ESG Emerging Regulations & Standards

Corporate SustainabilitySustainability Reporting Directive (CSRD)

T3’s expertise in ESG policies provides in-depth guidance on navigating the complexities of the CSRD, ensuring your compliance while demonstrating a genuine commitment to sustainability excellence.


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What is CSRD Reporting?

The Corporate Sustainability Reporting Directive (CSRD) reporting represents a significant advancement in the European Union’s approach to sustainability reporting. This new legislation, which expands upon the earlier Non-Financial Reporting Directive (NFRD), is set to bring about substantial changes in how companies report on their sustainability practices and impacts. It aims to enhance the quality, consistency, and comparability of sustainability information, which is increasingly deemed essential by investors, stakeholders, and consumers alike. It will affect a broader set of large companies and all listed SMEs, except listed micro-enterprises, operating in the EU. This means that around 50,000 companies will have to comply with the new rules. T3’s expertise is crucial in navigating this expanded directive, as non-compliance can result in fines and reputational damage. The directive, set to be implemented by 2024, demands a level of reporting accuracy and transparency that is critical in a market where, as per a KPMG survey, 80% of consumers would be more loyal to a company with a robust sustainability record.

Here’s an extensive look at the key aspects of CSRD:

  • Broader Scope of Applicability: Unlike its predecessor, the NFRD, which applied to only certain large companies, the CSRD extends its reach to all large companies and all listed SMEs, except listed micro-enterprises, across the EU. This expansion significantly increases the number of companies under its purview, with an estimated 50,000 companies expected to comply.
  • Enhanced Reporting Requirements: The CSRD mandates more detailed and comprehensive reporting than the NFRD. Companies are required to report on their sustainability impacts, risks, and opportunities in a more holistic manner. This includes covering environmental, social, and employee matters, respect for human rights, and anti-corruption and bribery issues.
  • Digitalization and Standardization: The directive introduces a digitalization aspect, where companies are required to report their sustainability information in a digital format, making it more accessible and easier to analyze. The standardization of reporting formats under the CSRD aims to enhance comparability and consistency across different reports and companies.
  • Alignment with the EU Taxonomy: The CSRD is closely aligned with the EU Taxonomy, a classification system establishing a list of environmentally sustainable economic activities. This alignment means that companies will need to report on how and to what extent their activities are associated with these environmentally sustainable activities.
  • External Assurance Requirement: The directive is expected to include a requirement for external assurance on sustainability reporting. This means that an independent third party will verify the accuracy and completeness of the sustainability information provided by the companies.
  • Implementation Timeline: The CSRD is set to be implemented in phases starting from 2024. This phased approach is designed to give companies sufficient time to prepare and adapt to the new reporting requirements.
  • Potential Impacts of Non-Compliance: Failing to comply with the CSRD can have serious implications for companies, including financial penalties and reputational damage. Given the increasing consumer and investor focus on sustainability, non-compliance could also impact consumer loyalty and investor confidence.
  • Market Impact: According to a KPMG survey, 80% of consumers are more loyal to companies with strong sustainability practices. The CSRD, by enhancing the transparency and reliability of sustainability reporting, can significantly influence consumer and investor decisions, potentially leading to competitive advantages for compliant companies.

The CSRD represents a substantial shift in the corporate sustainability landscape in Europe, emphasizing the need for accurate, comprehensive, and comparable sustainability reporting. For companies operating within its jurisdiction, understanding and preparing for these changes is not just about regulatory compliance but also about seizing opportunities to enhance their sustainability credentials and market positioning.

IS CSRD Mandatory?

The Corporate Sustainability Reporting Directive (CSRD) is a European Union (EU) regulation.

  • Directly applies to: All large companies within EU member states meeting the thresholds mentioned previously (turnover, assets, employees). This includes subsidiaries of non-EU companies if they have significant operations within the EU.
  • Phased Implementation: The CSRD is being rolled out in stages:
    • Companies already subject to the EU’s Non-Financial Reporting Directive (NFRD) are the first to comply, with more detailed reporting starting in 2024 for the 2023 financial year.
    • Other large companies will be phased in over the following years.
    • Listed SMEs (smaller companies on public stock exchanges) will have a later adoption timeline.
  • Potential for Global Influence: While the CSRD is an EU regulation, it’s expected to:
    • Influence how multinational companies report ESG data on a global scale.
    • Set a benchmark that other countries may look to when developing their own sustainability reporting regulations.

