What implications does the CSRD have for non-financial disclosures?

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CSRD non-financial disclosure in the EU

The EU Corporate Sustainability Reporting Directive (CSRD) which entered 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. EcoAct’s Stefan Holzheuser and Jordan Hairabedian guide us through this important directive and next steps for both EU and non-EU businesses.

Objectives of the CSRD

As a crucial pillar of the EU Sustainable Finance Strategy, the CSRD aims to guide investment flows towards sustainable enterprises to ensure that the following goals of the European Green Deal can be achieved:

  • Reduction of net greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels
  • Climate neutrality by 2050 (net-zero greenhouse gas 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 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 TCFD, CDP and the EU taxonomy, three topics where EcoAct has in-depth expertise.


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

In addition to their importance for the financial markets, non-financial information and indicators have become more important for other stakeholders, such as customers or civil society. Robust sustainability reporting is therefore an important instrument for creating 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. They were submitted to the EU Commission in November 2022, after a public consultation throughout the summer. Essentially, the reporting standards can be divided into three blocks:

What implications does the CSRD have for non-financial disclosures?

Key principles

The CSRD guidelines are as follows:

  • “Mandatory for all” disclosure: Companies shall disclose “mandatory for all” information which are general requirements and climate change related information
  • Double materiality: Companies should then investigate the publication of other indicators based on double materiality assessment, 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 a further 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 shall 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:

What implications does the CSRD have for non-financial disclosures?

For other large non-European groups, requirements start from 2028.

Where and how to report

Non-financial information will have to be published in companies’ annual reports: either in a single consolidated section, in four separate parts (general information, E, S, and G sections) or 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 mandatory for all, with the ambition to achieve the decarbonisation goals of the European Green Deal. This is reflected in the 13 climate change-specific disclosure requirements which can be classified under TCFD pillars:

CSRD timeline

However, responding to the CDP may enable companies to align more easily on CSRD requirements. Around 140 indicators should be reported and of which the vast majority are aligned with the CDP Climate change questionnaire. For example, CDP Climate C3.1 question matches ESRS E1-1 paragraph 15 a) indicator.

EcoAct and CSRD

This new directive is much more than just new reporting requirement: it enables you to measure the maturity of your business model against evolving ESG indicators.

EcoAct’s global team of climate experts can support you both with compliance and help you to transform your business model to achieve your net-zero targets. We have over 15 years of experience in corporate net-zero strategy, emissions measurement, risk analysis, reporting and offsetting.

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

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