[et_pb_section fb_built=”1″ _builder_version=”4.24.2″ _module_preset=”default” da_disable_devices=”off|off|off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row _builder_version=”4.24.2″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.24.2″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.24.2″ _module_preset=”default” global_colors_info=”{}”]

A game-changer in corporate sustainability reporting

By Raine St.Claire

Effective in 2024, the Corporate Sustainability Reporting Directive (CSRD) is a crucial EU law demanding companies to reveal their environmental and social impacts.

It replaces the Non-Financial Reporting Directive (NFRD), aiming to offer clearer insights into EU companies’ sustainability practices. Its goal is simple: to inform stakeholders about companies’ sustainability performance, aiding better decision-making for a greener future.

What is CSRD?

The Corporate Sustainability Reporting Directive (CSRD) constitutes a pivotal piece of European Union (EU) legislation. Implemented on January 5, 2023, its principal mandate is to compel EU businesses, including qualifying EU subsidiaries of non-EU entities, to divulge their environmental and social impacts, along with elucidating how their environmental, social, and governance (ESG) endeavours influence their operations.

Why was the CSRD introduced?

The main goal of the CSRD is to provide clear information for investors, analysts, consumers, and other stakeholders to assess the sustainability performance of EU companies. It expands on the Non-Financial Reporting Directive (NFRD) by broadening the scope and requirements for sustainability disclosures.

CSRD reporting focuses on double materiality, meaning companies must disclose both how their activities affect the environment and society, and how sustainability efforts impact their financial health. For example, companies must report not only energy use but also emissions data, targets for reducing environmental impact, and the financial effects of meeting these goals. All CSRD disclosures must be public, and third-party auditing is mandatory to ensure accuracy and completeness.

Which companies must comply with the CSRD?

Large companies already subject to the Non-Financial Reporting Directive (NFRD) have to comply with the CSRD from January 1, 2024, onwards. The CSRD measuring & reporting requirements are obligatory in the annual reports for the financial year 2024. This ‘first’ CSRD-compliant annual report will have to be published in 2025.

The CSRD applies to all large companies governed by or stock listed in EU law or established in an EU member state. It also applies to global businesses that have operations/securities in Europe.

[/et_pb_text][et_pb_image src=”https://www.topbusinesswomen.co.za/wp-content/uploads/2024/02/TW-GIF.gif” alt=”Top Women Leaders CTA. Banner” title_text=”TW GIF” url=”https://meetings.hubspot.com/twaambo-chileshe” _builder_version=”4.24.2″ _module_preset=”default” global_colors_info=”{}”][/et_pb_image][et_pb_text _builder_version=”4.24.2″ _module_preset=”default” global_colors_info=”{}”]

Who is required to comply with CSRD?

Though it’s an EU directive, the CSRD also applies to companies based abroad that have a presence in the EU. This means that a hypothetical South African-based company with dozens of subsidiaries has to abide by the CSRD if even one of those subsidiaries is in the EU.

What are the criteria for CSRD?

Companies meeting two of the following three conditions will have to comply with the CSRD: €50 million (R875 million) in net turnover, €25 million (R437.5 million) in assets, or 250 or more employees.

What about banks?

Over the next year until early 2025, larger banks must follow a similar CSRD implementation roadmap, including:

• Defining their vision and ambition, integrated into a double materiality assessment
• Addressing regulatory disclosure requirements related to the CSRD, such as conducting an ESRS gap assessment
• Adjusting processes, data, and IT systems
• Establishing or modifying a governance and controls framework
• Preparing for assurance activities
• Incorporating CSRD into their annual reports and aligning with other ESG disclosures like human rights reports, climate reports, and pillar 3 ESG disclosures

When must companies comply with the CSRD?

CSRD compliance is phased in between 2024 and 2029, primarily contingent on legacy NFRD obligations or company size.

Penalties for noncompliance

EU member states are tasked with establishing mechanisms for imposing penalties on non-compliant entities, aiming for effectiveness, proportionality, and deterrence. It is imperative for companies to stay abreast of legislative amendments and seek legal counsel to ensure compliance and avert potential penalties.

Penalties for noncompliance can be severe, with corporate directors facing fines up to €75,000 (R1.3 million) and potential imprisonment for up to five years if they fail to provide necessary information for external auditors to certify CSRD-aligned reports or obstruct their work.

READ THE 6TH EDITION OF ESG: THE FUTURE OF SUSTAINABILITY

[/et_pb_text][et_pb_code _builder_version=”4.24.2″ _module_preset=”default” global_colors_info=”{}”]

[/et_pb_code][/et_pb_column][/et_pb_row][/et_pb_section]