The CSRD, or Corporate Sustainability Reporting Directive, imposes obligations similar to those seen when the GDPR was implemented in 2018. Despite the disparity in objectives between the CSRD and the GDPR, both entail significant changes to companies' strategy, processes and budgets. Implementing these changes, a lengthy process that requires several months of coordination and that many companies do not perceive as urgent, is becoming crucial for timely CSRD compliance.
Context, objectives, obligations and implications of the CSRD
The CSRD, which replaces the Non-Financial Reporting Directive (NFRD), aims to improve sustainability reporting in order to raise companies' awareness of the environmental and social impacts of their activities, and extends its scope to all large companies with more than 250 employees, regardless of their activity. In force since January 2023, its rules will apply from January 2024, with reporting due in 2025.
The CSRD imposes reporting obligations covering the environmental, social and governance pillars. A dual materiality assessment is essential to define the scope of the reporting obligations and the organisational strategy in the short, medium and long term.
The benefits of early compliance
Despite the administrative burdens and implementation costs for companies subject to CSRD, there are a number of actions that can be taken to reap the benefits of early compliance. These include improving ESG transparency, identifying potential financial impacts and necessary adjustments in the supply chain, reducing various costs, increasing employee engagement and distinguishing a company from its competitors before reporting becomes a legal requirement.
The requirement for reporting companies to disclose information on impact, risks, opportunities, measures and targets will force entities to adapt their processes, reconsider their strategies, adopt internal policies and centralise data collection. Early compliance will also facilitate a smoother transition towards meeting the obligations of the Sustainable Care Directive (SCD), which will require due diligence procedures to prevent negative impacts on human rights and the environment. In addition, companies facing CSRD will have to align their business strategy with the Paris Agreement objectives of limiting global warming to 1.5°C.
Maximising time before the official deadline is crucial to ensuring business agility, coordination between different stakeholders and alignment of strategies with business objectives. A proactive approach ensures a smooth transition to rigorous and timely CSRD compliance.
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