Corporate Sustainability Reporting Directive (CSRD)

Table of Contents

Starting Context

In recent years, the European Union has initiated a series of reforms aimed at attaining a competitive position in the realm of sustainable transition compared to the rest of the world.

Its commitment to achieve climate neutrality by 2050 has led to the introduction of structural measures associated with the Industrial Green Deal and the approval and publication of corporate sustainability reporting: the Corporate Sustainability Reporting Directive – CSRD.

What is the EU Corporate Sustainability Reporting Directive (CSRD)?

On January 5th, 2023, the Corporate Sustainability Reporting Directive (CSRD) came into effect. 

The CSRD brings shared criteria that align with the EU’s climate objectives concerning corporations’ influence on the environment, human rights, and social norms, utilizing.

This will empower investors to redirect investments toward more sustainable technologies and sectors.

To ensure the credibility of companies’ disclosures, they will undergo independent auditing and certification. Financial and sustainability reporting will be placed on an equitable level, enabling investors to access comparable and dependable data. Furthermore, guaranteed digital accessibility to sustainability information will also be mandated.

The CSRD strives to streamline the reporting procedure for enterprises, unifing reporting criteria, fostering coherence and comparability of data.

Businesses will be obliged to divulge the influence of sustainability matters on their operations and the repercussions of their undertakings on society and the environment. 

Which Businesses Will Be Impacted?

The rules will start applying between 2024 and 2028, as follows:

-From 1 January 2024 for large public-interest companies (with over 500 employees) already subject to the non-financial reporting directive, with reports due in 2025

-From 1 January 2025 for large companies (with more than 250 employees and/or €40 million in turnover and/or €20 million in total assets) not presently subject to the non-financial reporting directive, with reports due in 2026

-From 1 January 2026 for listed SMEs and other undertakings, with reports due in 2027. SMEs can opt-out until 2028.

The Main News

The integration of ESG aspects along the value chain

Companies, in reporting sustainability disclosures, will have to consider not only the perimeter reference of the financial statements but also includes information on material impacts, risks and opportunities connected to the entire upstream and downstream .

The Obligation of Assurance

Sustainability reports will be subject to “limited assurance,” with the aim of eventually achieving “reasonable assurance”. The Directive stipulates that the review of the sustainability report will be carried out by an accredited statutory auditor.

Digitalized Sustainability Disclosure

With the aim of enhancing the dissemination of sustainability information, companies will be required to digitize the information found in their respective reports. This will involve the use of “tags” (digital labels) for ESG reporting.

Placement of Sustainability Disclosure

Companies will be required to include sustainability information within the Management Report, rather than as a separate document, in order to ensure greater integration between financial and non-financial information.

Unified Reporting Standard

To ensure enhanced comparability among disclosures, companies will be obligated to adopt a single standard for ESRS reporting (European Sustainability Reporting Standard), the development of which is entrusted to the European Financial Reporting Advisory Group (EFRAG). 

A few key methodologies and solutions will need to be considered:

How to be ready

Traceability Platform

Traceability is crucial for brands aiming to stay proactive and maintain a comprehensive understanding of their product’s composition and environmental impact. 

By initiating data collection and establishing strong communication channels with suppliers, brands can gain a significant edge. Our platform facilitates a collaborative environment for brands and suppliers to jointly manage supply chain data.

This collaboration enables the digital mapping of all suppliers and the traceability of all materials and process involved in manufacturing a specific garment, thereby streamlining the communication process for gathering vital product-level information required for the Digital Product Passport.

For brands that have to consolidate their traceability data yet, now is the opportune time to centralize this information.

This proactive step will align brands with forthcoming ecodesign regulations and meet evolving consumer demands for transparency. Book a call with our expert to explore ways to enhance your brand’s traceability strategies and stay ahead in the market.

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