How CSRD shapes the future of business
Are you among the 50,000 companies that will be impacted by the EU legislation?
Don't wait until it's too late to find out.
What is the CSRD?
The European Union has implemented a new regulation called the Corporate Sustainability Reporting Directive (CSRD), which requires larger companies to disclose information about their sustainability-related practices in their financial reports. Beginning in 2024, all companies should start to follow this rule. By 2026, all companies operating in the EU and listed SMEs will have to comply with this regulation and it is estimated that over 50,000 companies will be impacted.
Companies that need to start gathering information for future reports under the Corporate Sustainability Reporting Directive (CSRD) can now access the reporting standards for the CSRD.
The EU’s website states that the CSRD will “enable investors to re-orient investments towards more sustainable technologies and businesses, [..] and be instrumental in making Europe climate neutral by 2050”.
Where is this heading?
As this rolls out to more and more businesses and they have to be reported in a public manner, this also means an increasing transparency for future customers, employees and investors when it comes to who they buy or work for. From recent statistics it is already visible that this plays an increasing role - especially for younger people.
Which businesses are affected?
The companies listed below must comply with the disclosure regulations outlined in the CSRD. EU companies (including subsidiaries and branches of non-EU parent companies) which would meet at least two of the following criteria:
250 employees on average over the financial year
A balance sheet total of €20 million
A net turnover of €40 million
Also important requirements:
Companies listed on the EU regulatory market, regardless of size
Non-EU companies that have a turnover greater than €150 million in the EU
Can companies get sanctioned if they are not complying?
It is currently uncertain when the EU Commission will impose sanctions on companies for failing to adhere to the CSRD. However, as per the regulations outlined in the Directive, the sanctions are expected to be significant.
The nature and magnitude of the sanctions and fines will vary among the Member States. For instance, if German companies fail to report compliance with the German version of the Non-Financial Reporting Directive (which has been amended by the CSRD), they may be subject to fines that are the highest of the following: €10 million, 5% of the company's total annual revenue, or twice the amount of profits gained or losses avoided as a result of the non-compliance.
In contrast, French companies do not face fines for failing to report in accordance with the NFRD, unless a concerned party requests the disclosure of non-financial information. In the event that the information is not provided, a judge may then impose financial penalties.
Will CSDR affect only European companies?
Any company, regardless of location, that conducts business within the EU or trades in EU-domiciled securities will be impacted by the CSDR regulations.
Which information will have to be disclosed?
Additional to the NFRD Under Directive 2014/95/EU, large companies have to publish information related to:
Environmental protection
Social responsibility and treatment of employees
Respect for human rights
Anti-corruption and bribery and
Diversity on company boards
Also, the CSRD is adding additional requirements on:
Double materiality concept: Sustainability risk (including climate change) affecting the company + companies’ impact on society and environment
Process to select material topics for stakeholders
More forward looking information, including targets and progress
Disclose information relating to intangibles (social, human and intellectual capital)
Reporting in line with Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy Regulation
Are there any other benefits besides comply with regulations?
Yes, there are plenty. Sustainability is not an obligation, it is a massive business opportunities for businesses to get ahead. In this context it is good to keep in mind that in the long run it is likely that even more companies will have to report and give insights on their environmental efforts. While it can be still a competitive advantage currently, in the future it might be just expected.
Here are some additional studies on the positive business impact:
More than 80% are more likely to buy or work for a company that stands up for the environment.” - PwC
18% of revenue rise expected by leading businesses, due to increased sustainability focus. - HSBC Navigator Survey 2021
When compared to two years ago, 22% more consumers say environmental responsibility is very or extremely important when deciding on a brand. - IBM Sustainability Report
Nearly 3 out of 4 Millennial consumers are willing to pay between 10% and 25% more for sustainable products and services. The year before, only half of those polled would have demonstrated a similar behavior. -Nielsen IQ Survey 2015
6 in 10 consumers are willing to change their shopping habits to reduce environmental impact. - IBM Institute for Business Value 2020
92% will be more likely to trust a company that supports social or environmental issues. - 2017 Cone Communications CSR Study
88% will be more loyal to a company that supports social or environmental issues. - 2017 Cone Communications CSR Study
Why should you step up with CSRD and how Footprint helps?
Implementing CSRD compliance now not only satisfies future regulations, but it also gives your company a competitive advantage. Don't wait to take action, stay ahead of the competition. Here are some reasons why you should act now:
The time to act is now. But by taking action now, you can establish a competitive edge and make your brand truly stand out. This is an unique opportunity to stand out of the competition as it may become too late.
By adhering to the CSRD regulations, your company is not only demonstrating a commitment to responsible company practices, but also creating an attractive work environment that will help you attract and retain top-quality employees. Compliance is not just good for business, but also good for building a strong, talented team.
Investing in sustainability can bring significant financial rewards for companies. By using Footprint, companies can increase transparency and build trust with stakeholders, which in turn can lead to increased revenue and long-term success.
Final Thoughts
Starting in 2024, all EU-operating and listed SMEs that full-fill the requirements above must comply, with over 50,000 companies affected. Non-compliance can result in penalties for different companies. Embracing sustainability now can not only help your business meet the CSRD requirements but also increase transparency and result in long-term trust and success.
If you like to learn more or have any questions - our team is happy to share more insights on CSRD and how climate action can be simple and fast. Contact us anytime.
