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Corporate Sustainability Reporting Directive (CSRD)


These sustainability reporting obligations on energy and climate must be complied with

12.03.2023 6 Minutes

On January 5, 2023, the Corporate Sustainability Reporting Directive (CSRD) came into force at EU level. Compared to the previous CSR reporting requirements, the circle of users has expanded considerably: 50,000 companies face the challenge of complying with these new reporting requirements, of which around 15,000 are in Germany. Among other things, the directive requires very detailed information on topics such as energy consumption, greenhouse gas emissions and other environmental impacts. It must be transposed into national law in all EU member states by July 6, 2024; from 2025, the first companies will already have to submit their reports for the 2024 financial year.

We answer the key questions for you:

What is the objective of the Corporate Sustainability Reporting Directive?

The European Commission's "European Green Deal" pursues the ambitious goal of transforming the European Union into a sustainable continent by 2050. To achieve this, the economic and financial system is a crucial point of attack. The transformation to a resource-efficient, social and at the same time climate-friendly economy must succeed – without losing sight of global competitiveness. In the future, capital flows should be steered more strongly into sustainable economic activities. This requires transparency. This is where the new Corporate Sustainability Reporting Directive (CSRD) comes into play: It significantly expands the existing corporate sustainability reporting obligations and creates transparency for stakeholders. Its aim is to bring about comparability in reporting through clearly defined requirements and indicators.

Who is affected by the CSRD?

While approximately 11,000 companies have been required to comply with the NFRD to date, approximately 50,000 companies in the European Union are expected to be affected by the CSRD in the future. These include:

  • Large companies that meet at least two of the following three criteria (regardless of a capital market orientation):
    • more than 250 employees
    • net sales of at least 40 million euros
    • Balance sheet total of at least 20 million euros
  • All capital market-oriented small and medium-sized enterprises (SMEs), with the exception of micro-enterprises (SMEs include companies that meet two of the following three criteria: 1) at least 10 employees, 2) 350,000 euros in total assets, or 3) 700,000 euros in net sales)
  • Non-European companies with more than 150 million euros in net sales, if they have a branch or subsidiary in the EU

When do the CSRD requirements have to be met?

The introduction will be staggered. The following deadlines are envisaged for implementation:

  • From 2025 (report for the 2024 financial year): For companies already required to comply with the Non-Financial Reporting Directive (NFRD).
  • From 2026 (report for fiscal year 2025): For large companies that were not previously subject to non-financial reporting
  • From 2027 (report for fiscal year 2026): For capital market-oriented SMEs

The timetable is tight. Therefore, affected companies should start preparing for the CSRD requirements now at the latest.

How does the CSRD change sustainability reporting?

The CSRD replaces the Non-Financial Reporting Directive (NFRD) and puts sustainability reporting on a par with financial reporting. It requires companies to report on material sustainability-related impacts, risks and opportunities.

Reporting is to follow the principle of "dual materiality": This means that a sustainability aspect is relevant for reporting if it has a material impact on people and planet and/or has/can have a financial impact on the company.

While different reporting formats were previously possible, sustainability reporting will be firmly located in the management plan with the CSRD. In the future, the contents of sustainability reporting must – in terms of accessibility – be findable in digital format and machine-readable.

They are subject to an audit obligation by an accredited external auditor, initially with limited assurance. If a company does not sufficiently fulfill its reporting obligations in the future, it will be subject to fines and sanctions, which will be determined by the individual member states.

Which standards should sustainability reporting follow according to CSRD?

In the future, sustainability reporting is to be carried out in accordance with the so-called "European Sustainability Reporting Standards" (ESRS) as a uniform reporting standard. They were developed by the European Financial Reporting Advisory Group (EFRAG) in accordance with existing European legislation. The ESRS have now been handed over to the European Commission. They are expected to be adopted as delegated acts by June 2023, making them binding for companies affected by the CSRD.

The ESRS cover the spectrum of ESG (Environment, Social, Governance) factors and contain additional standards on cross-cutting issues. The ESRS are based on recognised frameworks such as GRI (Global Reporting Initiative) and TCFD (Task Force on Climate Related Financial Disclosures) and also take into account the environmental objectives of the EU taxonomy.

In total, they include 12 standards:

  • Overarching standards (so-called "cross-cutting standards").
    • General requirements (ESRS 1)
    • General disclosures (ESRS 2)
  • Environmental Aspects (Environment)
    • Climate change (ESRS E1)
    • Environmental pollution (ESRS E2)
    • Water and marine resources (ESRS E3)
    • Biodiversity and ecosystems (ESRS E4)
    • Resource use and circular economy (ESRS E5)
  • Social aspects (Social)
    • Own employees (ESRS S1)
    • Employees in the value chain (ESRS S2)
    • Affected community (ESRS S3)
    • Consumers and end users (ESRS S4)
  • Aspects of corporate governance
    • Business Conduct (ESRS G1)

Currently, a total of 82 disclosure requirements have been defined. In addition, sector-specific standards are to follow.

What concrete reporting obligations on energy and climate are planned? How can they be implemented?

The future reporting standards on energy and climate change are described in ESRS E1. According to the current status, companies will have to disclose the following contents in sustainability reporting in the future:

A transition plan for climate change mitigation: it should make the company's past, current and future climate protection efforts transparent. The plan shall ensure that the strategy and business model are consistent with the 1.5° degree target of the Paris Agreement.The targeted strategy with regard to, among other things.
  • combating climate change,
  • adaptation to climate change,
  • energy efficiency and
  • the use of renewable energies;
The climate change mitigation measures identified, including the funding allocated for their implementation;
Specific targets for reducing greenhouse gas emissions, as well as other climate-related issues.Energy consumption and mix , focusing on the following values:
  • Total consumption
  • Improvement of energy efficiency
  • Share of renewable energies
  • Energy intensity (total energy consumption per net sales)
Emission output with the following key figures:
  • Total GHG emissions
  • Net Scopes 1, 2, 3 GHG emissions
  • Greenhouse gas intensity (total GHG emissions per net sales)
    ESRS E1-7ESRS E1-8ESRS E1-9
    Representation of GHG removals...
    • the company's own business activities as well as in the upstream and downstream value chain (in CO₂e)
    • ...through the purchase ofCO2 certificates
    Disclosure of internal emissions pricingFinancial impact...
    • ...due to physical risks as well as transition risks
    • ...resulting from climate-related opportunities

    Anticipate: Prepare now for these new reporting requirements

    It is already clear that the CSRD will require very detailed information – including on energy consumption and greenhouse gas balance. However, many companies will first have to create the necessary framework conditions for collecting these data. Those responsible in companies are therefore well advised to deal with the reporting obligations at an early stage and to set the necessary course today, for example by implementing an effective energy and climate management system. The introduction of a specially designed software solution not only saves time and costs for data collection and evaluation, but also provides you with ready-made report modules.

    A flexible, comprehensive software approach to energy, climate, and environment can also provide metrics for adjacent reportable environmental aspects, such as pollution (ESRS E2), water resources (ESRS E3), or resource use (ESRS E5).

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