How CSRD will change companies in the future

With the introduction of the EU-wide CSRD reporting obligation on companies' commitment to sustainability, around 50,000 large companies will be obliged to disclose their business activities from 2025. The slogan "Do good and talk about it" will therefore no longer only apply to individual companies that want to make their image greener, but will be extended to the majority of all large corporations based in the EU.

What is the CSRD? ‍

With the Corporate Sustainability Reporting Directive (CSRD), the EU obliges large companies to regularly publish their corporate strategy. The directive thus replaces the former regulation on non-financial reporting (NFRD).
‍
The aim of the CSRD is to make climate and sustainability reporting transparent and comparable. Added to this is the new perspective for stakeholders, who will find it easier to evaluate the company with a view to the risks to the climate and environment. For companies, this means developing a responsible business approach, improving impact annually, and keeping their own resolutions.

Which companies are affected by the CSRD?

All companies that are listed on an EU-regulated market, with the exception of micro-enterprises, as well as non-capital market-oriented companies that fulfill at least two of the following three criteria are subject to CSRD:

- a balance sheet total of more than 25 million euros,
- net sales of more than 50 million euros,
- or more than 250 employees.

‍
In addition, companies not based in the EU are subject to the CSRD obligation if they have subsidiaries in the EU that are either listed SMEs or large companies, or if they themselves generate more than 150 million euros in net sales on a consolidated basis. Third-country companies with branches in the EU are also required to report if they exceed certain turnover and revenue thresholds. In total, this affects around 15,000 companies in Germany and around 50,000 companies throughout the EU.

When does the CSRD require reporting?

The CSRD Directive is being introduced gradually:

• From January 1, 2024: Companies subject to NFRD reporting will report from 2025 for the 2024 financial year.
• From January 1, 2025: Large companies not previously subject to NFRD and large groups will report in 2026 for the previous financial year.
• From January 1, 2026: Listed SMEs, smaller banks and insurers report in 2027 for the 2026 financial year, whereby SMEs can refrain from reporting until 2028, but must then explain the reasons in the management report.
  

Small and medium-sized enterprises are also affected

Small and medium-sized enterprises will not be directly affected until 2026, but the reporting obligation for large companies will also force them to act early and therefore affect them indirectly in previous years. In this way, the new directive will affect almost all companies in a roundabout way.

Contents of CSRD sustainability reporting

The Corporate Sustainability Reporting Directive focuses on the detailed disclosure of environmental, social and governance (ESG) information by companies. It requires the application of the ESRS (European Sustainability Reporting Standards) in order to ensure uniform and comparable reporting. Important content includes the disclosure of information on environmental impacts such as CO₂ emissions (Scope 1, 2 and 3), social aspects such as employee well-being and diversity, as well as governance practices. The CSRD also emphasizes the concept of"double materiality", which assesses both the company's impact on the environment and society and the impact of environmental and social issues on the company itself.

Two main conceptual lines of CSRD‍

In accordance with the principle of dual materiality, companies must demonstrate how their sustainability measures affect their own performance, position and development on the one hand. On the other hand, the impact on society, stakeholders and the environment must be taken into account. All environmental measures that affect or influence the company (greenhouse gas emissions, energy efficiency, ecological footprint, etc.), social aspects and the approach to corporate ethics as well as all topics that affect the company's financial health and operational performance must therefore 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.) and that standards for general reporting and important companies are mapped. Here, the guideline provides for an assessment by an internal management system as well as an external audit.

Where to start with the CSRD?

With the CSRD, reporting on greenhouse gases becomes particularly relevant. Every company should have an overview of its greenhouse gas data (Scope 1, 2 and 3 emissions) for this purpose. With the Planted software solution, we support companies in the TÜV-certified recording of the CO₂ balance sheet, decarbonization through to the CSRD report. Our ESG and CSRD experts are on hand to support your company every step of the way.

In addition to greenhouse gases, all types of environmental impacts that are also covered by Planted's solutions are relevant in the reporting obligation. For example, the required measures "mitigation of climate change", "adaptation to climate change" and "biodiversity and ecosystems" are implemented by supporting climate protection projects and planting trees regionally with Planted. In this way, your company contributes to a holistic solution that is active both regionally and globally and makes 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.

Would you like to get to know the Planted software solution for implementing the CSRD? Book a no-obligation demo.

‍

‍