Likely, you have already heard of the Corporate Sustainability Reporting Directive (CSRD). This new EU legislation requires companies to publish regular reports on their environmental and social activities. Many people believe that the requirements only apply to large corporations, and that small businesses are not affected by the new regulations. However, that is not true.
Starting in 2027, small and medium enterprises will have to start reporting as well. While this may seem far in the future, it is important to start preparing as soon as possible in order to gather all necessary data in time.
In this article we’ll zoom in on the CSRD legislation and explain more about what it is, its predecessor, the timeline and how you can start preparing for this new legalization.
What is the Corporate Sustainability Reporting Directive (CSRD)
The CSRD is part of the EU Green Deal and successor of the Non-financial Reporting Directive (NFRD). There are a lot of differences between the two, but what it mostly comes down to is that with the CSRD a lot more needs to be reported and a lot more companies need to report.
The topics companies will need to report on can be divided in three categories: Environmental, Social, and Governance. Under these three categories the topics that need to be reported on are shown in the table below.
In the NFRD, companies were already required to report on environmental protection, social responsibility, respect for human rights, anti-corruption and bribery, and diversity on the company board.
One of the key differences between the NFRD and the CSRD is the introduction of the "double materiality" concept. This means that companies are required to conduct a risk analysis on their impact on the environment and society (incluing climate change). In collaboration with stakeholders, companies will need to select the most important topics and improve on those. The improvement of these topics need to be in line with the EU goals and the Paris Agreement.
For instance, if the stakeholders of a company first want to focus on reduction of carbon emissions and better working conditions for the workers in your value chain, the company can focus on these issues instead of others.
The table above already lists many topics to report on, but this isn’t a complete list yet. New report requirements are yet to be added to the list for specific sectors. For example, it is likely that the textile industry will be required to report on child labor in the future.
CSRD Timeline - When do you need to start reporting
Not everyone has to start CSRD reporting immediately. To get all the data that is needed for the reporting and to have the systems in place to report on this properly, is not a small matter. So even if your company is not obligated to start reporting for a while, we do advise to start as soon as possible.
The timeline for the CSRD reporting is as follows:
- 2025: Companies that already have to do the NFRD reporting will have to start CSRD reporting in 2025 over the year 2024.
- 2026: Large companies that meet one of the following three criteria will have to report over the year 2025.
- More than 250 employees
- More than €40M turnover
- More than €20M in total assets
- 2027: Small and Medium Enterprises (SMEs) will have to report over the year 2026.
- 2029: Non-European companies with branches or subsidiaries in the EU need to report.
If you are an SME, you might think that 2027 is still very far in the future, but remember that you will need to report over 2026. This means that you already have to have all your systems setup and your data available at the end of 2025 - which is not that far in the future at all!
How to get started with CSRD
CSRD reporting may seem a bit overwhelming now, but you don’t need to do everything from scratch. There are reporting systems available such as GRI that have all the tools available to make the reports. This reporting system includes all the topics you need to report on with CSRD and more.
But even with tools like GRI it can be difficult to know where to start with your journey to become CSRD compliant. Thankfully, RethinkRebels (Circular Impact Consultancy) and tex.tracer (Supply Chain Transparency) created an 8-step plan for complying with the CSRD.
Step 1 - Project Team: Becoming compliant with CSRD is not something one person in your organization does by themselves. You will need a multidisciplinary team including finance, strategy, communication, operations, and sustainability.
Step 2 - GAP analysis: To be able to report, you will need to have data. Therefore, it is important to make a GAP analysis. Find out what your organization is already doing, and what is missing.
Use the GRI Standards to make a risk analysis and compliance check.
Step 3 - Strategy: Make a strategy and plan that meets the core values of your organizations. It is important to clearly communicate this strategy both internal and external.
Step 4 - Roadmap + Actions: Use the GAP Analysis and strategy to make a roadmap and action plan. Include clear KPI’s and discuss with the aligned teams.
Step 5 - Stakeholder dialogue: This is very important to be in line with the double materiality concept of the CSRD, which we discussed earlier. In this dialogue you will have to discuss with your stakeholders what is material to them and compare this to your risk assessment.
Step 6 - Data analysis: If you are following your roadmap and filling the gaps in you GAP analysis, you now have a lot more data. Keeping track of all your data is crucial. There are several platforms that you can use to keep track of your data, but Excel can also be used if you do it carefully.
Step 7 - Report & Communicate: Make sure that all the CSRD themes are documented according to a report framework such as GRI, CO2 prestatieladder, Sustainable development goals, SASB, TCFD, etc.
Step 8 - Report CSRD guidelines: Report with CSRD guidelines, get 3rd party assurance from an accountant, and submit online in the EU portal.
(Picture below for clarity)
If you need help with getting started for CSDR both RethinkRebels and tex.tracer can help you get started!
Why you should start now
The most important thing for the CSDR reporting is that you have all your data in order. You might have a pretty good idea of who your tier 1 suppliers are, but how much data do you have further down the supply chain.
Gathering data of your whole supply chain is not an easy task. Using certified materials will already make this a lot easier, because this will leave a paper trail that you can ask for. If they are not certified, it will take some more effort. Not all your suppliers will be keen on sharing all their data with you, the further down the chain you, the harder it may be.
This is why it is important to start as soon as possible. Getting the right data, and setting up the systems to properly register, analyse and report that data takes more time than you think and 2026 is only a bit more than 3 years away.