As regulatory timelines tighten, companies are facing an increasingly urgent need to comply with binding regulations. Notably, all large companies will be required to adhere to the Corporate Sustainability Reporting Directive (CSRD) and report their figures for the 2025 financial year. Experts anticipate that this directive will not just affect these companies in isolation but will also create a spillover effect, encompassing entire value chains. This means that all entities cooperating within these chains will likely need to elevate their reporting and sustainability practices. This imminent change underscores the critical need for companies to proactively adjust their strategies now to meet these upcoming and expansive requirements. T3 can help you navigate the CSRD directive and what it means for your organization.

The financial repercussions of failing to comply with regulatory standards can be profound and multifaceted, posing significant risks to businesses. Firstly, non-compliance may lead to a dwindling customer base and restricted market access as clients increasingly favor companies with compliant, sustainable practices. Secondly, it can result in disqualification from procurement processes, as many organizations mandate compliance for eligibility. Thirdly, access to essential financial resources could be hindered, with banks and investors often favoring entities that adhere to regulatory expectations. Fourthly, operational expenses may surge due to the imposition of carbon taxes and the costs associated with operational inefficiencies. Finally, businesses may face substantial regulatory penalties and suffer severe reputational damage, which can have long-lasting negative effects on their brand value and stakeholder trust.

WHO is impacted by csrd?

The CSRD marks a new era in sustainability regulation. Its reach is unprecedented – an estimated 50,000 companies worldwide will need to fundamentally change how they track and disclose their environmental, social, and governance (ESG) performance. Even if your business isn’t directly in scope, the CSRD will impact you. Here’s why:

What Makes CSRD Reporting Different:

  • Mandatory for Many: If your company has two 2 of 3 : 1) net turnover above €40 million, balance sheet assets > €20 million, or 2) More than 250 employees – you MUST comply.
  • Phased Approach, But Act Now: Smaller companies have more time, but early strategizing is key for a smooth transition.
  • Ripple Effects: The CSRD puts pressure on your entire supply chain. Prepare for increased transparency demands from investors, clients, and partners, even if your company isn’t directly mandated to report.
Asset Managers
Commodity Houses

easiest way to comply with csrd?

T3 can assits you with you CSRD compliance in several ways:


Scope Determination

T3 will help you determine if your company falls under the CSRD’s scope. This involves assessing the company’s size, turnover, balance sheet, and employee count against the thresholds set by the directive. For example, we would evaluate if a company is a ‘large’ undertaking or a listed entity that requires reporting from 2025 for FY 2024 or in subsequent years. Small and medium-sized public-interest entities


The CSRD: Data-Driven Sustainability Transformation


The CSRD: Data-Driven Sustainability Transformation

The CSRD isn’t just about compliance – it’s a catalyst for change. Success starts with data. Companies face a vast array of ESG disclosure demands – over 1,000 data points across 10 key topics like pollution, resources, and biodiversity. This data must be qualitative and quantitative, spanning your entire value chain with short, medium, and long-term views.

The Double Materiality Advantage

The CSRD mandates reporting both on how sustainability impacts your business and how your business impacts the world. This deep analysis isn’t a burden – it’s a strategic advantage. Management gains a 360-degree view, pinpointing how environmental and social factors drive performance. Investors get the transparency needed for informed decisions.


Materiality Assessment

T3 will consequently conduct a materiality assessment to identify the ESG topics that are most significant to your company’s stakeholders and operations. This step is crucial to aligning the company’s sustainability report with the CSRD’s focus on double materiality, which considers both the impact on the company and the company’s impact on society and the environment.


Existing Disclosures Review

T3 will also review any existing disclosures, such as those made under the Task Force on Climate-Related Financial Disclosures (TCFD), to evaluate their alignment with the CSRD. This step will identify gaps and T3 will advise on additional disclosures needed, ensuring that the company’s reporting also meets the broader ESRS requirements.


Report Publishing

T3 will provide you expertise in sustainability reporting, help you navigate this regulatory requirement, and ensure that the company not only complies with the CSRD but also capitalizes on the opportunity to showcase its commitment to sustainability to stakeholders.

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