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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Overview of Topic

The Corporate Sustainability Reporting Directive (CSRD) 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.

Significance in Today's Landscape

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.


CSRD has a wide-ranging impact across various sectors, affecting large companies, publicly listed firms, non-EU companies with significant EU operations, subsidiaries of large groups, and indirectly impacting SMEs, especially those in supply chains of larger firms

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How Can We Help?

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


Standards Understanding

T3 will then guide your company through the European Sustainability Reporting Standards (ESRS), explaining the requirements for ESG disclosures that the CSRD will mandate. We will ensure that the company understands the necessity of auditing the reported information and how the ESRS enhances data comparability and reliability.


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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