Corporate Sustainability Reporting Directive (CSRD)

The Corporate Sustainability Reporting Directive (CSRD) replaces the previously applicable Non-Financial Reporting Directive (NFRD) and expands the existing reporting obligation for non-financial reporting. Whereas only 500 companies in Germany were required to report under the NFRD, there will be around 15,000 from the 2024 reporting year. According to the new regulation, the sustainability report must be integrated and checked in the management report. The CSRD is based on the EU taxonomy and the Sustainable Finance Disclosure Regulation (SFDR). 

The CSRD officially came into force in November 2022. With the fulfillment of a wide range of characteristics (see graphic), the introduction of the reporting obligation takes place according to a stage model:

1. Large public companies: Reporting in 2025 for FY 2024
2. Non-public companies: Reporting in 2026 for FY 2025
3. Capital market-oriented SMEs: Reporting in 2027 for FY 2026

Disclosure is based on the principle of double materiality and covers the areas of environment, social affairs and governance.
In addition to the previous content requirements of the NFRD's sustainability reporting, the following information must be included:

• Description of the business model and strategy in relation to sustainability aspects and stakeholder interests
• Process for selecting material topics (double materiality)
• Report on key sustainability issues including targets, planned measures and potential risks
• Extension of the system boundaries to the upstream and downstream value chain

The principle of double materiality is based on the consideration and categorization of sustainability aspects from two perspectives: the ecological and social perspective (impact of business activities on people and environment; inside-out perspective) and the financial perspective (importance of environmental issues for the company; outside-in perspective).
The rating as "essential" is based on a scale as part of a materiality analysis. The sustainability report according to CSRD must report on all topics that turn out to be significant in at least one of the two dimensions. Instead of just using the intersection of the two perspectives, as was done under the NFRD, the group of topics classified as essential is enlarged and provides more information. 

In the future, investors and lenders will rely even more heavily on data from the sustainability report to make decisions. Other stakeholders such as society, customers and employees are also increasingly influencing the sustainable management of companies.
The CSRD requires the disclosure of essential business activities and strategic backgrounds. In this way, internal company processes will be optimized with the evaluation. This saves costs, leads to a better understanding of potential risks and opportunities and strengthens future viability. 

The preparation for the CSRD begins in a first step with an inventory as well as an analysis of the environment and a subsequent materiality analysis in the sense of double materiality. The key sustainability activities with global challenges for sustainable development in your core business are identified, stakeholder expectations integrated, and strategic and operational deductions made. We would be happy to support you in implementing the CSRD in your company and in achieving the greatest possible positive impact.