If you’re leading a business with connections to the European Union, the term CSRD— an acronym that stands for Corporate Sustainability Reporting Directive— might have caught your attention. As it should!
Indeed: the EU CSRD directive aims to enhance environmental transparency for businesses within the European Union, requiring disclosure of environmental impacts, as well as social and governance issues.
But then, what exactly does this mean for your business, especially if it operates from the U.S. or has significant ties to the EU market? How does it differ from the previous NFRD? And more importantly, who needs to comply?
We’ll delve into these questions, offering insights for American businesses navigating these changes! 👇🌱
To provide a bit of context, the European Union introduced the Green Deal at the start of 2020 – an across-nations directive, aiming for climate neutrality by 2050.
As part of this initiative, the EU mandates all large companies and most publicly traded companies to report on the risks, opportunities, and impacts of their activities in terms of social and environmental responsibility.
This is where the Corporate Sustainability Reporting Directive (CSRD) comes into play, setting a new standard for transparency in sustainability reporting within the EU.
The EU CSRD (Corporate Sustainability Reporting Directive) is an initiative within the European Green Deal aimed at increasing transparency in sustainability reporting across companies in Europe. According to the European Commission, it aims to “modernize and strengthen the rules concerning the social and environmental information that companies have to report”.
Set to take effect from January 1st 2024, the EU CSRD directive thus seeks to enable investors, civil society, consumers, and other stakeholders to better assess companies’ sustainability performances and alignment with the EU’s sustainable development goals.
Still according to the European Commission, the standardized and detailed reporting required by the EU CSRD aims to facilitate the assessment of risks and opportunities associated with climate change and other sustainability issues, while ultimately streamlining the reporting process for companies.
Ensure complete, reliable CSRD reports that comply with the new European standards 🇪🇺
The EU CSRD is set to replace the NFRD (Non-Financial Reporting Directive), which has been in effect since 2017, introducing corporate responsibility regarding environmental, social, and governance (ESG) issues.
In other words, the CSRD enhances the scope and depth of these requirements, aiming for more precise and reliable sustainability reporting across Europe.
This shift represents a significant step forward in standardized reporting at the European level, ensuring that companies provide more accurate and comprehensive information on their sustainability practices.
The Corporate Sustainability Reporting Directive (CSRD) marks a significant evolution from the Non-Financial Reporting Directive (NFRD), setting a new standard for sustainability reporting within the EU.
A pivotal aspect introduced by the CSRD is the principle of double materiality, demanding that companies assess and report in two critical areas:
This dual-focus ensures that sustainability reporting encompasses both the risks and opportunities presented by a company’s environmental actions and the broader implications on financial outcomes.
The idea is to provide stakeholders with a comprehensive view of a company’s sustainability efforts and financial resilience in the face of environmental challenges.
🇺🇸 For American businesses operating in or with the European Union, understanding and aligning with these principles is crucial. It’s not only about compliance; it’s about leveraging sustainability as a strategic asset in global markets.
Initially, the NFRD’s umbrella only covered larger European companies, specifically those boasting over 500 employees.
However, the EU CSRD broadens this scope significantly: not only does it apply to a more extensive range of businesses within the European Union, but it also extends its reach to include certain companies located outside of Europe.
This means that for American companies operating in EU, understanding whether the CSRD applies to you is crucial, as its criteria and phased implementation could very well mean your business will need to adapt to these new reporting standards.
This expansion is set to roll out in three stages over three years, gradually encompassing more businesses. Let’s take a look at the decisive criteria for determining whether or not your company is eligible for CSRD.
In 2024, the CSRD will apply to companies located and running in the European Union, if company meets 2 of the 3 following criteria:
Those companies will need to report for the year 2024 in 2025.
In 2025, the CSRD directive will start to apply to non-European companies listed on a regulated market in the European Union.
If you run an American company that operates within the EU, you’ll need to report according to the new regulation if your company meets 2 of these 3 criteria:
In 2026, small and medium-sized enterprises (SMEs) will be added to the companies covered by CSDR in the previous year, provided they are listed on the stock exchange in the EU.
However, this extension will not apply to micro-businesses with fewer than 10 employees, if:
Don’t forget: all these criteria will also apply to non-European companies, as long as they are listed on an EU market.
Now that we’ve covered the essentials of the EU CSRD and identified which businesses will be impacted, a crucial question remains: how can you prepare?
Moving from theory to practice, let’s explore the basic steps your company needs to follow if it falls under the CSRD’s scope.
Assess how your operations impact the environment and society, and understand how sustainability issues affect your financial performance. Look at your entire value chain for short, medium, and long-term effects.
Get to know the European Sustainability Reporting Standards (ESRS), which dictate the sustainability information you need to report, focusing on environmental, social, and governance aspects.
Details of the 12 main standards can be found on the European Commission’s ESRS Q&A page
Gather reliable data from your operations, suppliers, and partners. With the EU CSRD requiring clear, data-backed audits, consider leveraging CSRD reporting software for efficiency and accuracy.
Ensure your sustainability reports are transparent, digital, accessible, and independently audited, following specific European reporting frameworks.
Embed sustainability into your operational processes early on, even if CSRD requirements don’t yet apply, to build a solid foundation for future compliance and sustainability initiatives.
💡 Extra tips to consider for USA businesses
As an American business owner, when you navigate the complexities of the EU CSRD, consider a partnership with European experts, knowledgeable in these areas.
These specialists bring a deep understanding of the requirements, helping to ensure your compliance strategy is both effective and aligned with all the local best practices in sustainability reporting.
Also, as you know, Europe isn’t one country; and each individual government might have their own requirements and specifications concerning sustainability. Make sure you surround yourself with local experts to guide you.
In the broadcasting industry, preparing for the CSRD highlights unique and specific challenges related to production, post-production, and distribution. This industry, by its nature, mobilizes considerable resources, implies frequent travel, and uses energy-intensive equipment (lights, cameras, portable generators, etc.).
Optimizing energy use on sets, minimizing waste generated by sets, props, and costumes, and sustainably managing the logistics of filming are therefore essential: first, to contribute to CSRD compliance, but also to strengthen brand reputation and alignment with the values of environmentally conscious consumers and investors.
Generate your reports easily, seamlessly
To ensure 100% CSRD-compliant reports, discover the all-in-one audiovisual production management platform TheGreenShot 🌱
TheGreenShot’s sustainability module will allow you to:
And much more!
We hope this article has helped you better understand the CSRD and its implications!
If you want to learn more, or if you need advice on managing your company’s sustainability, feel free to contact us 🎬
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