CSRD & ESRS Guide: Prepare your Company for Sustainable Reporting Success

Discover all you need to know about the Corporate Sustainability Reporting Directive (CSRD) and its emerging European Sustainability Reporting Standards (ESRS) in this comprehensive guide. Begin preparing for CSRD now to ensure compliance with the stringent reporting requirements and avoid potential business threats associated with non-compliance. Ecochain can help!

Understanding CSRD

What is the CSRD?

The Corporate Sustainability Reporting Directive (CSRD), approved by the EU Council in 2022, requires companies to report on the social and environmental performance of the activities across their value chain. It is closely related to the emerging European Sustainability Reporting Standards (ESRS).

While the CSRD defines the overarching framework for sustainability reporting, ESRSs provide detailed reporting standards to support CSRD compliance. The CSRD is a key component of the EU’s sustainable finance action plan, supporting the objectives of the European Green Deal and the transition to climate neutrality by 2050. It replaces the Non-Financial Reporting Directive (NFRD), significantly expanding the scope and requiring more comprehensive sustainability reporting from a broader range of companies. This directive aims to enhance transparency and accountability in corporate sustainability practices across the European Union.

Who does it apply to?

The CSRD extends the range of companies that must report on sustainability. It applies to:

  • Large EU companies*;
  • Most businesses with operations or securities in Europe, including small and medium-sized enterprises (SMEs) (exemptions apply);
  • Non-EU parent companies with a cumulative group turnover in the EU greater than €150 million.

Of course, exemptions to this list apply. Further, not all listed company groups are required to comply simultaneously. The CSRD outlines ESRSs with different data collection and reporting requirements for each group. See the following section for more on the CSRD compliance timeline.

*Large companies: Are companies (including EU and non-EU subsidiaries) that exceed two of the following three criteria: (1) 250 employees, (2) net revenue of €40 million, or (3) total assets of €20 million. 

Compliance Timeline

The CSRD, although initiated in 2022, just recently came into force at the beginning of 2024. Below, we outline the compliance timeline.

January 2024: Large EU companies with over 500 employees must begin data collection in January 2024 for reporting in 2025.
January 2025: Other large EU companies must begin data collection in January 2025 for reporting in 2026.
UPDATE – February 14, 2024: The CSRD was amended; extending the release of new sector-specific ESRSs (i.e., reporting standards) and reporting timelines for some large EU companies for two years [1].
January 2026 – 2028: SMEs can begin data collection in January 2026, however, they have the option to opt out of reporting for two years (exemptions apply).
January 2028: Non-EU parent companies must begin data collection for reporting in 2029.

According to CSRD, different reporting standards (i.e., ESRSs) will be developed for each company group. This timeline provides an estimate for when companies can expect to be required to comply with reporting standards, which as shown by the recent ESRS delay (February 14th, 2024), is subject to change.

Regardless of reporting timelines, all companies should begin preparing for the CSRD now! Early preparation enables companies to identify potential challenges, implement necessary systems and processes, and demonstrate their commitment to corporate sustainability, smoothening the compliance process. PLUS – non-compliance yields a suite of business threats, such as legal sanctions, reputational damage, lost business opportunities, regulatory scrutiny, and market exclusion. But what does preparing for the CSRD mean? Find out in the following section.

Reporting requirements

Under the CSRD, companies must disclose comprehensive sustainability information on social, governance, and environmental impacts. While all these topics are mandated by the CSRD, have specific ESRSs dedicated to them, and are integral to a company’s overall sustainability, this article focuses on environmental reporting, aligning with Ecochain’s mission to drive environmental sustainability. Of course, it is imperative to do your research on the reporting requirements that apply to your business [2].

Environmental reporting and LCA

One of the primary and most extensive pillars of CSRD reporting is the environment. Companies must provide transparent and detailed disclosures regarding their environmental impacts across their value chains. Further, environmental reporting requirements extend beyond climate change or carbon impacts – capturing business impacts on pollution, water and marine resources, biodiversity and ecosystems, and resources use and circular economy. Simple carbon calculation tools won’t cut it; impact calculation methods must account for these diverse impact categories.

Life Cycle Assessment (LCA) aligns well with these ESRS requirements. LCA is a robust methodology that enables companies to quantify and analyze the environmental footprint of their products and operations across various stages of their life cycle or value chain. It extends beyond simple carbon accounting, capturing many environmental impact categories within its calculations.

Beyond CSRD compliance, by conducting LCAs, companies gain valuable insights into their environmental performance, identify areas for improvement, and make informed decisions to enhance their sustainability practices.

Ecochain solutions

Although a suitable methodology for obtaining the CSRD environmental reporting requirements, LCA can often be complex, time-consuming, and costly. This is not ideal, given the already multi-faceted nature of CSRD reporting. Ecochain offers two software solutions that smoothen the process of obtaining environmental footprint data, assisting companies in meeting CSRD reporting requirements. Ecochain Helix facilitates annual company portfolio environmental footprints that are easily updated yearly, aligning well with the continuous CSRD reporting requirements. Ecochain Mobius enables companies to easily create product LCAs, a great solution for SMEs with smaller product portfolios. These solutions ensure accurate measurement and transparent reporting of environmental data.

Ecochain Mobius Ecochain Helix

What now?

As the CSRD sets new benchmarks for corporate sustainability reporting, companies, especially SMEs with less robust internal reporting teams (compared to large firms), must proactively adapt to meet these requirements. By leveraging Ecochain’s innovative solutions, businesses can navigate the complexities of CSRD compliance effectively while enhancing their environmental sustainability. Explore Ecochain Mobius and Helix to learn more about streamlining your CSRD compliance journey.

References

[1] European Council of the European Union (2024). Council and Parliament agree to delay sustainability reporting for certain sectors and third-country companies by two years. Retrieved from: link

[2] European Comission (n.d.). Corporate sustainability reporting. Retrieved from https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en

Author image Emily  Lalonde
Author
Emily Lalonde

I’m a content specialist at Ecochain, focused on educational material. I am an experienced academic writer passionate about solutions for pressing environmental and sustainability challenges. I am happy to combine my science communication skills with my LCA and ecodesign knowledge to deliver accessible and engaging content to the Ecochain community!

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