What is CSRD?

CSRD (Corporate Sustainability Reporting Directive) is the EU's new law that makes companies report their environmental and social impacts. Starting in 2024, about 50,000 companies must comply.

You need to follow CSRD if your company has:

• 250+ employees

• €50M+ annual turnover

• €25M+ in total assets (must meet 2 of these 3)

Non-EU companies: You're affected if you make €150M+ in EU revenue.

Here's what makes CSRD different:

• It's mandatory: No more optional reporting

• It requires outside verification: Third parties must check your data

• It uses double materiality: You report both how sustainability affects you AND how you affect sustainability

• It needs digital reporting: All data must be in standard digital format

Key dates:

Breaking the rules? Expect hefty fines (up to €10M in some countries) or even jail time for serious violations.

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Who Needs to Follow CSRD

The CSRD isn't just for EU companies. It's a big deal for businesses worldwide. About 50,000 companies that make up 75% of all EU companies' turnover need to follow these rules.

Company Size and Type

If you're a large EU company, you're in the CSRD spotlight. You're "large" if you hit two of these:

• Over 250 employees

• Annual turnover above €50 million

• Total assets over €25 million

But here's the kicker: non-EU companies aren't off the hook. You'll need to comply if you:

• Have securities on EU regulated markets

• Make over €150 million in annual EU revenue

• Own an EU subsidiary that's considered large

"High-quality sustainability reporting by companies will help create a culture of greater public accountability while directing investments towards the green transition", says the European Commission in their CSRD guidelines.

This is WAY different from old rules. Here's who needs to report:

EU subsidiaries of non-EU parent companies follow the EU timeline. But they might not need separate reports if their parent's consolidated management report includes their data.

What Companies Must Report

CSRD requires companies to include detailed sustainability info in their annual reports. This covers environmental, social, and governance (ESG) impacts across their entire value chain.

ESRS Guidelines

The European Sustainability Reporting Standards (ESRS) lay out the rules. There are 12 standards: 2 general and 10 topic-specific ones for ESG matters.

Companies need to report on:

1. Governance: How they manage sustainability

2. Strategy: How sustainability fits into business plans

3. Impact Management: Their policies and action plans

4. Metrics: Current performance and progress

"The ESRS aim to advance the scope and quality of corporate sustainability reporting and promote sustainable development through transparency."

Reports must include both required and optional disclosures. Each requirement has specific data points to track. For example, when talking about sustainability policies, companies need to cover:

• Policy goals and major impacts

• What activities are included and who's affected

• Who's responsible at the top

• What outside standards they follow

• How they consider stakeholders

Report Checking

To make sure reports are accurate, they need to be checked by outside auditors. By 2028, companies will have to meet tough standards to prove their info is trustworthy.

Reports must have:

• Digital tags for all sustainability data

• A format machines can read for the European Single Access Point

• Integration with the company's main management report

• An assessment of what matters from both financial and impact angles

Some companies use tools like Emerald Power's carbon accounting software to track and report emissions data for CSRD. This kind of platform makes it easier to collect data and do calculations that follow the GHG Protocol.

"Mastering the ESRS Mandatory Disclosure Requirements (MDR) is essential for organizations committed to sustainable practices and transparency."

When to Start Reporting

The CSRD rolls out in stages, with different deadlines for various company types. It impacts about 50,000 EU companies, expanding sustainability reporting requirements.

Reporting Schedule

The CSRD unfolds in four main phases:

1. Large public-interest entities (500+ employees)

These companies, already under NFRD, start January 1, 2024. First report due in 2025.

2. Large companies (250+ employees, €40M+ turnover)

Begins January 1, 2025. First report due in 2026.

3. Listed SMEs

Kicks off January 1, 2026. First report due in 2027.

4. Non-EU companies (€150M+ EU turnover)

Starts January 1, 2028. First report due in 2029.

Big public companies need to start gathering ESRS data now for their 2024 fiscal year reports. They must meet specific criteria: over 500 employees and either a balance sheet above €25 million or net turnover over €50 million.

"The CSRD aims to standardize sustainability reporting across the EU, ensuring that all relevant firms disclose essential ESG information in a uniform manner."

Smaller businesses get more time. Listed SMEs have until 2026 to get ready, with an option to delay until 2028. Non-EU companies with big EU operations need to align by 2028, if they keep €150 million+ EU turnover for two years straight.

Micro-enterprises (under ten employees, €250,000 or less on balance sheet, under €700,000 revenue) don't have to report, but can if they want to.

Tools for CSRD Reporting

CSRD reporting is no walk in the park. It involves tracking over 1,100 data points across 12 categories. That's a lot of info to handle!

Here's the kicker: an EY study found that about 55% of businesses are still using spreadsheets for ESG data management. That's like trying to build a skyscraper with a hammer and nails. It's not just inefficient - it's asking for data quality problems.

