On October 18, 2023, the European Parliament rejected the motion to weaken the conditions of the Corporate Sustainability Reporting Directive (CSRD). While this is excellent news for the move towards a sustainable economy, it also means now’s the time to start preparing for the CSRD before it’s too late.
So, what does the CSRD entail? Why does it matter? And what tools and workflows are out there to make CSRD compliance easier? Read on for everything you need to know to prepare your business for these upcoming changes.
The CSRD is a new European Union legislation requiring organizations to publish regular reports on the environmental and social impact of their business activities. You can check out our extensive article for a deeper look into the upcoming CSRD regulation. Otherwise, here’s a rundown of the key takeaways:
The CSRD will come into effect on January 1, 2024, impacting over 50,000 EU companies in its first year, up from the current 11,700. Affected businesses must create a sustainability strategy, establish accurate reporting systems, and ensure the right data has been collected for reporting–a lot of work in a tight time frame.
Your business should take the urgency of these upcoming obligations seriously. Companies that fail to report and comply with the CSRD could face fines of up to 10 million euros, or 5% of annual revenue.
Navigating the complexities of CSRD reporting can be daunting for many businesses. Thankfully, many practical tools and workflows exist to simplify your compliance journey. Let’s dive into the essentials that will guide you through the process:
Are you looking to fast-track your CSRD monitoring and compliance? Sustainability reporting software tools like Coolset can help you understand, streamline, and report on complex regulations in days–without having to deal with endless spreadsheets.
These platforms offer advanced data collection techniques, detailed sustainability insights, and streamlined reporting tools to help you reduce emissions and get compliant. Even if you're new to sustainability reporting, these tools guide you through the entire process.
To gather accurate sustainability data, you'll need a reliable data collection tool. These platforms simplify data collection, analysis, and reporting, so you can effectively track and manage your business’s environmental, social, and governance (ESG) performance.
When searching for a data collection tool, opt for a user-friendly option that captures relevant data in a structured way. Make sure it covers important sustainability metrics like carbon emissions and social impact.
Once you've gathered sustainability data, data management and analysis tools can help you better organize, validate, and process data for reporting purposes.
These tools include features like a centralized database, advanced search functionalities, and thorough record-keeping capabilities for powerful data storage and security. And don't overlook the versatility of Microsoft Excel, a trusty companion for extracting valuable insights from data.
Workflow automation simplifies the collection, management, and reporting of sustainability data. Purpose-built platforms automate the collection of ESG data and seamlessly integrate it into your strategic business decisions.
With a strong emphasis on data quality, accuracy, and auditability, these tools not only save you time but also minimize the risk of errors. This empowers you to communicate your ESG efforts with confidence, enhancing your overall ESG performance.
Achieving CSRD compliance demands maintaining a thorough audit trail and documenting all of your sustainability efforts. Implementing document management best practices, including version control, data retention policies, and document classification is essential.
Proper documentation ensures the reliability and accuracy of your sustainability reports.
Here are answers to some frequently asked questions about CSRD, covering topics such as the CSRD timeline, the steps to achieve compliance, and strategies for building a carbon reduction plan to reduce emissions.
The CSRD entered into force on January 5, 2023. This means more large companies and listed SMEs will now be required to report on sustainability. Some companies must comply with the CSRD as early as the 2024 financial year, for reports published in 2025.
CSRD compliance will be phased in gradually between 2024 and 2029. When your business must comply depends on its size, turnover, and location. Here’s the breakdown:
Large companies already subject to the NFRD must comply with the CSRD.
Large companies that meet two out of three of the following criteria must comply with the CSRD:
Listed small to medium-sized enterprises (SMEs) must comply with the CSRD if they meet at least two out of three of the following criteria:
Third-country undertakings must comply with the CSRD.
Take a look at our extensive article for a full rundown of the CSRD’s timeline.
Achieving CSRD compliance requires a strategic approach. Here are six crucial steps to get you on the right track:
A key distinction between current regulations and the CSRD lies in its 'double materiality' assessment requirement. This refers to identifying sustainability topics that matter most to your organization and its stakeholders.
Not only is this process time-consuming, but it also requires the support of expert technology. Choosing a sustainability reporting platform like Coolset can ensure you’re well-prepared from day one.
If your business falls under the scope of the CSRD then it's crucial to start familiarizing yourself with the European Sustainability Reporting Standards (ESRSs). Complying with these requirements is mandatory under the CSRD so it's important to develop a thorough understanding early on.
CSRD-impacted businesses are now responsible for collecting data from their operations, suppliers, and partners to include in sustainability reports. Businesses must also conduct due diligence and audits such as reporting on Scope 1, 2, and 3 carbon emissions.
Qualified data alone may not guarantee complete CSRD compliance. That’s why ensuring the reliability of your data collection process is critical. To streamline this process, save time, and guarantee the accuracy of your data and documentation, consider using a tool like Coolset specifically designed to meet CSRD requirements.
Make sure your risk management aligns with your sustainability strategy from the outset. This is essential to safeguard your business value and reduce risks.
Research by Moody’s ESG Solutions revealed that moderate to severe ESG events can lead to abnormal stock market losses of up to -7.5% over a year–something not to be taken lightly. Consider the impact of sustainability topics on your reputation and license to operate when crafting your sustainability strategy.
Using well-known ESG and sustainability reporting frameworks alongside CSRD requirements can improve the transparency and effectiveness of your reporting.
These frameworks empower your business to go beyond minimum requirements and meet the increasing demands of stakeholders. Additionally, it's vital to ensure your reports are digitally accessible and undergo independent audit verification.
Regardless of whether your business will be impacted by CSRD in 2024, proactively embracing sustainability compliance is a compelling choice. Companies that act now will gain a competitive edge, enjoy the financial and non-financial benefits of their sustainable initiatives, and see results before the first deadlines set by the EU.
Minimizing your carbon footprint is one of the simplest ways to start mitigating your business's environmental impact. Here are five simple steps to creating your first carbon reduction plan:
Baseline emissions are used as a reference point to define your carbon reduction targets. Choosing a baseline year is the first step to creating your carbon reduction plan.
Assess your organization's Scope 1, 2, and 3 carbon emissions. This analysis will provide a clear understanding of the sources of your emissions.
Completing a thorough carbon emissions analysis will allow you to pinpoint the emissions hotspots across your value chain. Starting with quick wins is crucial to creating a successful carbon reduction plan.
Calculating the costs and effects of your carbon reduction programs can seem like a daunting prospect. Using reliable carbon accounting software tools like Coolset can simplify the process.
Now that your carbon reduction plan is in place, it's time to determine the best implementation strategy. Prioritizing actions that align with your goals and leveraging the opportunities revealed by your carbon accounting software will streamline your execution process.
Check out our extensive Coolset Academy article for more information on creating your first carbon reduction plan.
To be fully prepared for the CSRD, businesses must start preparing now. Making sure you have the proper tooling and workflows in place is the first step. If you’re looking to learn more about the CSRD, how to comply with CSRD, or how companies like Coolset can help you, request a demo today.