What is the CSRD guideline and why is it important?

Marco DeesCSRD
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Transparency about sustainability

You hear a lot lately about CRSD...RSCD...SRCD...SCRD...CSRD. Yes, that's it...the CSRD directive. The Corporate Sustainability Reporting Directive (CSRD) requires companies to communicate transparently about their impact in relation to sustainability. The idea behind the CSRD is to make what companies call sustainability as transparent and reliable as financial information. This regulation is an outgrowth of the European Green Deal that came into being in 2019. With the advent of this new directive, transparency on sustainability should increase and greenwashing should largely become a thing of the past.

What is CSRD directive about?

This directive replaces the current Non-Financial Reporting Directive (NFRD) and is less non-binding in nature. It imposes stricter requirements on companies and covers not only environmental aspects but also social and governance issues.

Why this new CSRD scheme?

The CSRD should ensure better and more reliable information on sustainability. It encourages companies to operate more sustainably and be transparent about their impact. The premise of the European Green Deal is that companies should be climate neutral by 2050.

Standardization of sustainability reporting also allows companies to be better compared on their performance. That can be important for clients, consumers and investors. There was a growing demand for more transparency from companies anyway. By promoting that transparency, CSRD can increase public and investor confidence in companies.

Employee checks ISO2HANDLE CSRD reporting on his tablet

Dual materiality

On the one hand, companies are expected to report on how external factors (think climate change or scarcity of natural resources) affect their business. This is called financial materiality. Conversely, they must also record how their business activities impact people and the environment. That is then called impact materiality. Because inde CSRD looks at impact in two ways, it is called the dual materiality principle'.

A phased implementation of the CSRD

The scope of the NFRD will be gradually expanded and the CSRD will be phased in. Starting in 2024, it will apply to companies covered by the NFRD. This will include CSRD reporting for fiscal year 2024. From 2025, the CSRD will be mandatory for large companies not currently covered by the NFRD. From 2026, the CSRD will apply to listed Small and Medium Enterprises (SMEs) and non-EU companies.

Structure of the CSRD guideline

Under the CSRD Directive, companies must report (CSRD reporting) according to standardized standards. The European Sustainability Reporting Standards (ESRS). Those reporting standards include:

1. Environmental aspects

This includes issues such as greenhouse gas emissions, energy consumption and use of renewable energy, impact on biodiversity resources and climate change adaptation.

2. Social Aspects

You can think about workers' rights and working conditions, diversity and inclusion, and human rights in the chain. Indeed in the chain, because CSRD is not limited to what happens in your own company, but also at companies that play a role in your chain.

3. Governance aspects

Here it is about business ethics and anti-corruption, the transparency of your compensation policies and your stakeholder engagement.

Companies must provide information on their sustainability policies, strategies and goals. And CSRD reporting must be audited by an outside party (in this case, the auditor) to ensure reliability

Manageability with CSRD reporting

The CSRD reporting is has a very extensive scope and there are literally hundreds of questions to be answered. It makes sense that answering those questions will lead to the necessary actions and tasks. It is already recognized that this is quite a daunting task for most companies that have to work with it.

How can efficient CSRD Software help with this?

In managing follow-up questions, CSRD looks like many other audits. This prompted ISO2HANDLE CSRD software to integrate CSRD into its platform some time ago.

By integrating CSRD into the existing ISO2HANDLE environment, life for CSRD managers suddenly becomes a lot more fun and efficient. Actually in exactly the same way that quality and risk management can be for the QHSE manager.

Want to know what that could mean for your business or are you curious about a CSRD reporting example? We would be happy to show it to you in a short demo.

Want to know how management software can help you with CSRD reporting?
FAQ

What is CSRD?

The CSRD is a European guideline for sustainability reporting and stands for corporate sustainabillity reporting directive.
FAQ

CSRD when mandatory?

The CSRD requires companies under the NFRD to report on their human and environmental impact starting in 2024. This will apply to large companies under NFRD in 2025 and to listed SMEs and non-EU companies in 2026.
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AUTHOR
Marco Dees
Are you a QHSE manager looking for a powerful solution? With our quality management software you get superpowers that give you control over processes for quality, (occupational) safety, hr and environment in no time. Based in the Netherlands, we proudly support hundreds of companies worldwide.