In today’s business landscape, sustainability is now a crucial aspect of corporate responsibility and long-term viability. The Corporate Sustainability Reporting Directive (CSRD) represents a significant development in this arena, particularly for companies operating within the UK and the broader European Union. This directive aims to enhance and standardise corporate sustainability reporting, ensuring transparency, accountability, and comparability across the board.

What is the Corporate Sustainability Reporting Directive?

The CSRD was proposed by the European Commission in 2021 as an update to the Non-Financial Reporting Directive (NFRD). The update now expands on the scope and detail of sustainability reporting requirements. It is designed to ensure that stakeholders, including investors, customers, and regulators, have access to consistent and reliable information about a company’s environmental, social, and governance (ESG) practices.

Who does the CSRD apply to?

The CSRD has significantly expanded the scope of companies required to report on sustainability. Previously, the NFRD meant that only large public-interest entities with over 500 employees were obliged to report. The CSRD extends this requirement to all large companies and all companies listed on regulated markets, including small and medium-sized enterprises (SMEs).

Large companies meeting two of the following criteria (both within and outside of the EU):

• €50m+ net turnover
• €25m+ in assets
• 250+ employees

Additionally, non-EU companies with a €150m+ turnover in the EU must also comply.

SME organisations listed on European markets that meet at least two of the following criteria:

• €8m+ net turnover
• €4m+ in assets
• 50+ employees

Key features of the CSRD

Enhanced reporting standards
The directive introduces more detailed and stringent reporting standards. Companies will need to disclose information on their sustainability risks, opportunities and impacts. Details of which are to be in line with the European Sustainability Reporting Standards (ESRS). These standards will be developed by the European Financial Reporting Advisory Group (EFRAG) and are expected to align with global frameworks like the Global Reporting Initiative (GRI) and the Task Force on Climate-related Financial Disclosures (TCFD).

Digital reporting
To improve accessibility and usability, the CSRD requires companies to submit their sustainability reports in a digital format. This aligns with the European Single Electronic Format (ESEF), enabling easier data extraction and analysis.

Assurance requirement
Unlike the NFRD, the CSRD requires limited assurance of the reported sustainability information. This means that an independent third party must verify the data, enhancing its reliability and credibility.

Double materiality
The CSRD introduces the concept of double materiality. This is where companies must consider both the impact of sustainability issues on their financial performance and the impact of their activities on the environment and society.

How does CSRD implicate UK businesses?

While the UK has left the EU, the implications of the CSRD still resonate strongly for UK businesses. This particularly applies to those with operations, customers, or investors within the EU. Here are some significant considerations:

Alignment with global standards
The UK government has expressed its commitment to maintaining high standards of corporate governance and sustainability reporting. Aligning with CSRD requirements can help UK companies stay competitive and meet the expectations of international stakeholders.

Investor expectations
With growing investor emphasis on ESG criteria, compliance with the CSRD can enhance a company’s attractiveness to potential investors. Transparency and reliable reporting are key factors for investors making decisions in an increasingly sustainability-focused market.

Reputation and market position
Demonstrating a commitment to sustainability through adherence to the CSRD can bolster a company’s reputation and competitive stance. It positions the business as a responsible and forward-thinking entity, potentially opening up new market opportunities and partnerships.

Operational readiness
UK companies should assess their current reporting practices and identify gaps relative to the CSRD requirements. This includes ensuring data accuracy, implementing robust reporting processes, and engaging with third-party assurance providers.

Cross-border operations
For UK businesses with subsidiaries or significant operations in the EU, compliance with the CSRD is non-negotiable. These companies must prepare to meet the directive’s requirements to avoid regulatory penalties and maintain smooth operations across borders.

How to prepare for the Corporate Sustainability Reporting Directive

Carry out an analysis
Assess your current sustainability reporting practices against the CSRD requirements. Identify areas that need improvement and develop a roadmap for compliance.

Engage stakeholders
Involve key internal and external stakeholders in the reporting process. This includes management, employees, investors, and customers, ensuring their outlooks and expectations are considered.

Invest in training and resources
Equip your team with the necessary knowledge and skills to meet the CSRD requirements. This might involve training sessions, hiring experts, or investing in sustainability reporting software.

Establish robust data management systems
Implement systems to collect, manage, and report sustainability data accurately and efficiently. Ensure that these systems can handle the increased scope and detail required by the CSRD.

Seek external assurance
Engage with third-party assurance providers early in the process to verify your sustainability information. This will not only enhance the credibility of your reports but also ensure compliance with the assurance requirement of the CSRD.

Conclusion

The Corporate Sustainability Reporting Directive represents a step towards greater transparency and accountability in corporate sustainability practices. For UK businesses, understanding and preparing for the CSRD is essential, not only to comply with regulatory requirements but also to enhance reputation, attract investors, and secure a competitive edge in the global market.

By taking proactive steps now, companies can ensure they are well-positioned to meet the challenges and opportunities of this directive.

We hope you have found this blog both interesting and valuable. Feel free to share your thoughts or questions on this via email at info@consultivutilities.com.

Have you considered how your business energy impacts your sustainability performance and commitments?

Our team have extensive experience in providing guidance on energy contracts for organisations of all sizes. We can offer a tailored service, working with you to secure a contract that suits both your energy and sustainability requirements.

If you would like to arrange a free consultation with one of our energy specialists to discuss how we can assist you with your energy, please contact us.