Setting the scene for CSRD, a necessary regulation to help drive positive impact

For the first time, investors will be able to access public data pertaining to a company's key sustainability themes. This will help them to gain a comprehensive understanding of both a company’s ‘outgoing’ impact on the environment and society and on its ‘incoming’ sustainability-related risks and opportunities.

However, the directive will also present a significant reporting challenge to companies. It is vital that companies commence preparations well before the start of their responsibilities.

Is my company in scope?

The ‘scoping maze’ introduced by the CSRD does present hurdles, as it adds layers of complexity, especially for non-EU parent companies with large or EU-listed subsidiaries.

The CSRD impacts four distinct categories of companies, each with its unique timeline:

How can my company prepare and start aligning?

Navigating the CSRD preparation is a multifaceted, long-term endeavour. After confirming your company's applicability, it is crucial to commence preparations early. Our readiness blueprint consists of three stages:

Phase 1: Preparation

Training & preparation: training senior management, including the Board and Executive Committee levels, is key. The CSRD encompasses intricate reporting mandates, making the engagement of top-tier decision-makers indispensable. Specialists in the subject must conduct insightful training sessions on the CSRD, highlighting the practical aspects and relevance of its reporting criteria to foster knowledge growth.

Double materiality assessment: a comprehensive materiality evaluation, grounded in environmental, social, and governance (“ESG”) materiality and stakeholder analysis, is essential for companies. The CSRD mandates that companies address sustainability using the double materiality principle, which encompasses both the significance of impact and financial materiality.

Gap analysis: this process entails comparing existing reporting methods with the stipulations of the CSRD, pinpointing crucial discrepancies and immediate alignment actions. The outcome of the gap analysis forms a pragmatic strategy for alignment.

Phase 2: Alignment

The EU prescribes what disclosures it requires from companies in the so-called European Sustainability Reporting Standards (“ESRS”), which cover a wide array of topics. These standards are tailored to align with EU policies and will simultaneously support and enhance global regularity efforts.

Companies have to report on topical standards that are material to them, following the double materiality approach.

Phase 3: Ready and Report

With all preparations done, your company has everything in place to start reporting from the moment the CSRD starts applying to them.

Our recommendation

We advise initiating the adoption of the CSRD regulation well before your reporting duties commence. Companies are already starting to determine their scope and engage with their stakeholders to clarify intricate eligibility queries. Clients with a definitive understanding of their scope have already embarked on their double materiality evaluations. While CSRD can be intricate, leveraging a systematic, phased approach will enable companies to meet the reporting deadline with greater ease.

Wherever you stand now, Apex can guide you through all phases of your journey towards CSRD compliance.

To find out more, please contact the team.