CSRD directive: key points and requirements

In the European Union, when a law is passed and requires modification or updates over time, the parliament may delegate authority to a commission to draft delegated acts. This mechanism allows legislation to be adjusted to evolving circumstances without initiating a new legislative process, streamlining the adaptation of regulations to new realities.

What is the CSRD, and why is it important for businesses?

The CSRD (Corporate Sustainability Reporting Directive) establishes a common framework for companies to publish sustainability information. Its goal is to enhance transparency and comparability of non-financial data, driving the transition to a more sustainable economy.

Unlike its predecessor, Directive 2014/95/EU, the CSRD introduces significant changes:

• Elevated status of sustainability reporting: Non-financial information is now referred to as a "sustainability report," gaining equal importance to financial reporting.
• Broader scope: The directive affects significantly more companies—around 50,000 across the EU—including those listed on regulated markets, large unlisted companies, and listed SMEs.
• Focus on double materiality: Companies must report on both the financial impacts of sustainability issues on their business and their activities' impacts on people and the environment.

When does the CSRD come into effect?

The CSRD will be implemented gradually:

• From January 1, 2024: For companies already subject to previous regulations (those with over 500 employees).
• From January 1, 2025: For companies not previously covered by the directive (those with fewer than 500 employees).
• From early 2026: For listed SMEs.

Micro-enterprises are excluded from the directive’s application.

What are the delegated acts of the CSRD?

Since its approval on December 14, 2022, the European Commission has adopted several delegated acts defining the European Sustainability Reporting Standards (ESRS), mandatory for all companies subject to the CSRD.

These delegated acts are organized into two main annexes:

1. Annex I: European Sustainability Reporting Standards (ESRS)

This annex outlines specific standards companies must follow when preparing sustainability reports. It is divided into two categories:

Cross-cutting standards:

• ESRS 1: General reporting requirements: Principles for sustainability reporting, including scope, materiality, and data quality.
• ESRS 2: General disclosures: General company information and sustainability strategy.

Environmental, social, and governance (ESG) standards:

• Environmental:
  • ESRS E1: Climate change
  • ESRS E2: Pollution
  • ESRS E3: Water and marine resources
  • ESRS E4: Biodiversity and ecosystems
  • ESRS E5: Resource use and circular economy
• Social:
  • ESRS S1: Own workforce
  • ESRS S2: Workers in the value chain
  • ESRS S3: Communities affected by business activities
  • ESRS S4: Consumers and end users
• Governance:
  • ESRS G1: Business conduct, including ethics, anti-corruption measures, and respect for human rights.

2. Annex II: Glossary

This annex provides precise definitions of terms used in the ESRS, ensuring consistent interpretation of reporting requirements.

Preparing and verifying sustainability reports with Manglai

At Manglai, as experts in emissions measurement following the GHG Protocol and ISO 14064, we offer comprehensive solutions to help businesses comply with the CSRD requirements:

• Measure carbon footprints: Precisely calculate emissions across scopes 1, 2, and 3.
• Identify emission reduction measures: Use data analysis and personalized recommendations.
• Prepare auditable sustainability reports: Ensure compliance with international standards.
• Communicate sustainability strategies: Share transparent and effective information with stakeholders.

Frequently asked questions

What does CSRD stand for?‍

CSRD stands for Corporate Sustainability Reporting Directive.

When does the CSRD come into effect?

• January 1, 2024: For companies already subject to previous regulations.
• January 1, 2025: For companies not covered by the previous directive.
• January 1, 2026: For listed SMEs.

What is the goal of the CSRD?‍

The CSRD aims to improve transparency and comparability of non-financial information, supporting the transition to a more environmentally sustainable economy.