CSRD checklist: 9 measures for successful implementation of the reporting guideline

What is the Corporate Sustainability Reporting Directive?

The Corporate Sustainability Reporting Directive (CSRD) was introduced by the European Commission in 2021 and aims to oblige companies to provide consistent sustainability reporting. This introduces a standardized electronic reporting format for the first time, which serves the purpose of better accessibility and comparability. The rules will apply from January 01, 2024.

The CSRD thus extends the Non-Financial Reporting Directive (NFRD), which came into force in 2014 as the first attempt to standardize ESG reporting. While the NFRD only requires certain large companies to report on non-financial information, the CSRD aims to extend the scope of reporting to more companies and increase reporting obligations.

The main objectives of the CSRD as a reporting framework

The new CSR Directive has two main objectives: Firstly, it aims to increase the confidence of investors, consumers and other stakeholders in companies' sustainability performance through improved reporting with enhanced disclosure requirements regarding sustainability-related information. Secondly, the CSRD aims to help accelerate the transition to a more sustainable economy by encouraging companies to identify their sustainability risks and opportunities and take appropriate action.

The CSRD is intended to support the European Green Deal by channeling the financial flows required for the transformation to a resource-efficient, sustainable economy into sustainable companies and technologies. This can only happen if the necessary information on the sustainability performance of companies is available.‍

Relationship between CSRD and ESRS

In addition to the environmental, social and governance (ESG) guidelines, the CSRD is introducing a reporting standard in the form of the European Sustainability Reporting Standards (ESRS). The ESRS are uniform EU standards for sustainability information that must be disclosed in the management report in future. On behalf of the EU Commission, the European Financial Reporting Advisory Group (EFRAG) has developed cross-sector standards (Set 1), which were adopted into EU law in July 2023.

The CSRD thus describes the "why", "who" and "when", while the ESRS define the "how" and "what" by providing the framework for the companies covered by the CSRD.

Who is subject to CSRD?

All companies that are listed on an EU-regulated market (with the exception of micro-enterprises) are affected by the CSRD. In addition, all non-capital-market-oriented companies that fulfill two of the following three criteria are affected:

• Balance sheet total: > € 25 million
• Net sales: > € 50 million
• Number of employees: > 250

Non-EU companies with subsidiaries in the EU are required to report if 

1. the subsidiary (in the EU) is a listed SME or a large company.
2. The third-country company has generated net sales of more than EUR 150 million at consolidated or group level in two consecutive years.

Third-country companies with branches in the EU are required to report under the following three conditions:

1. The third country company does not have a subsidiary in the EU
2. The branch generated net sales of more than EUR 40 million in the past financial year.
3. The third-country company has generated net sales of more than EUR 150 million at consolidated or group level in two consecutive years

This means that a total of around 15,000 companies in Germany and almost 50,000 companies in the EU must prepare a CSRD report.

Which companies are exempt from the CSRD?

Subsidiaries are exempt from the reporting obligation if the parent company includes the subsidiary in its report, as are listed micro-enterprises. Non-listed SMEs can publish a report on a voluntary basis.

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.
  

Checklist: Measures for successful implementation of the CSRD reporting obligation

The CSRD and the associated preparation of a CSRD report lead to far-reaching changes in the sustainability reporting of companies. In order to successfully implement the CSRD Directive and meet the requirements, companies should take the following nine measures:

1. Define measures for applying the CSRD
   
   The measures for applying the CSRD must be adopted. This includes consideration of a variety of aspects, such as the corporate structure, the integration of subsidiaries, the need for consolidation and the value chain.
   
   
2. Preparation and implementation of the double materiality analysis
   
   Companies are required by the CSRD to report transparently on the impact of their business activities on society and the environment. They must also report on the impact that the environment has on their business activities. The basic double materiality analysis forms the starting point for identifying these factors.
   
   A systematic methodology is required to carry out the analysis, which also includes the involvement of stakeholders and the inclusion of activities in the value chain in order to identify and assess material impacts, opportunities and risks. The implementation of double materiality ultimately determines what information the company must disclose as part of the ESRS.
   
   
3. Data collection, availability and control
   
   A thorough review of data availability and quality is a critical step in determining a company's level of CSRD compliance. CSRD-affected companies must report their emissions according to Scope 1, 2 and 3 and check each data point required by the ESRS that is material to the company, whether and where the data is available and who within the organization is considered the data controller.
   
   
4. Develop a comprehensive understanding of ESRS
   
   In order to make the link between the results of the dual materiality analysis and reporting in accordance with the European Sustainability Reporting Standards (ESRS) seamless, it is essential for companies to carry out a comprehensive analysis of the ESRS formulated by EFRAG. This process of identifying the relevant CSRD requirements for their own company requires the application of a precise methodology and a deep understanding of the guidelines.
   
   In addition, the CSRD introduces new sustainability elements that can be complex for companies in their entirety, such as the implementation of transition plans and the Key Performance Indicators (KPIs) listed in the EU taxonomy.
   
   ESRS reports also contain an extensive amount of data, including up to 1,200 data points and over 80 disclosure requirements, which can be interrelated. An understanding of these interactions is also essential to successfully meet the reporting requirements.

5. Involve internal and external stakeholders in the CSRD process
   
   Companies should involve their relevant stakeholders in the reporting process and take their expectations and needs into account. This helps to improve the quality of reporting and increase the acceptance of the information. For the reporting obligation under the ESRS in particular, it is essential for successful implementation to involve the teams involved within the organization (e.g. sustainability, finance and management teams), as well as key business partners in the value chain.
   
   
6. Early involvement of auditors in the CSRD
   
   The CSRD makes an audit of sustainability reporting mandatory for the first time. The previous optional reviews focused mainly on limited assurance. According to the EU's new Corporate Sustainability Reporting Directive (CSRD), external assurance of sustainability reports is now mandatory for the first time. It is planned that the scope and accuracy of the assurance will be expanded in future in order to achieve reasonable assurance. It therefore makes sense to involve the auditors at an early stage in order to support the company in preparing compliant disclosures.
   
   
7. Using software tools for CSRD reporting
   
   Technology is an important aspect of ESG reporting and can make it much easier. With innovative software solutions, companies can efficiently collect, analyze and manage data, making the reporting process much simpler. Reporting tools, such as Planted's solution, guide users step-by-step and are a valuable resource throughout the reporting process. This not only speeds up the process, but also ensures accuracy and compliance with complex ESG guidelines.
   
   
8. Involve CSRD experts
   
   To ensure that CSRD requirements are met and best practices are applied, it can be helpful to work with experts in the field of sustainability reporting. Planted has in-house TÜV-certified CO₂ specialists, sustainability experts and works closely with auditors who support companies across the board in implementing sustainability strategy as well as CSRD-compliant reporting.
   
   
9. Keep up to date with new CSRD reporting requirements
   
   By keeping up to date with developments in the European Sustainability Reporting Standards (ESRS), companies can be proactive and adapt to the dynamic requirements of sustainability reporting. With the upcoming publication of new industry-specific standards by EFRAG and the introduction of the XBRL taxonomy for digital tagging of sustainability reports in the coming months, it is crucial to be up to date and proactively respond to potential challenges.

Implement sustainability reporting in a holistic and CSRD-compliant manner

Planted enables your company to record its carbon footprint based on data and science, as well as to implement your ESG reporting and comply with legal guidelines. You will be supported by our team of experts in cooperation with auditors who will assist you every step of the way. Would you like to get to know our solution without obligation? Simply book a demo here.