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Sustainability in Business - How CSRD will change businesses for the future

Sustainability in Business - How the CSRD will change companies for the future. The fundamentals of CSR and ESG reporting are fundamentally changing and becoming mandatory.
Elena Welsch
February 21, 2023
Climate positive

With the introduction of the EU-wide reporting obligation on the sustainability commitment of companies, approximately 50,000 large companies will be obliged to disclose their corporate activities from 2024. The slogan "Do good and talk about it" thus no longer applies only to individual companies that want to make their image greener, but expands to a large part of all large corporations based in the EU.

But what does CSRD mean and what does it mean for companies?

With the Corporate Sustainability Reporting Directive (CSRD), the EU obliges large companies to regularly publish their corporate strategy. The directive is currently still a proposal of the EU Parliament, but is soon to replace the regulation on non-financial reporting (NFRD).

The aim of the directive is to make climate and sustainability reporting transparent and comparable. In addition, there is the new perspective for stakeholders, for whom it will be easier to assess the company with regard to risks for climate and the environment. For companies, this means developing a responsible business approach, improving their impact annually and keeping their own resolutions.

Which companies are affected?

The new regulation applies to large companies that are listed on the stock exchange, have a registered office in an EU member state or are subject to EU law. International companies operating in Europe or holding securities here are also covered by the regulation. In addition to these criteria, companies must meet at least two of the following requirements:

  • A turnover of over 40 million euros net
  • A balance sheet total of over 20 million euros
  • 250 or more employees

Reporting obligation for CSRD starts for the coming year 2023

The first CSRD annual report is scheduled for the year 2024 and covers the previous business year 2023. The reporting requirements are thus already mandatory from the year 2023.

Small and medium-sized enterprises will only be directly affected in 2026, but the reporting obligation of large companies will also make them act ahead of time and thus indirectly affect them in previous years. In this way, the new directive will affect almost all companies in a roundabout way.

Contents of CSRD sustainability reporting

Large companies are obliged to report on environmental goals, social aspects and governance aspects. The criteria are strongly based on international ESG standards and the work of the Global Reporting Initiative (GRI). A complete list of criteria is currently being developed by the EU Financial Reporting Advisory Group (EFRAG), and the proposal for these standards has already been published. 

Two main conceptual lines of CSRD

According to the principle of double materiality, companies must show how sustainability measures affect the company's own performance, position and development on the one hand. On the other hand, the impact on society, stakeholders and the environment must be considered. Thus, all environmental measures that affect or influence the company (greenhouse gas emissions, energy efficiency, ecological footprint, etc.), social aspects and the approach to business ethics, as well as all issues that affect the company's financial health and operational performance must be disclosed.

The second main line relates to the quality of the information. Here it must be ensured that the sustainability information is of high quality (comparability, verifiability, etc.) as well as standards for general reporting and important companies are mapped. Here, the guideline provides for an assessment by an internal management system as well as by an external audit. 

The second set of standards will be published in mid-2023 and is required for the 2024 reporting year. These will address forward-looking metrics, the integration of financial and non-financial reporting, and the accuracy of data.

Start year 2022

At the outset, each company should be clear about where it currently stands in terms of sustainability engagement and what environmental, social and economic impacts are taking place. What climate-related data and ESG information is already being collected, what systems are being used for standardisation? CRSD will be central to the entire strategy of the company, selective measures will no longer be sufficient and companies will have to compete with competitors on these three levels in the future. 

So where to start?

With Planted, we provide a catalog of measures that companies can use to reduce their emissions independently. In the future, we will also offer software for this purpose, which will enable companies to find suitable measures, measure their own position, track implementation and show the impact achieved.

With the CSRD, reporting on greenhouse gases in particular becomes relevant. For this, every company should measure the greenhouse gas data (the scope 1, 2 and 3 emissions). In this regard, we at Planted support with internal TÜV specialist and calculate the CO₂ balance. In addition to measuring the emissions, we also make your entire company and its employees climate-positive and actively help them to reduce them. Here we focus not only on compensation, through which global climate protection projects of the highest standard and the SDGs of the United Nations are supported, but also plant trees in Germany.

In addition to greenhouse gases, all types of environmental impacts become relevant in the reporting requirement. Here, too, we contribute to the required measures "climate change mitigation", "climate change adaptation" and "biodiversity and ecosystems" by reducing emissions, supporting climate protection projects and reforesting regionally. In this way, the companies contribute to a holistic solution that is regionally and globally active and thus make a major contribution to active environmental protection and the reduction of emissions.

CSRD is more than a start

With the new reporting obligation, the topic of sustainability becomes an indispensable part of corporate strategy. Social and ecological actions become mandatory and the CSRD makes it more difficult to use sustainability measures as mere greenwashing. Economic sustainability has long ceased to be a cherry on the cake with which companies can greenwash their reputation: The CSRD Directive is causing companies to fundamentally integrate sustainability into their business model, and corporate success will also depend on the implementation of the Directive in the future. And rightly so, because all of our well-being depends on everyone's actions to stop the worst effects of climate change. We still have the time.