In 2024, there will be significant alterations in the mandatory reporting and disclosure requirements for companies, particularly concerning their social impact activities, with the implementation of the Corporate Sustainability Reporting Directive (CSRD).
Here’s what you need to know about CSRD and how to prepare for it.
What is CSRD?
The Corporate Sustainability Reporting Directive (CSRD) is a policy that promotes transparency and accountability by mandating that companies provide accurate reports on their environmental, social and governance (ESG) performance.This directive expands and refines the existing Non-Financial Reporting Directive (NFRD), with a focus on providing detailed and reliable information on ESG aspects, in line with the EU's climate objectives. The CSRD aims to curtail greenwashing and make disclosures more precise and digitally accessible.
The CSRD came into effect on 1st January 2024, when it will impact large EU public companies already subject to the NFRD, plus listed enterprises with over 500 employees. The reporting will be due from 2025. From 1st January 2025, large companies not currently subject to the NFRD will be required to report. SMEs listed on EU-regulated markets will submit their reporting from 2027 and non-EU companies operating in EU-regulated markets must reports from 2029.
How is CSRD different from NFRD?
CSRD applies to around 50,000 listed companies and large businesses, compared to the NFRD which impacted approximately 11,000. CSRD strengthens reporting requirements by mandating companies to report their sustainability data and auditing the reports.
Companies are required to report according to the EU’s sustainability standards and publish their reports in a standardized format, namely the European Single Electronic Format (ESEF/XHTML). The CSRD ensures that companies follow a unified reporting framework, unlike the NFRD which offered multiple framework options.
How can you get ready for CSRD?
You first need to assess the extent to which the new regulations apply to your company by conducting a scoping exercise. Scoping exercises need to consider your organization as an entity. This can be challenging if you don’t have the right data that can allow you to consolidate all your country-by-country data.
Your company can be subject to CSRD rules if it is listed on an EU-regulated market. You should look at which exchanges your company is listed on. You also need to collaborate across functions including finance, sustainability, treasury, and legal, and doing so across jurisdictions.
Then, you need to determine the timeframe for when you need to comply with the new CSRD rules based on your company size and jurisdiction. Because CSRD primarily concerns reporting, you need to evaluate your reporting practices and make sure you’re ready to follow the updated requirements. Finally, you need to train relevant employees to be fully aware of and follow CSRD rules.
Learn more about how new CSRD rules intersect with many other social impact trends we expect to see in 2024.
Build a culture of social impact
Social impact is at the heart of CRSD, which is why you should build a company culture with social impact at its center. You can do this by fostering a culture of employee volunteering and donations, supporting employee resource groups, and empowering your employees to support causes they care about and drive your company’s purpose.
To do this, you need a social impact platform that not only helps you create a culture built around social impact, but can also consolidate all your company’s data including your payment processing system, which makes it easy for you to report in compliance with CSRD rules.
We also want to mention Paystub Hero: a Generate error-free paystubs for business owners, entrepreneurs, and employees paid in cash. Additionally, integrating scheduling software for employees can further streamline your operations and support your social impact initiatives.
Contact us today and learn how Optimy can help you amplify your impact!
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