Sustainability is no longer a choice but a necessity. The European Union through the CSRD is pioneering efforts to ensure that large and publicly listed companies, excluding listed micro-enterprises, are held accountable for their impact on society and the environment.
This initiative is a cornerstone of the European Green Deal, aimed at promoting transparency and enabling stakeholders to make informed decisions based on the sustainability performance of these corporations.
What is the CSRD?
The Corporate Sustainability Reporting Directive (CSRD), which came into effect on 5 January 2023, represents a significant overhaul of the EU’s approach to corporate sustainability reporting. By broadening the scope to include a wider array of large companies and listed SMEs, the directive mandates the disclosure of social and environmental information, crucial for investors and other stakeholders to assess a company’s sustainability impact and financial resilience amid climate change and other sustainability challenges.
Companies falling under the CSRD’s ambit are now required to adhere to the European Sustainability Reporting Standards (ESRS), developed by the European Financial Reporting Advisory Group (EFRAG).
When were the standards published, and what is their aim?
These standards, which were officially published on 22 December 2023, aim to harmonize sustainability reporting across the EU, thus facilitating comparability and reducing reporting costs over time. The directive also introduces the need for assurance on reported sustainability information and the implementation of a digital taxonomy for sustainability reporting, enhancing the reliability and accessibility of disclosed information.
Why is this transition so important?
The transition from the Non-Financial Reporting Directive (NFRD) to the CSRD marks a significant expansion in reporting requirements. Previously, the NFRD required large companies to report on environmental, social, and employee matters, respect for human rights, anti-corruption, and bribery issues, as well as diversity on company boards. These requirements set the stage for the comprehensive and detailed reporting standards introduced by the CSRD.
When are companies expected to start applying?
Companies are expected to start applying these new rules beginning in the 2024 financial year, with the first reports to be published in 2025. This timeline provides businesses with a clear framework for aligning their reporting practices with the new directive, ensuring that they are well-prepared to meet the enhanced transparency requirements.
The CSRD is not just a regulatory requirement but an opportunity for businesses to demonstrate their commitment to sustainable development and to differentiate themselves in a competitive market. By providing clear, reliable, and comparable information on their sustainability practices, companies can strengthen their relationships with stakeholders, including investors, customers, and the wider community.
Final thoughts on the CSRD
As we move towards a more sustainable future, it is imperative for innovative startups and scale-ups to lead the way in adopting and promoting best practices in sustainability reporting. The European PropTech Association invites these pioneers to showcase their commitment to sustainability by applying for the Startup & Scaleup Europe Awards 2024. This prestigious recognition will not only highlight their dedication to sustainable development but also provide them with a platform to inspire others in the industry.
Join us in setting new standards for corporate sustainability and transparency.
