Ready for the CSRD in 5 steps
#CSRD • 14/07/2022 • Lien Moris & Katelijne NorgaAre you among the 50,000 companies that will have to publish their first sustainability report according to the CSRD starting in fiscal year 2025? With our plan, you will meet your obligations step by step.
Large companies will soon be required to report on their sustainability. This is stated in the Corporate Sustainability Reporting Directive (CSRD), a new European directive that will receive final approval this year. The CSRD is the successor to the Non-Financial Reporting Directive (NFRD), which already obliges large listed companies, banks and insurers to publish a sustainability report since 2017. The aim of the new directive is to get a better view on the sustainability of all large European companies. In this way, stakeholders (such as banks, NGOs and the general public) will know how sustainable a company is performing and you, as a company, will gain insight into your progress, gaps and risks in the areas of people, profit and planet.
For who?
The CSRD broadens the target group of the NFRD and is mandatory for all European organizations that meet two of these criteria:
- more than 250 employees
- a revenue of more than €40 million
- a balance sheet total of more than €20 million
All listed companies, including listed SMEs, must also comply with the CSRD. The fact that Europe is making sustainability reporting a priority has everything to do with the Green Deal: the plan to make Europe the first continent in the world to become climate neutral by 2050. Together with the EU taxonomy, the CSRD is an important cornerstone to improve and standardize sustainability reporting in Europe. In short: the CSRD will be a real game-changer.
The CSRD: the specifics
What will be required exactly? Starting in fiscal year 2025, large companies will be required to submit an annual report to the European Commission, providing insight into their sustainability performance, policies and action plans. For companies already covered by the NFRD, this requirement will go into effect as early as fiscal year 2024.
The annual sustainability report must comply with certain standards, which were published in a first draft version this spring. The standards introduce several new obligations, such as double materiality and due diligence (care for people and planet throughout the chain). You are also required to have your report audited before submitting it.
The key question: how do I start with the CSRD?
It should be clear that the requirements set by Europe are not negligible. If you meet the criteria of a large company, you will be confronted with many new obligations in the coming years. In order to be ready for the new obligations as of the reporting year 2025, it is best to start on time. We can help you with the following steps:
1. Conduct a gap analysis
Do you already publish a sustainability report? Then Pantarein will help you expose the gaps compared to the CSRD and the current version of the European reporting standards. Together we determine your ambition level, the priorities and the roadmap for the coming years.
Even if you don't yet put together a sustainability report, we can support you. We start with an analysis of where your organization stands in terms of sustainability, what your competitors and sector peers are doing and what the ambition level is of the company management. We draw up a roadmap to become CSRD-compliant in the coming years.
2. Conduct a double materiality analysis
A sustainability report must be based on a thorough dialogue with your company's main stakeholders. Thus, you are required to conduct a double materiality analysis, which clarifies which impacts your stakeholders consider significant for your company. What is new is that it involves two types of materiality:
- The impacts of your company on people and planet (both positive and negative). You ask your stakeholders about CO2 and climate, but also themes such as water, biodiversity, human rights, how you deal with your employees and the remuneration of the directors are compulsory elements of the analysis.
- External risks that affect your company financially, but also opportunities arising from the green transition. This means that you have to map out the risks of, for example, floods, raw material shortages or reputational damage, but also the financial impact of, for example, new business models or energy savings. And that your stakeholders should be able to have their say on this.
The result of this exercise is a list of your material impacts: the topics that matter to your organization and your stakeholders. The materiality analysis forms the basis for your roadmap and report. We help you to conduct it in an expert manner: we enter into dialogue with your stakeholders and present the results in a clear materiality matrix.
In its sustainability report, Oxfam Fair Trade laid out ten impact areas, divided between their partners, their employees, their customers and society. Among other things, they commit to a fair and sustainable assortment and to becoming a carbon-positive organization by 2025.
3. Establish a roadmap with targets and KPIs.
The time that a sustainability report only looked back is over. The CSRD requires that as a company you also have your roadmaps and action plans in order and that you present them to the outside world in an accessible way.
Your roadmap should also look beyond your own company floor to the supply chain. This means that you have to think about how you will tackle your impacts upstream in the chain (with your suppliers, during transport, etc.) and downstream in the chain (with the end user of your service or product). So in your roadmap you not only have to determine how you will reduce your direct CO2 emissions, but also how you will tackle the CO2 emissions of suppliers, transport and consumers.
As a producer you also have a social responsibility and you must be able to demonstrate that you are taking action to address human rights violations at your suppliers.
Clear targets, an indicator framework to follow them up and a strategy for consistent monitoring and data collection: there is a lot involved in drawing up a roadmap. With the help of our consultants, you can create a roadmap that makes sense and is supported within your organization.
Technology federation Agoria set targets within 12 impact domains. For example, by 2025 they aim to rank third within the EU in terms of the integration of digital technologies in companies. They monitor this commitment using the Digital Economy and Society Index.
4. Create a transition report for 2022.
Collect and analyze the 2022 data and prepare a transition report. It is neither necessary nor possible to check off all the boxes in one year and be fully CSRD-compliant. It makes more sense to look at CSRD as a multi-year project, taking meaningful steps with your sustainability report each year.
We help you draw up a transition report for the year 2022, with which you can already take the necessary steps towards full CSRD compliance. Involve your accountant already in this phase, so you are prepared for the mandatory audit from the year 2025.
5. Go step-by-step for full CSRD compliance starting in 2023
With the CSRD roadmap we create together in Step 1, you have everything you need to report step-by-step in compliance with CSRD starting in 2023.
Overwhelmed by all the new obligations coming your way? Pantarein can help you with every step of the process. And best of all, we don't just help you to be compliant, but also to propagate your report to the outside world. Based on your roadmap, we write out your sustainable narrative. An engaging storyline in words and images that clearly describes and visualizes what sustainability means for your business. It forms the backbone of all your further sustainability communication: your website, social media, internal activation and so on.
Ready for the first step? Contact us at mail@pantarein.be to get acquainted.
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