Businesses in Ireland need to start preparing for the mandatory sustainability reporting requirements as part of the new Corporate Sustainability Reporting Directive (CSRD), which will start impacting some companies from as early as the 2024 financial year.
What is the Corporate Sustainability Reporting Directive (CSRD)?
The Corporate Sustainability Reporting Directive (CSRD) is a new EU regulation that essentially focuses on companies’ green credentials. Starting in phases from the 2024 financial year, businesses must report any risks or opportunities arising from their environmental, social and governance (ESG) activities.
The CSRD is part of an EU drive to increase transparency for investors and other stakeholders, mainly relating to how companies have an impact on the environment.
Who is affected by the CSRD?
The following companies must become CSRD compliant:
- Ireland and other EU public interest entities with over 500 employees starting in 2024.
- Larger Ireland and other EU companies with over 250 employees starting in 2025.
- Listed Ireland and other EU SMEs starting in 2026, with an opt-out until 2028.
- Non-EU companies if they generate more than €150M on the EU market.
Non-listed Ireland and EU SMEs must also report on their environmental impact to large companies (if they’re part of their value chain). However, there is a transition period of three years where larger companies can state that they’ve not yet been able to gain the information if there are any issues in doing so.
What are the CSRD reporting requirements?
Companies must use a double materiality assessment to report their ESG impact. The European Financial Reporting Advisory Group define this as “a perspective in which the risks and opportunities to the undertaking (financial materiality) and the impacts of the undertaking (impact materiality) each represent one materiality perspective.”
This essentially means that you must report on:
- Financial materiality: How sustainability issues (like climate change or social trends) affect your company’s financial performance and prospects.
- Impact materiality: How your company’s operations affect society and the environment.
In terms of what must be included in the report, there are twelve European Sustainability Reporting Standards (ESRS), covering various ESG areas. The standards include:
- General requirements
- General disclosures
- Climate change
- Pollution
- Water and marine resources
- Biodiversity and ecosystems
- Resource use and circular economy
- Own workforce
- Workers in the value chain
- Affected communities
- Consumers and end-users
- Business conduct
How can my business prepare for CSRD compliance?
CSRD compliance will become integral to your business’s ongoing ESG planning. As such, it should be treated as an opportunity to create an impactful sustainability strategy that will meet the new regulations and drive positive changes within your company as well as for the wider community.
It’s important that roles and responsibilities are clearly defined within your organisation. ESG may already be the responsibility of a director, manager, team, or committee, but if this isn’t the case, a person, team, or steering group should be given a role in overseeing ESG strategy and CSRD compliance. It will be their role to initially determine when and how your business will become affected by CRSD rules. Based on this, they’ll create a roadmap for preparing and delivering your reports.
The best way to prepare these reports is to ensure that you’re keeping records of all corporate activities that relate to the twelve European Sustainability Reporting Standards (ESRS). As such, a good starting point will be to review your current ESG reporting practices against these standards, as this will help you assess your current ability to collect the necessary data and identify any potential reporting gaps. And remember, these standards must be considered from two different angles – how your company is affected internally and how your company affects the outside world.
It’s also worth reaching out to your value chain early on to discuss what information they might need to supply for your report.
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