Milestones in Climate Reporting – New CSRD Proposal finalized
For months the European Parliament and the EU Council have been negotiating, and now they have been finalized: the CSRD. These new rules for sustainability disclosures will tens of thousands of companies have to publish in the future.
The new proposal released at the end of June 2022 addresses shortcomings in the existing rules on disclosure of non-financial information. The existing regulation has formerly been considered insufficient to be properly taken into account by investors. But there is hope on the horizon! The new CSRD takes climate reporting to a historic new level. Find out the most relevant insights on the new CSRD proposal:
1. Introduced more detailed reporting requirements
Transparency is key. The CSRD makes sustainability-related information about companies more readily available, of higher quality and more comparable. Large companies are obligated to report on social and environmental issues, human rights as well as governmental factors. The disclosures must now be externally audited and made in a separate section of the annual report.
2. Over 50,000 companies in Europe soon to be affected by CSRD
Affected are large companies with over 500 employees that are already subject to the Non Financial Reporting Directive (NFRD). They will first have to prepare the reports for the 2024 financial year and publish them in 2025. Additionally, all other large companies will be required to report one year later. Finally, capital market-oriented SMEs will be included from the 2026 financial year.
From which points in time does the CSRD apply to companies?
- 2024 for companies already subject to the non-financial reporting directive
- 2025 for large companies that are not presently subject to the non-financial reporting directive
- 2026 for listed SMEs, small and non-complex credit institutions and captive insurance undertakings
Furthermore, non-European companies, which are generating a net turnover of €150 million in the EU and are having at least one subsidiary or branch in the EU, are required to report on their ESG impacts.
3. CSRD aligned with global reporting standards
The new CSRD guidelines will require companies to report in line with mandatory EU sustainability reporting standards. For example: the suggestions of the TCFD as well as the EU Taxonomy and the existing NFRD.
The reporting will need to cover:
- The Greenhouse Gas Protocol – disclosing their Scope 1, 2, and 3 emissions.
- The 6 environment impact criteria – disclosing how they substantially contribute to the environmental goals of the EU Taxonomy while not damaging one of them:
- Climate change mitigation
- Climate change adaptation
- Water and marine resources
- Circular economy
- Biodiversity & ecosystems
- Existing ESG-Standards such as the GRI – disclosing their social and environmental impact as well as governance
- Responsible Business Guidelines (OECD) – disclosing the entire impact along the value chain
CSRD – Economy’s game changer
The European milestone in setting international standards for sustainability reporting shows: In the future, every company worldwide will have to disclose its climate impact. This will help investors to reorient capital flows towards sustainable investment and manage financial risks stemming from climate change and improve transparency.
This is a great opportunity, guidance and motivation for effective climate action. It enables companies to position themselves as pioneers and to empower business partners along the way.
You want to learn more on how to prepare best for CSRD, in order to seize the opportunity now to drive forward climate transformation? Access the Whitepaper on CSRD here to get more insights.
You want to drive climate transformation in your organization today? Find out more about the free CLIMATE Readiness Check here and take the first steps towards a low carbon economy!