Enter modern CSRD reporting platforms. These tools are game-changers. They automate data collection, validation, and reporting. From carbon emissions to social metrics, they help companies stay on top of it all while keeping in line with European Sustainability Reporting Standards (ESRS).

Carbon Tracking Software

Let's look at some top-notch platforms that can help you tackle CSRD reporting:

• Sweep: Offers materiality assessments and gap analysis tools. It's like having a sustainability expert on your team 24/7.

• Watershed: Known for its strong governance features. Perfect for companies that need to meet strict audit standards.

• Greenly: Uses AI to make ESG data management and double materiality assessments a breeze.

For mid-market businesses, Emerald Power is worth checking out. Their platform is packed with features:

"A good CSRD tool automates key tasks - from data collection to reporting - making the process more efficient and accurate while helping you focus on the most relevant sustainability issues."

When you're shopping for CSRD software, keep an eye out for these features:

• Can it play nice with your existing business systems?

• Does it have built-in double materiality assessment tools?

• Can it automatically spot gaps in your data?

• Does it support all three emission scopes (1, 2, and 3)?

• Can it produce audit-ready reports?

For the smaller players out there, check out Coolset. It's designed specifically for SMEs, offering simplified carbon tracking and CSRD compliance features. It's like CSRD reporting with training wheels - perfect for businesses just starting their sustainability journey.

What Happens If Rules Aren't Followed

Breaking CSRD rules can seriously hurt your business. The EU doesn't set specific penalties, but each country creates its own enforcement rules. France has taken the lead, showing what companies might face across Europe.

Let's talk real consequences. In France, not publishing your sustainability report can cost you up to €18,750. But that's just the start. You might also get banned from public contracts - a huge problem if you rely on government work.

It gets worse for company leaders. Directors who mess with audits or hide information face fines up to €75,000 and could spend up to five years in jail. Even missing the audit requirement could mean two years behind bars and a €30,000 fine.

Germany's not messing around either. Companies there could face penalties up to €10 million or 5% of their annual turnover - whichever hits harder. They might even have to pay double what they made (or saved) by breaking the rules.

How Rules Are Enforced

Each EU country handles enforcement differently, but they all use a "trust but verify" approach. Independent auditors are key - they have to check and verify your sustainability reports. And these auditors aren't just there for show; they've got real power.

"The CSRD will require corporations to integrate Sustainability as a major topic in their Risk discussion which must be qualified and quantified in their ERM." - KPMG

Beyond fines and jail time, not following the rules can cause a chain reaction of problems:

The message? CSRD compliance isn't optional. With about 49,000 companies now under these rules (up from 11,700), regulators mean business. Smart companies are getting their act together now, instead of risking these tough penalties.

Key Points to Remember

The CSRD marks a big change in EU sustainability reporting. From January 2024, about 49,000 companies must report detailed sustainability data - that's 4x more than before.

Your company needs to report if it hits two of these:

• Over 250 employees

• More than €40M turnover

• Above €20M in total assets

Non-EU businesses? You're in if you make over €150M in EU revenue and have at least one EU branch.

"Through the CSRD, the European Commission creates a regulatory framework and a common language for all economic actors." - European Commission Representative

CSRD reports must cover both how sustainability issues affect your business and how your business impacts sustainability. This "double materiality" approach means tracking up to 1,200 data points across environmental, social, and governance areas.

Here's what good CSRD reporting looks like:

The ESRS guidelines now have 84 disclosure requirements instead of 136. It's more manageable, but you'll still need solid systems. Tools like carbon tracking software can help.

CSRD isn't just about ticking boxes - it can improve your business. Companies that jump in early often find ways to cut costs and run more efficiently. And with penalties ranging from big fines to possible jail time, getting it right is crucial.

"Early compliance with ESG reporting in the long term offers scope for streamlining your own production and supply chain from a sustainability point of view." - KPMG

Don't wait. Set up your reporting systems, train your team, and get to know the requirements. CSRD covers over 75% of EU companies' total turnover - it's not just another rule, it's the new normal for business transparency.

FAQs

Does CSRD affect US companies?

Yes, CSRD impacts US companies with big EU operations. NTT DATA says over 3,200 US companies will need to follow CSRD rules. You're on the hook if your company:

• Makes more than €150 million in EU revenue for two years straight

• Has a big EU subsidiary or stocks listed on an EU market

• Runs an EU branch making over €40 million

"CSRD requires disclosures from a 'double materiality' perspective, which means that companies have to report how sustainability issues affect their business as well as how their business impacts people and the environment." - Wolters Kluwer

This means you need to look at sustainability from both sides: how it affects you and how you affect it.

Which companies have to comply with CSRD?

CSRD casts a wide net:

For EU companies, you're in if you hit two of those three size markers. By 2028, even one EU operation puts you in scope if you're raking in enough cash. And heads up - these rules cover ALL your operations, not just your EU stuff.