CSRD and the integration of sustainability in companies
The Corporate Sustainability Reporting Directive (CSRD) came into effect in January 2023 in the European Union (EU), but the relevance of the topic goes beyond companies operating in the bloc. The guideline is a milestone for discussions involving the standardization and comparability of sustainability reports globally.
This is an extension of the Non-Financial Reporting Directive (NFRD), a guideline for reporting mandatory non-financial information that was adopted by the EU in 2014. The new guideline seeks to modernize and strengthen the rules regarding social and environmental information that companies must report and is expected to be applied for the first time in the 2024 fiscal year, for reports published in 2025.
Companies subject to CSRD will have to report in accordance with the European Sustainability Reporting Standards (ESRS), developed by EFRAG, formerly known as the European Financial Reporting Advisory Group. The standards will be adapted to EU policies, while building on and contributing to international standardization initiatives.
Which companies are subject to the CSRD?
In general, companies that operate in the European Union or do business with companies there, that is, are part of its value chain, will have to adapt to the new reporting standard. This includes large listed companies and SMEs, with an exception for micro-enterprises.
The CSRD comes into effect in 2024 for companies that reported to the NFRD, this includes Brazilian subsidiaries of large European companies. From 2028, it will be valid for large non-European companies operating in Europe.
What is the importance of CSRD?
According to Lauro Marins, ESG Strategy Manager at WayCarbon, the ESRS standard aims to expand the concept of sustainability and integrate this agenda into corporate strategy. “Companies will have to report information based on material topics both from the perspective of the impact they cause, and from the financial perspective of the sector (double materiality). Furthermore, the standard aims to align with other frameworks (GRI, IFRS) and assess interoperability between them”, explains Marins.
The expert also reinforces that the main point is to remember that the report is the end of the ESG strategy process. “Companies need to internalize, understand where and how to act in light of this agenda and internalize sustainability issues into their business”, he concludes.
According to the European Commission portal, the new rules will ensure that interested parties have access to the information they need in order to assess the impact of companies on people and the environment and for investors to assess financial risks and opportunities arising from climate change and other sustainability issues. Furthermore, the idea is that disclosure costs will be reduced for companies in the medium and long term through the harmonization of the information to be provided.
Do you want to understand how your company can incorporate sustainability into its operations and adapt to the CSRD? Get in touch with our experts.
