At the end of 2022, the European Union approved the Corporate Sustainability Reporting Directive (CSRD) that will come into force in 2024, introducing a new obligation to report hundreds of non-financial metrics that will affect thousands of companies, including those based outside of the EU but operating subsidiaries or offices within the EU, or those listed on regulated EU markets.
Upon approving the new CSRD regulation, EFRAG (European Financial Reporting Advisory Group) published the first drafts of the European Sustainability Reporting Standards (ESRS), which are much stricter in terms of scope and depth of reporting requirements compared to current Non-Financial Reporting Directive (NFRD).
During the first stage in 2025 (reports on the fiscal year 2024), the new regulation will apply to companies who are already obliged to submit reports in accordance with NFRD – that means all companies listed on the EU markets as well as large companies with over 500 employees (of which there are just a few dozen in Czech Republic). Next, starting in 2026 (reports on the fiscal year 2025), the directive will also apply to all large companies meeting at least two of the following criteria:
- 250+ employees
- Turnover of 40+ million euros
- Total asset worth of at least 20 million euros
In the next stages, the reporting obligation will encompass small and medium companies listed on the stock market, and companies outside of the EU as well.
If your company will be in the first stage already, then the clock is ticking. You must prepare to submit operational information from various parts of the company and your value chain and be ready for the fact that the information you publish will have to pass a third-party verification, the so-called limited assurance.
CSRD getting wider and going deeper
One of the main goals of CSRD is to make companies and their value chains more transparent, and to bring the non-financial reporting on par with its financial counterpart, making them both a priority for corporate leadership.
Although companies have been publishing information on their approach to sustainability for some time now, CSRD will require a new level of information and hundreds of metrics, goals, and policies in areas such as:
- Management of risks related to climate change
- Circular economy and pollution
- Protection of biodiversity
- Reducing water and power consumption
- Fair treatment of workers both inside the company and within its entire value chain
- Prevention of corruption and bribery
- Supplier relationships management
- Payment practices
- Lobbying and other topics
Are you getting hit by the first wave? Start getting ready now
There’s only a year left before the start of the first monitored period, while introducing new processes and collecting all necessary data from within your company and your suppliers could take months. You should already start your preparations and consider the following:
- Creating a management structure lead by the board
- Introducing a due diligence process into the company’s entire value chain
- Integrating ESG into corporate risk management policies
- Preparing for third-party verification of information you provide
- Planning for short-term, medium-term, and long-term outlook
Even if you are a pioneer in ESG reporting, you still need to prepare – especially for the fact that there’s a lot of work to be done in your value chain.
How KPMG can help
Whether you are just taking your first steps in non-financial reporting or have been on top of it for some time now, we can help you prepare to face new requirements and challenges that CSRD brings. Use our consulting services and let us create a tailor-made solution just for you or trust our expertise to verify the information you publish.