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June 5, 2023 in News

Flush with cash through effective and flexible cash flow planning

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CSRD: the new guideline for sustainability reports

The Corporate Sustainability Reporting Directive (CSRD) has been in force since the beginning of this year. Since this expansion of existing sustainability reporting obligations is a complex topic that also affects many companies, we have summarized the most important information you need to know about it in the following.

The ongoing climate change and the severe consequences it has for the environment and people have now become a priority for most companies. To steer the economy toward sustainable business practices, the “Corporate Sustainability Reporting Directive” (CSRD) came into effect at the beginning of 2023. Its aim is for sustainability information to be given the same importance as financial information. But what exactly should one consider regarding this topic?

If you take a closer look at the topic, you will quickly come across the term ESG reporting. The term ESG stands for “Environmental, Social and Governance” and is an generic term for the level of sustainability of a company. The CSRD is complemented by its own reporting standards: the European Sustainability Reporting Standards (ESRS). These specify concrete report contents, quantitative and qualitative information. This enables comparability of sustainability reporting. This allows sustainability information to be more quantified and shifts the focus of companies towards integrating ESRS into their own operational processes.

But for which companies is this even relevant? It applies to both companies already obligated to publish sustainability reports under the Non-Financial Reporting Directive (NFRD) and to those that meet two of the following three criteria: Sales revenue > € 40 million, Balance sheet total > € 20 million, Employees (Ø) > 250.

This new reporting obligation applies to companies that were previously obligated to report from 2024, to companies newly covered by the CSRD from 2025, and listed SMEs must report with adapted standards from 2026.

Compliance with these regulations is a major challenge for many companies due to various problems. Because of the rapid introduction of the CSRD, many companies lack the necessary expertise to prepare appropriate sustainability reporting on their own. In particular, the effective and complete collection as well as transparent communication of the necessary data could be a difficulty, especially for small and medium-sized enterprises1. In addition, the new reporting obligation entails high investments for many companies to make their operational structures more environmentally friendly2. It is therefore advisable to prepare well in advance and draw up a plan to produce auditable CSRD reporting by the respective deadline.

Since the contents can vary greatly depending on the company, a project should therefore be initiated in which the following 5 phases are dealt with:

  1. GAP analysis
  2. Materiality analysis
  3. Deriving action recommendations and priorities
  4. Development of a roadmap
  5. Accompanying the implementation

The exact contents of the sustainability report are defined according to the ESRS and on the basis of the company-specific materiality analysis and divided into the areas of environment, social and governance. In this regard, the company must precisely describe to what extent it operates sustainably and, if necessary, make adjustments to its operational structures.

Would you like to learn more about it? Then join our webinar with our new partner, Magnolia Consulting GmbH, where we will explain the essential fundamentals from a professional perspective and demonstrate hands-on how you could address this with Board’s intelligent planning solution.

The online webinar on designing CSRD-compliant sustainability reporting will take place on 20.04.2023 at 11 am. Click here for free registration: CSRD compliant sustainability reporting – how to succeed!

 

If you have any questions or comments on the topic of ESG reporting or Transform8 in general, please feel free to contact us at: info@transform8.de.

 

1CSRD reporting obligation: “The challenge is the sustainable business model” (umweltwirtschaft.com)

2 “CSRD reporting requires preparation time” | springerprofessional.de

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