CSRD – what is it, and what does it mean for businesses?
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The CSRD (Corporate Sustainability Reporting Directive) is a new EU piece of legislation that aims to change companies’ approaches to sustainability reporting. What is the CSRD in practice? What obligations does it impose on entrepreneurs? Who does it apply to? Let’s find out.
What is the CSRD?
Published on 16 December 2022 in the Official Journal of the European Union, the CSRD Directive aims to increase the transparency of companies’ activities regarding their impact on the environment, society and issues related to broadly understood corporate governance. It introduces new reporting obligations of great importance for large entities and small and medium-sized listed companies.
It can be considered that CSRD is a continuation of activities carried out by the EU earlier and, more specifically, an extension of previous regulations, such as the NFRD (Non-Financial Reporting Directive). CSRD is a directive that introduced the obligation of ESG reporting.
Remember: The CSRD Directive is a regulation that aims to standardize companies’ reporting on social activities and sustainable development.
Who is affected by the CSRD?
All large companies and listed small and medium-sized companies will be required to disclose information on how their activities affect the following issues:
- Environmental
- Social
- related to human rights,
- corporate management.
✔️The CSRD applies to all large units that meet the size criteria, including those with more than 500 employees.
✔️It also includes small and medium-sized companies listed on the stock exchange.
All of the companies mentioned above will have to adapt to the new requirements, but we have good news – the directive provides for simplified reporting standards for small and medium-sized enterprises.
Important! The CSRD regulations also apply to companies operating on international markets, meaning that companies operating in Poland and other European Union countries must meet the same standards.
CSRD reporting standards, or ESRS
The CSRD’s reporting will be based on the European Sustainability Reporting Standards (ESRS). As complicated as it may sound, the ESRS is really just a set of common guidelines designed to standardize how individual companies present reported information.
Thanks to this, not only government or EU institutions but also real consumers/contractors, e.g. investors, banks, and local communities, will have access to information that is easy to absorb and compare with each other. The point is that the facts should be presented simply and transparently, becoming a source of reliable information. As we have mentioned, simplified versions of the ESRS are provided for small and medium-sized listed companies. All this is done in order not to exclude them from the regulations but to facilitate their adaptation.
CSRD implementation timeline
The CSRD introduces a gradual schedule for implementing the new reporting obligations. The schedule is as follows:
- 2024 — The largest entities that already report non-financial information by the provisions of the Accounting Act will have to provide reports for the financial year 2024 for the first time.
- 2025 — The next step will be for large entities to start reporting for the 2025 financial year.
- 2026 — small and medium-sized listed companies will report for the 2026 financial year for the first time.
With this timeline, companies will have time to adjust their reporting systems and prepare the appropriate teams and procedures – the largest companies will have to prepare for the changes first, and they need to act immediately
Why do we need CSRD? Benefits of the Directive
Introducing the CSRD will benefit report users (people looking for information about companies) and… the undertakings themselves. Although it may not seem important, companies can present themselves as socially responsible by disclosing more detailed information about their sustainability activities.
This, in turn, increases their attractiveness in the eyes of investors and business partners and becomes a tool for better, simpler, and more effective communication!
