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Did you say CSRD? The impact of the new non-financial reporting on CSR

The CSRD is a European law that challenges the CSR of companies. All companies with 250 or more employees will have to measure and declare their extra-financial performance, making their choice through numerous indicators from 2024.

In this article :

  1. What is the Corporate Sustainability Reporting Directive, or CSDR?
  2. In concrete terms, what are the obligations?
  3. Which companies are concerned?
  4. When does the CSDR come into force?
  5. Are there any penalties for non-compliance?
  6. How can I prepare for the upcoming regulatory changes?
  7. The stakes
  8. How to prepare for the upcoming regulatory changes ?

1. What is the Corporate Sustainability Reporting Directive or CSRD?

The Corporate Sustainability Reporting Directive (CSRD) is part of the Sustainable Finance Package, initiated by the European Commission in April 2021 to achieve carbon neutrality by 2050. This new rule concerns Environmental, Social and Governance (ESG) criteria in general, i.e. all extra-financial data. By allowing investors to redirect their investments towards more sustainable technologies and businesses, these measures should make Europe carbon neutral by 2050.

2. What does it mean in practice ? What are the obligations ?

There are several :

  • Have a detailed audit of ESG (sustainable development) information carried out by an independent third party
  • Establish reports that comply with European standards in terms of sustainable development
  • Leave a digital track of the information communicated, so that it is machine-readable

3. Which companies are concerned?

The CSRD will concern large companies, that is entities exceeding at least 2 of the following criterias :

  • 20 million euros in balance sheet ;
  • 40 million euros in sales;
  • 250+ employees

The proposal does not impose any new reporting obligations on small companies, except for SMEs, whose securities are listed on stock markets

4. When does the CSRD comes into application ?

As early as 2024. So it's time to think ahead ! Here are some key dates to remember :

  • The proposal was issued in 2021
  • The SRFD is expected to be adopted by the EU in October 2022
  • By the end of 2022, the directive will be added to the legislation of each state
  • The first application of the directive will be on January 1, 2024 for the fiscal year 2023
  • In January 2027, listed SMEs will also be affected for their financial year 2026

5. Are there any penalties for non-compliance ?

The text does provides for sanctions, which will be defined by each Member State of the EU. They must be "effective, proportionate and dissuasive".

6. How can I prepare for the upcoming regulatory changes ?

  • Start a reflection with your stakeholders on your ESG and CSR strategy
  • Do not neglect your digital footprint in this reflection
  • Take the time to measure your extra-financial data on the three ESG dimensions. Specific tools exist
  • Update your CSR and ESG strategy, taking into account the cost-opportunity calculation of compliance with new regulations
  • Do not hesitate to seek for external support, to ensure that you are doing things by the book

7. The stakes

Financial information is very standardized, and this is a good thing. It allows all stakeholders to have access to accurate, qualitative and reliable information, and to agree on concrete expectations. However, extra-financial datas and their measurement lacks precision, and it is necessary to adopt a common language when talking about CSR and ESG.

Of course, complying with this new directive is a constraint. However, it is also an opportunity for your company to prove its financial performance.

Knowing how to move your strategy towards an environmental, social and governance positive impact is a guarantee for your shareholders of good economic health !

8. How to prepare for the upcoming regulatory changes ?

Start a reflection with your stakeholders on your ESG and CSR strategy.

  • Do not neglect your digital footprint in this reflection
  • Take the time to measure your non-financial data on the three ESG dimensions. To do this, specific tools exist and are there to guarantee a good evaluation and shareable results
  • Update your CSR and ESG strategy by taking into account the cost-opportunity calculation of compliance with new regulations
  • Do not hesitate to seek external support to be sure to establish a sustainable strategy.

In conclusion, the future compliance with CSRD standards is a necessary step to implement an efficient adaptation strategy to climate change. To facilitate this evolution, it is important to be accompanied by experts in order to correctly measure its impacts and establish an operational roadmap. There are softwares (like Fruggr) that allow you to assess your ESG-compliant digital footprint and generate the necessary data to comply and adopt a sustainable digital transformation strategy.

Don't hesitate to ask the experts !

Auteur : Marie-Christine Aubin