Corporate Sustainability Reporting Directive (CSRD) has entered into force 1.1.2024
CSRD is a reporting directive by the EU, with the aim of driving transparency and investments to sustainable business activities. The directive will impact gradually all companies, either directly or indirectly. Starting from big companies, the reporting requirement hits all companies, but indirectly also small or even micro companies, since the reporting covers the full value chain. Due to that, CSRD has also been considered wider than financial reporting.
Depending on the turnover, number of employees and profits, the company is reporting its sustainable activities according to the CSRD. In the first wave are large companies, gradually followed by others. My own company, Nevel, operating as a utility infrastructure company, will be required to report from fiscal year 2025. Due to the number and complexity of the requirements, we have started gradually developing our sustainability assessment and reporting practices.
Since CSRD is relatively new for everybody, and its directives are bound to interpretation, here are my key learnings and considerations for the planning and implementation of it.
- CSRD is not only limited to reporting. Reporting provides transparency to sustainability of business activities. Its requirements actually drive companies to develop activities in order to become aligned with the criteria, if so decided.
- Climate and environment are important elements of the directive, but it covers a holistic approach to sustainability, including social and governance activities. A good example is human rights.
- Do not get carried away with potential easy wins. One might think that in especially Nordic markets compliance is on good level, but applying policies and guidelines is not sufficient. Companies need to be able to demonstrate compliance through metrics, follow-up and cascading the approach through suppliers in the value chain.
- The criteria are not necessarily carved in stone. Some are bound to interpretation. We use relatively tight interpretation to avoid surprises in the long run once the practices mature.
- Company management is responsible for competences and resourcing responding to the CSRD. All functions involvement is critical in order to fulfil the requirements across the organisation. Whether HR, finance, sourcing, business – everybody has a role. Since financial and sustainability reporting are becoming more and more integrated, cooperation between the functions is essential.
- Even if your company is not obliged to report according to CSRD, you will eventually be requested to provide input on your sustainable business practices by your customers. It is good to prepare how you will respond to these requests. Customers will decide what is material information to their business, so information is not same for all.
Initiating the various elements of the assessment and reporting needs to start early enough in order to prepare, collect data, respond to requirements and even develop the activities. Terms like double materiality assessment, technical screening criteria, minimum safeguards, taxonomy eligibility and alignment, digital reporting will become familiar through the process. My respect to all of those who are already running the process, required tools and have involved their organisation, or are learning more of the requirements. The journey has started.
Hanna Viita
Director Sustainability and communications
