As part of the Green Deal and to become the first climate neutral continent by 2050, the EU has notably introduced the Corporate Sustainability Reporting Directive (“CSRD”) as a new regulation for sustainability reporting. By creating such common reporting framework, the goal of the CSRD is to increase the overall transparency on Environmental, Social and Governance (“ESG”) matters. In this framework, the adoption of the European Sustainability Reporting Standards (“ESRS”) has triggered a significant challenge for those obliged to comply.
We explain hereafter the implications of the CSRD.
Companies under the CSRD scope
The CSRD directly affects large companies and groups that meet two of the following three criteria:
- more than 250 employees,
- more than 50 million euros net turnover, or a total balance sheet exceeding 25 million euros.
These companies will be required to report for the first time at the beginning of 2026, covering the calendar year 2025.
Companies below these criteria, so-called small and medium enterprises (“SMEs”), are indirectly impacted as well, as they must provide relevant information to their reporting customers. For example, SMEs will need to provide data on their CO2 emissions in relation to the products sold or services provided. This data will be key for large companies as it will have to be included in their own CSRD reporting.
Irrespectively of the CSRD compliance obligations, it seems highly probable that the CSRD standards will also be used in public tenders or in the ESG assessments performed by banks.
Double Materiality: the challenge of data collection and management
The concept of “Double Materiality” is a central component of the CSRD. It requires companies to identify both how their activities impact people and environment, as well as how sustainability impacts their business.
The assessment of the Double Materiality will lead to the identification of topics that are material and to reporting based on the standards defined in the ESRS (over 1800 data points for reporting on relevant topics).
For example, transport companies have a high impact on climate change by the consumption of fuel and can conversely be impacted by price increases or emission taxes.
To meet this reporting challenge, companies need to identify key topics, define relevant data points and organise themselves to collect reliable and accurate data, which often comes from complex supply chains and numerous subsidiaries.
One example is the climate change issue, which is relevant to nearly all companies and requires not only the measurement of direct CO2 emissions, but also indirect emissions throughout the entire value chain.
A pragmatic approach
Deveco has developed its own pragmatic method to guide large businesses as well as SMEs in a straightforward and goal-oriented approach on their path to CSRD compliance. This method includes impact analysis, double materiality and ESG strategy formulation, as well as identifying and compiling the necessary data for reporting. With our additional expertise in carbon footprint assessment, we offer an integrated and cost-efficient solution, enabling our clients to efficiently meet CSRD requirements.
