sustainability reporting plays a vital role in establishing trust and strengthening a company’s reputation.

Failure to comply with this directive will result in significant fines.

A focus on ESG indicators

The European Sustainability Reporting Standards (ESRS) are the ESG quantitative and qualitative indicators to report under CSRD. Essentially, the reporting standards can be divided into three blocks:

New developments to the CSRD: What are the implications for non-financial disclosures?

Key principles of the CSRD

The CSRD guidelines under the delegated act released by the European Commission are as follows:

  • Reinforced double materiality: Companies should conduct a materiality assessment on all topics (except for “General Disclosures” – ESRS 2), which relate to matters that are either significant for the business (financial materiality) or from ESG concerns (impact materiality)
  • Scope: The CSRD covers the entire value chain of companies
  • Time horizon: The CSRD requires increased depth of reported information that is qualitative and quantitative, and covers short, medium, and long periods of time when appropriate
  • Due diligence: Procedures must be implemented to identify, prevent, mitigate, and account for the actual and potential negative impacts on the environment and people
  • Verification: Non-financial reporting must be verified annually by a statutory auditor, or an audit firm accredited by each Member state

Which companies are affected?

  • Large EU companies (listed or not) & non-European large companies listed on EU regulated markets: with more than 250 employees, with a total balance sheet of more than 20 million euros or with a turnover of more than 40 million euros (2 criteria out of three).
  • All EU & non-EU small and medium enterprises that are listed on European regulated market, except micro-enterprises.
  • Small and non-complex credit institutions as well as captive insurance companies
  • Other large non-European groups with significant activity in the EU (turnover of more than €150 million) and with a large branch or subsidiary based in the EU.

When to report?

CSRD reporting must be annual. The timeline is as follows:

New developments to the CSRD: What are the implications for non-financial disclosures?

With the new delegated act released in June, the calendar stays the same. However, the phasing of certain obligations is possible:

For all undertakings:

  • First reporting year: the company may omit anticipated financial effects disclosure related to non-climate environmental issues (pollution, water, biodiversity, circular economy), as well as certain datapoints related to own workforce (ESRS S1: social protection, people with disability, work-related ill-health, and work-life balance).

For large companies with fewer than 750 employees: 

  • First reporting year: the undertaking may omit disclosures on Scope 3 GHG emissions (in ESRS E1) and own workforce standard (ESRS S1).
  • First two years: the undertaking may omit disclosures related to biodiversity (ESRS E4), workers in the value chain (ESRS S2), affected communities (ESRS S3), consumers and end users (ESRS S4). However, the undertaking should disclose whether the sustainability topics covered respectively by ESRS E4, ESRS S1, ESRS S2, ESRS S3 and ESRS S4 have been assessed to be material as a result of the undertaking’s materiality assessment and disclose specific elements if the topics are material (ESRS 2 paragraph 17).

Where and how to report

Non-financial information must be published in companies’ annual reports: either in a single consolidated section, in four separate parts (general information, E, S, and G sections) or using incorporation by reference (e.g. ESRS E1-6, paragraph 41).

Companies must also digitally tag information so that it is machine-readable for use in the European Single Access Point (ESAP). Digitizing this information is part of the EU’s digital finance strategy that aims to improve the accessibility and reuse of financial sector data. ESAP will facilitate accessibility, analysis and comparability of annual reports.

Climate change at the core of the reporting

The reporting indicators related to climate change are an important basis of the CSRD. They are subject to materiality analysis and are divided into which can be classified under TCFD pillars:

CSRD timeline

Responding to the CDP may enable companies to align more easily on CSRD requirements. Around 140 indicators should be reported in the CSRD standard on climate change of which 85-90% are aligned with the CDP 2023 Climate change questionnaire.

EcoAct and CSRD

We can help you achieve CSRD compliance:

  1. Understand: Train your teams to prepare CSRD requirements by involving them from the start, identifying your strengths and weaknesses, as well as coordinating internally
  2. Prepare: Conduct a double materiality assessment and carry out a gap analysis on ESG, of your published data (CDP, TCFD, CSR reports, etc.) with a particular focus on climate and biodiversity objectives
  3. Perform: Bring your climate and biodiversity performance to align with best-in-class CSRD requirements. We have over 17 years’ experience in guiding businesses in climate change consulting, from emissions measurement to risk analysis, decarbonisation, science-based targets and carbon offsetting. We can also help you chose the most relevant digital tool for data collection and disclosure
  4. Transform: We can help you transform your business model to operate within planetary boundaries.

At EcoAct, we see CSRD not just as a reporting requirement, but as a strategic tool for measuring the maturity of your business model to cope with the challenges of climate change. Our extensive range of services is structured around the implementation of a global strategy to reduce your risks and impacts on the planet.

If you need support in the preparation and production of a CSRD-compliant sustainability report, please get in touch.

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