The European Corporate Sustainability Reporting Directive (CSRD) is coming into effect as soon as 2024.
Five years ago, sustainability still only felt like an emerging trend. Today, it is increasingly embedded in CEO agendas with more chief sustainability officers (CSOs) appointed in 2021 alone, than between 2016 and 2020.
This trend is expected to accelerate with the European Commission’s Corporate Sustainability Reporting Directive (CSRD), designed to end greenwashing and direct capital towards businesses truly resilient to climate change.
Five things you need to know about the CSRD:
1. With the CSRD, the sustainability report becomes mandatory, auditable, and accessible in an open-source format.
2. With the CSRD, the sustainability report will follow a unique standard defined as the European Sustainability Reporting Standards (ESRS) developed by EFRAG (See below).
3. The CSRD will take effect in three stages, starting with listed companies already subject to the non-financial reporting directive (NRFD) in January 2024 (reporting in 2025 on 2024 data), followed by large companies with more than 250 employees and a turnover/balance sheet above €40/20 million in January 2025 (reporting in 2026 on 2025 data), and listed SMEs in January 2026 (reporting in 2027 on 2026 data). Non-European companies will follow in January 2028 (reporting in 2029 on 2028 data).
4. With the CSRD Scope-3 impacts are included in the company report. This covers impacts from the supply chain as well as those from consumers, end-users until the end-of-life of the product.
5. The CSRD brings the notion of Double Materiality. The “Financial Materiality” quantifies people and the environment’s effect on the company and its financials, as well as the “Impact Materiality” which will quantify the company’s impact on the people and the environment.
By prioritizing sustainability, a company can attract talent, create a positive culture and a shared sense of purpose, improve efficiency, reduce long-term costs, mitigate environmental and social risks, encourage innovation, attract investors, as well as gain and retain customers.
One way companies can signal their commitment to sustainability is by merging the roles of Chief Sustainability Officer (CSO) with the Head of Strategy. This sends a clear message that sustainability is at the heart of the company’s strategy and underscores a commitment to integrating sustainability into all aspects of the business.
While reporting is important, true business transformation can only happen through implementation. That’s where the CSO comes in. By driving the transformation process, they help ensure that every job in the company becomes a sustainability job, leading to a truly sustainable business fit for the future.
Christel Dendas is a Business Executive. She has over 30 years of experience in the Petrochemicals and Nonwoven industries. She leads organizations growth and transformation. Her expertise lies in strategy and sustainability. As Chief Commercial Officer and BU President at Jacob Holm, she successfully led the business re-engineering efforts after a major acquisition and spearheaded the company’s sustainability transformation. In October 2022, she was invited to present at the Outlook annual international Nonwoven conference, where she discussed how Circular Economy Business Models can reshape the industry.