Corporate Sustainability Reporting Directive (CSRD) in Europe: A Phased Approach

What is the Corporate Sustainability Reporting Directive (CSRD)?

The Corporate Sustainability Reporting Directive (CSRD) is a comprehensive financial reporting framework which came into force in January 2024. Approximately  50,000 organizations across the EU will fall under the scope of CSRD, a key component of the European Green Deal aiming to achieve climate neutrality by 2050. 

Under directive 2023/34/EU, CSRD introduces both internal adjustments and external preparations. One notable change is the requirement for CSRD to be reported in a standardized digital format, specifically Inline XBRL (iXBRL). This format has been in use for financial reporting since 2021 and is now extended to Environmental, Social and Governance (ESG) reporting, allowing companies to integrate these disclosures seamlessly with their financial results. 

CSRD Implementation Timeline

The Corporate Sustainability Reporting Directive (CSRD) first came into force in January 2024 and full integration across the EU is pending. The implementation plan is designed to achieve comprehensive adoption of CSRD by 2028. The timeline for companies is as follows:

By 2024 (reports due in 2025): CRSD comes into effect for listed companies with over 500 employees.

By 2025 (reports due in 2026): Companies meeting two of the following three conditions will have to comply with the CSRD:

1. €50+ million in net turnover
2. €25+ million in assets
3. 250+ employees

In addition, non-EU companies with a turnover of above €150 million in the EU must also comply.

By 2026 (reports due in 2027): CRSD comes into effect for listed SMEs.

By 2028 (reports due in 2029): CRSD comes into effect for companies where:

1. 1. At least one EU subsidy or listed on an EU-regulated market
   2. Net turnover in the EU > EUR 150m

Challenges and Considerations

For companies that did not previously fall under the scope of the Non-Financial Reporting Directive (NFRD), CSRD presents a transformative shift. These companies need to implement robust systems to collect, manage and report sustainability data accurately. This will result in significant investments in technology and training.

Notwithstanding, the transition to CSRD presents opportunities. Through the wider adoption of digital reporting technologies like iXRBL, companies can streamline their reporting processes and reduce bottlenecks. Furthermore, leveraging emerging technologies like AI can assist in enhancing reporting efficiency.

How to Get Ready for CSRD

The CSRD directive is pivotal, not only for advancing environmental goals in the EU but also for enhancing market transparency and accuracy. It provides stakeholders with reliable information, empowering informed decision-making and deepening awareness of corporate environmental impacts.

As the phased approach unfolds, organisations must prepare now to meet the upcoming requirements. This proactive approach will ensure compliance and position companies as sustainability and corporate responsibility leaders.