The CSRD and NFRD: everything your company needs to know

In this article we dive deeper into the newly proposed Corporate Sustainability Reporting Directive (CSRD). The goal of this new EU directive is to give investors and consumers more information about the footprint of organizations they buy from. With this knowledge about companies - investors, partners and consumers can make well-informed choices about what companies they want to invest in, who they want to work with or from who to purchase - and thus make more sustainable choices along the way. Funding economic activities that support environmental objectives is one of the key drivers for achieving the EU’s 2050 net-zero objective. 

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The NFRD

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Up until recently, the Non-Financial Reporting Directive (NFRD) was the main compliance framework in place. Under the NFRD, only large companies (>500 employees) are required to publish reports on social responsibility (including relevant KPIs). In practice, several shortcomings have been identified related to the comparability, reliability and relevance of the non-financial information provided.

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The CSRD

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Therefore, the CSRD was presented. The CSRD will require many companies ( >50.000 compared to c. 11.700) to disclose more detailed information about their carbon footprint. The proposal requires companies' assurance on reported information, has more detailed reporting requirements, and requires companies to ‘tag’ the reported information, so it is machine readable. This allows auditors to efficiently review and evaluate the data. In addition, a standardized format will be used which will be more insightful for investors and which ensures that the comparability between companies will improve. 

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When do companies need to become CSRD compliant?

Financial year 2024 (report in 2025)

All organizations already within the existing scope of NFRD.

Financial year 2025 (report in 2026)

All organizations where at least two of the following conditions apply: 

1. Net turnover of at least €50 million;

2. total assets of at least €25 million;

3. More than 250 employees.

Financial year 2026 (report in 2027)

All listed mid-market companies.

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Also, companies based outside the EU must comply if they have subsidiaries in the EU or have securities on EU-regulated markets (micro-enterprises form an exception).

CSRD compliance will be enforced by 2025 for companies reporting over 2024. Sustainability reporting will no longer be a non-binding choice and therefore, the best preparation is to start now, for instance, by checking out our list of CSRD software tools. Alternatively, book a demo with one of our experts, today.