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What does the CSRD mean for you?

Executives discuss what CSRD means for them


The CSRD is a complex legislation that affects everyone. From the year 2024, companies must comply with this sustainability legislation. In this article, you will find information about what the CSRD entails and its impact on you, whether you are a company obligated under CSRD, an SME, a freelancer, or a consumer.

What is the Corporate Sustainability Reporting Directive (CSRD)?

The Corporate Sustainability Reporting Directive (CSRD) is legislation from the European Union that requires companies to extensively report on their sustainability outcomes. Sustainability is divided into three different themes: environment, social, and governance, abbreviated as ESG.

Reporting on the outcomes in these themes must be done in a uniform manner according to the legislation. For this purpose, the European Sustainability Reporting Standards (ESRS) were established. These standards specify what and how a company must report to comply with CSRD legislation.

The CSRD is European legislation and applies only to European companies, with some exceptions for companies from other continents that are very active in Europe. Not all companies in Europe need to comply with this legislation. Initially, this legislation applies only to organisations that meet at least two of the following criteria for 2 years:

  • More than 25 million euros in total assets.
  • A net turnover of 50 million euros.
  • More than 250 employees.

The legislation has been active since January 5, 2023, and is part of the broader European Green Deal. The rollout of the legislation is gradual, with the companies that had to comply with the NFRD, as you will read more about at the bottom of the article, being the first. They will have to mention their activities around the ESG themes in their annual report of 2025 starting from 2024.

What is ESG and CSRD

Example of CSRD in practice

To translate this information into a concrete example, the following situation can be outlined. Company X was established in the Netherlands and is still based there. They provide services within and outside the European Union.

In 2022, Company X had a turnover of 93 million and had 280 people on the payroll. This increased in 2023 to 105 million and 293 employees. This means, as described in the requirements above, that they qualify for CSRD.

The new legislation obligates them to report on the ESG themes (environment, social, and governance). The company will, therefore, have to write in detail about the impact of the company on the environment and the impact of the environment on them. They must do this not only for the environmental theme but also for social and governance.

They must report according to the guidelines of the ESRS. These guidelines include many data points indicating what the company must report. Some of these data points (ESRS 2) are mandatory for every company, while other data points are determined by the company, depending on what is important to them.

According to the ESRS guidelines, Company X must report on, among other things, the diversity of gender among board members, as well as the total profit from different categories such as coal, oil, gas, and chemical products.

All this information is ultimately compiled in their annual report. This must then be audited by an accountant who provides assurance (certainty) that the annual report complies with CSRD legislation.

This is why the CSRD also impacts you

This complex legislation is an important step towards providing transparency and reliability, especially in the information that large companies release about their sustainability efforts. The introduction of the CSRD not only has a significant impact on companies but also changes the situation for other stakeholders.

The impact of CSRD on the relevant companies

An estimated 50,000 companies are eligible for the new CSRD legislation. Companies falling under this legislation will all need to make the necessary adjustments to how they deal with certain sustainability themes.

Firstly, companies will have to re-examine their stakeholders and supply chain. They need to identify their stakeholders and their place in their supply chain. Additionally, they will have to determine which ESG themes are important to them. Ultimately, they will need to collect data to report according to the ESRS guidelines.

This will present companies with significant challenges. Important decisions will need to be made throughout the process that will impact both the company itself and the environment around the company.

Moreover, it also offers opportunities for companies to demonstrate the steps they are taking towards a more sustainable world based on the various ESG themes. By critically examining stakeholders and the supply chain, new insights can be gained and policies can be adjusted.

Complying with the CSRD will involve considerable administrative costs and time for companies. The company will need to go through the entire process meticulously and systematically. They may need to invest in additional tools, such as CSRD software and accounting systems, to comply.

Large company in context of CSRD

Are non-affected companies ‘safe’ from CSRD?

Even companies that do not need to comply with the CSRD legislation will feel its effects. SMEs and even freelancers may need to provide data to relevant companies they do business with. This means they too must be aware of their contribution to sustainability.

This can be seen as a burden, but also as an opportunity by companies. They will be forced to make choices regarding their suppliers and other stakeholders. If you as a supplier can not only provide the necessary data to the companies but also representative data, then this can be a good reason for the relevant companies to choose you.

Additionally, there are suggestions that a lighter version of CSRD will be made for SMEs. It certainly does no harm for entrepreneurs to familiarize themselves with this legislation early on.

CSRD offers opportunities for investors

One of the aims of the CSRD is to provide transparency that helps investors and analysts better evaluate the sustainability performance of EU companies. Through this mandatory disclosure of information, investors are provided with essential data to assess the sustainability of companies and make informed decisions.

This promotes greater involvement in sustainable investments and encourages companies to improve their sustainability efforts to meet investor expectations.

Furthermore, the so-called double materiality analysis also provides valuable insights for investors. This double materiality assessment is a mandatory analysis that companies must conduct, which is also included in the mandatory ESRS 2 guideline. Companies must not only consider the impact of their business on the world but also the impact of the world on their business.

What changes for the consumer?

In the daily life of the consumer, not much changes. Thanks to the transparent information about companies’ performances, consumers can better understand the impact of their purchases on people and the environment. Consumers can confidently choose products and services that align with their own values and contribute to a more sustainable future.

Additionally, some products may become more expensive. One reason for this could be that companies opt for a supplier with a stronger focus on sustainability than on offering the lowest price.

Impact CSRD on consumer

Why does the CSRD legislation exist?

The new directive, the Corporate Sustainability Reporting Directive (CSRD), came into effect on January 5, 2023, modernizing and strengthening the rules regarding the social and environmental data that companies need to report.

In 2022, the European Financial Reporting Advisory Group (EFRAG) released its first set of European Sustainability Reporting Standards (ESRS). The EFRAG is an independent body that brings together various stakeholders.

The ESRS were published in the Official Journal on December 22, 2023, in the form of a delegated regulation. They are aligned with EU policy and contribute to international standardization initiatives.

CSRD form European Union

The upgrade from NFRD

This directive replaces the earlier Non-Financial Reporting Directive (NFRD) and aims to increase the transparency and reliability of sustainability information. It covers not only environmental aspects but also social and governance issues.

The Non-Financial Reporting Directive (NFRD) is a directive on non-financial reporting. This was included in the annual report alongside the regular financial figures. Companies reported on matters around the previously discussed ESG themes.

The NFRD applied to companies with more than 500 employees and of public interest. The aim of the NFRD was to encourage companies to evaluate, manage, and report on their impact on society and the environment. Therefore, the NFRD is seen as the precursor to the CSRD.

Working towards the European Green Deal

The CSRD is part of the broader European Green Deal, which aims for a sustainable EU economy with net-zero greenhouse gas emissions by 2050, and where economic growth is decoupled from resource use.

The European Green Deal is an ambitious initiative of the European Union to address the challenges of climate change and environmental pollution. Its goal is to transform the EU into a modern, resource-efficient, and competitive economy by 2050, with key objectives being:

  • No net emissions of greenhouse gases by 2050.
  • Economic growth decoupled from resource use.
  • No person and no place left behind.

To achieve these objectives, the European Commission has adopted a set of proposals to align the EU’s climate, energy, transport, and taxation policies. The aim is to achieve a net reduction in greenhouse gas emissions of at least 55% by 2030 compared to 1990 levels.

Make your CSRD reporting easier and faster
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