What is CSRD and ESRS – and who is impacted?
As a part of the European Green Deal, the Corporate Sustainability Reporting Directive (CSRD) necessitates the disclosure of sustainability data within the framework of the European Sustainability Reporting Standards (ESRS) adopted within the European Union (EU). This impacts approximately more than 50,000 entities within the EU and third-country entities operating within the EU like subsidiaries or branches. Small and medium-sized enterprises (SMEs) that are not listed are not covered by the CSRD.
Key elements introduced by CSRD and ESRS involve the inclusion of forward-looking information, data regarding the entire value chain (upstream and downstream), and the concept of sustainability due diligence, which aligns with the upcoming Corporate Sustainability Due Diligence Directive (CS3D) aimed at promoting sustainable corporate conduct across global value chains. ESRS takes into account existing European and international sustainability reporting initiatives, aiming to ensure compatibility with various standards to prevent redundant disclosure efforts by entities.
The CSRD, implemented by the European Commission, imposes reporting obligations starting from different fiscal years:
- 2024 for large public-interest entities, banks, and insurance entities already under the Non-Financial Reporting Directive (NFRD)
- 2025 for large entities not currently under the NFRD
- 2026 for listed small or medium-sized entities (SMEs)
Summary of the initial ESRS framework
The foundational structure of the first ESRS set is crafted to ensure a meticulous and coherent presentation of sustainability information. It operates on the following framework, divided into four reporting categories
- Governance: Encompasses the governance procedures, controls, and methodologies utilized to supervise, administer, and oversee impacts, risks, and opportunities.
- Strategy: Explores the interaction between the undertaking’s strategy and business model concerning its significant impacts, risks, and opportunities, including the strategies devised to tackle them.
- Management of Impact, Risk, and Opportunity: Elucidates the process(es) by which the undertaking identifies and evaluates significant impacts, risks, and opportunities. It also details how it handles substantial sustainability concerns through policies and initiatives.
- Measurement and Objectives: Explores how the undertaking evaluates its performance, including the goals it has established and the progress made toward achieving them.
