Sustainability transparency
You've been hearing a lot lately about CRSD... RSCD... SRCD... SCORD... CARD. Yes, that's it... the CSRD directive. The Corporate Sustainability Reporting Directive (CSRD) requires companies to communicate transparently about their impact in relation to sustainability. The idea behind the CSRD is to make what companies say about sustainability as transparent and reliable as financial information. This arrangement is a result of the European Green Deal that was concluded in 2019. With the arrival of this new directive, transparency about sustainability should increase and greenwashing should largely be a thing of the past.
What is the CSRD directive about?
This directive replaces the current Non-Financial Reporting Directive (NFRD) And is less voluntary. There are stricter requirements for companies, not only about environmental aspects, but also about social and governance issues.
Why this new CSRD scheme?
The CSRD should provide better and more reliable information about sustainability. The directive encourages companies to operate more sustainably and to be transparent about their impact. The starting point of the European Green Deal is that companies must be climate neutral by 2050.
Standardisation of sustainability reports also ensures that companies can be better compared on their performance. This can be important for clients, consumers and investors. In any case, there was already a growing demand for more transparency from companies. By promoting that transparency, CSRD can increase public and investors' trust in companies.
Dual materiality
On the one hand, companies are expected to report on how external factors (such as climate change or scarcity of natural resources) affect their business. That's called financial materiality. Conversely, they must also record how their business activities have an impact on people and the environment. This is then called impact materiality. Because the CSRD looks at impact in two ways, it does talk about the dual materiality principle”.
A phased introduction to the CSRD
The scope of the NFRD is gradually being expanded and the CSRD is being phased in. From 2024, the regulation will apply to companies covered by the NFRD. This also includes the CSRD report for the 2024 financial year. From 2025, the CSRD will be mandatory for large companies that are not currently covered by the NFRD. From 2026, the CSRD Directive will apply to listed Small and Medium Enterprises (SMEs) and non-EU companies.
Structure of the CSRD Directive
Under the CSRD Directive, companies must report (CSRD reporting) according to standardized standards. The European Sustainability Reporting Standards (EARS). These reporting standards include:
1. Environmental aspects
This includes issues such as greenhouse gas emissions, energy consumption and use of renewable energy, impact on biodiversity and raw materials and adaptation to climate change.
2. Social Aspects
This includes employee rights and working conditions, diversity and inclusion and human rights in the chain. Indeed, in the chain, because the CSRD is not limited to what happens in your own company, but also to companies that play a role in your chain.
3. Governance aspects
This is about business ethics and combating corruption, the transparency of your remuneration policy and your stakeholder involvement.
Companies must provide information about their sustainability policy, strategy and goals. And the CSRD report must be audited by an external party (in this case, the auditor) to ensure reliability
Controllability with a CSRD report
The CSRD report has a very extensive scope and literally hundreds of questions need to be answered. It is logical that answering these questions leads to the necessary actions and tasks. It is already recognized that this is quite a challenge for most companies that need to get started with this.
How can efficient CSRD Software help with this?
When it comes to managing the follow-up of questions, CSRD looks like many other audits. For ISO2HANDLE CSRD software that was the reason some time ago to CSRD to integrate into its platform.
By integrating CSRD into the existing ISO2HANDLE environment, the lives of CSRD managers suddenly become a lot more fun and efficient. Actually, in exactly the same way as quality and risk management that can be for the QHSE manager.
Do you want to know what that could mean for your company or are you curious about a CSRD reporting example? We would love to show it to you in a short demo.
