The EU’s Corporate Sustainability Reporting Directive (CSRD) is transforming ESG reporting. Starting from 2024, almost 50,000 companies are subject to mandatory sustainability reporting, including non-EU companies which have subsidiaries operating within the EU or are listed on EU regulated markets.
In order to stay compliant with the CSRD reporting requirements, the disclosure requirements and data points of the European Sustainability Reporting Standards (ESRS) must be complied with. The first draft of ESRS standards were released in November 2022, with the final ESRS standards expected to be published in June 2023. In addition, a number of sector-specific ESRS standards are expected to be published by the end of 2023.
With a total of 80 disclosure requirements and 800 data points, the ESRS set much higher requirements for sustainability reporting than the current Non-Financial Reporting Directive (NFRD). Going forward, affected companies will have to report in accordance with the ESRS and thus disclose much more comprehensive sustainability information, supported by targets and data points, than they have been used to in the past.
On this page, we will keep you updated with our latest news on CSRD, the ESRS, the EU taxonomy and ESG reporting in general. In the report 'Get ready for the next wave of ESG reporting', we give you an overview of the upcoming requirements. In addition, you get insight into concrete steps your company can take to prepare for CSRD readiness. Below you can find more information about the services we offer within ESG reporting - we also encourage you to stay updated on the latest insights by signing up to our newsletter.
When do the new requirements apply?
In 2025, the first annual reports containing disclosure requirements and data points according to the ESRS standards will be published. This means that companies that will have to comply with the ESRS standards from January 1, 2024 must start preparing to collect and ensure valid ESG data as soon as possible.
The companies that are included in CSRD will be covered on an ongoing basis over the coming years, see below.
- In 2025, companies in the EU with more than 500 employees (companies currently covered by the NFRD) will have to report for the financial year 2024.
- In 2026, large enterprises meeting two of three requirements: more than 250 employees, EUR 40 million in turnover and EUR 20 million in shares, must report for the financial year 2025 - corresponding to enterprises in reporting class C (large) according to the Danish Financial Statements Act.
- In 2027, listed SMEs must report for the financial year 2026 (derogation to 2028 is possible).
- In 2029, non-European companies with a net turnover exceeding EUR 150 million in the EU and with at least one subsidiary or branch in the EU must report for the financial year 2028.
Far more ESG performance data to report — across a wider range of topics
From 2024 onwards, companies will have to report on over hundreds of metrics and targets. In addition to tracking performance on climate change, the circular economy and pollution, organizations should be transparent about how they tackle biodiversity loss, and reductions in resource and water use - where this is material, or part of mandatory items required by other EU legislation. Social challenges like the treatment of workers, within their own organization and across the value chain, are also part of the new CSRD. Also, disclosures related to business conduct policies including corruption and bribery prevention, supplier relationship management, lobbying activities and payment practices fall under the G standard.
This is an extension to both the range of indicators that companies need to report on, and the depth of information required, with a need for far greater transparency over the entire value chain.
If you want to learn more about the importance of having in-depth knowledge of your value chain, read more here.
Effective ESG reporting will not happen overnight
One of the core objectives of the CSRD is to ensure that ESG and financial reporting become of equal importance.
Although many companies have already been reporting on their sustainability performance for some time, the CSRD will require a new level of disclosure, with ESG reporting now a board-level priority. Companies need to disclose their policies and targets across a wide range of areas, including emissions reduction targets and resource conservation plans. This transparency may drive them to revisit or develop policies and targets, and integrate ESG into corporate strategy and operations. To achieve this, they must set up processes to gather ESG data, evaluate ESG performance, and report according to the ESRSs in an appropriate, auditable way.
One tool that can help your business keep track of emissions and ensure valid ESG data is Salesforce Net Zero Cloud. You can read more about that here.
A substantial change management exercise
As companies’ ESG performance comes under growing scrutiny, ESG reporting is going mainstream. Keeping track of and adapting to evolving sustainability regulations has become a critical strategic priority for boards. As some companies only have a year before the first reporting period starts, it is vital to be prepared by considering the following key items:
- Establish a board-led governance structure
- Set up a due diligence process across complete value chains
- Integrate ESG into corporate risk management systems
- Prepare for assurance
- Consider short, medium, and long-term time horizons
Even those companies that are fairly advanced in their sustainability reporting are likely to require significant improvements to the way they gather, process and report data across environmental, social and governance topics across their entire upstream and downstream value chain.
At KPMG, we can help you do the initial analysis that shows where you are and where you need to go. With our internationally developed tools, we can ensure an efficient and quick process of creating the overview and defining a way forward.
Please reach out if you would like to hear more.
Contact our experts within ESG reporting
Christian Møllegaard Larsen
Director, ESG Advisory Services
KPMG in Denmark
Katrine Geipel
Manager, Reporting & Accounting Advisory
KPMG in Denmark
