If you’re just getting started with your sustainability journey, it’s hard to know what “CSRD” even stands for, let alone whether or not it’s relevant for your business. But don’t worry - we’ve compiled a quick Q&A to simplify the process and answer some of your most pressing questions.
CSR stands for "Corporate Social Responsibility". It describes how a company is acting in an ethical, sustainable, and socially responsible way when it comes to their business practices. The purpose of CSR is to create a balance between how much money a company makes and how much they contribute to society as a whole.
The EU “Corporate Sustainability & Reporting Directive” (CSRD) is a set of laws that were passed by the European Parliament in January 2023. These laws mean that businesses operating in the EU need to provide the government with sustainability information across 13 different areas known as the “European Sustainability Reporting Standards” (ESRS) - two examples of these are climate change (ESRS E1) and pollution (ESRS E2).
Why has the CSRD been introduced?
The EU has set itself an ambitious goal of becoming climate neutral by 2050. To become climate neutral, the EU needs to reduce its greenhouse gas (GHG) emissions as much as possible, and compensate any remaining emissions by offsetting or reducing them with climate-friendly initiatives (for example by planting trees to absorb CO2). This goal was written into the European Climate Law in 2021 and is now legally binding. The CSRD replaces a previous law known as the “Non-Financial Reporting Directive'' (NFRD)- a set of guidelines that companies had to follow, which provided information on their environmental, social and governance (ESG) credentials. Even though the NFRD was seen as a landmark law in 2014 when it was published, companies found it difficult to follow because the reporting requirements were vague, and it wasn’t clear what data was needed.
The new law will affect more companies in the EU compared to the NFRD, and will set clearer guidelines for what needs to be reported. This in turn should help prevent greenwashing because companies will know what’s required, and crucially will be liable for any false claims they make about their sustainability.
How will the CSRD be rolled-out?
The EU has decided to roll out these laws in three stages:
Companies with 250+ employees
The first stage will come into effect on the 1st January 2024, and will affect over 49,000 businesses (up from 11,000 businesses that were affected by the NFRD). During this stage, all listed companies, as well as companies that fulfil two of the following criteria will have to report on their CO2e emissions:
• Companies with over 250 full-time employees in the EU
• Companies with an annual turnover value of over €40 million
• Companies with assets over €20 million
Companies with 10+ employees
The second stage will come into effect on the 1st January 2026, and will affect small to medium businesses with:
• 10 or more employees
• An annual turnover value of over €700,000
• Assets of over €350,000
Non-EU companies with offices in the EU
The third stage will come into effect on the 1st January 2028, and will mean that any company based outside the EU will have to provide CSR information for the whole group if they:
• Have an office in one of the 27 EU member states
• Generate over €150 million in turnover