Objectives of the CSRD
ESG Reporting: Transparency and proof of your sustainability strategy
Lay the foundation for sustainability reporting obligations from 2024 onwards
Understanding the relevance of ESG reporting: responsibilities and opportunities
From 2024, ESG (environmental, social and governance) and the associated reporting will occupy an important place in corporate reporting. As early as 2022, the EU decided that companies must do their part to achieve climate targets and set out their progress in the area of sustainability in binding reports. This is done within the framework of the Corporate Sustainability Reporting Directive (CSRD), which lays down clear rules for sustainability reporting. Because you can only successfully manage what you can measure.
However, this presents companies with some challenges. On the one hand, the topic of ESG, CSRD and the associated reporting standards is inherently complex. On the other hand, implementation and practical application raise many questions: Which data is really relevant? From which of the numerous systems in the company can this data be collected? And how must it be prepared to meet the requirements? We are here to help you deal with these questions.
What is CSR - Corporate Social Responsibility?
Let's first take a look at CSR: This means that companies take responsibility for their own initiative for the impact of their business activities on society. A company's CSR initiative usually comprises various measures and activities aimed at positively influencing social and ecological standards.
What is CSRD - Corporate Sustainability Reporting Directive?
The CSRD is a proposed new directive that will replace the NFRD (Non-Financial Reporting Directive) and extend the scope of sustainability reporting requirements. The CSRD is a legal obligation adopted by the EU as a result of the Green Deal. Its goal is to make all companies climate-neutral by 2050, and it requires all companies to actively contribute to achieving this EU target. The CSRD gradually introduces comprehensive legal guidelines that will apply to virtually all companies in the EU from 2026.
In addition, they will have to report on their corporate governance, adverse effects of their business activities and their intangible resources in accordance with uniform standards. Put simply, the CSRD is about "why", "who is affected" and "by when must this be implemented".
The impact of the CSRD on UK companies
The CSRD is an EU regulation and doesn't exclusively apply to UK-based companies. However, it's crucial for UK businesses to take note for two key reasons:
- The UK is likely to adopt similar ESG reporting regulations in the not-to-distant future
- Non-EU companies operating within the EU, including EU subsidiaries of UK parents, come under the CSRD's scope, even if they aren't listed. They must provide sustainability disclosures if:
- Their net turnover generated in the EU exceeded EUR 150 million for each of the last two consecutive financial years.
- They have at least one subsidiary in the EU or an EU branch with an annual net turnover exceeding EUR 40 million in the previous financial year.
What is ESRS - European Sustainability Reporting Standard?
The ESRS falls within the CSRD framework, serving as the technical standards that underpin the CSRD's sustainability reporting requirements. Understanding this connection is vital to comprehending the regulatory landscape. The ESRS is the associated set of rules, including the defined key figures and reporting formats, which companies must apply to ensure comparability. The ESRS thus specifies "how" and "what" to report.
- 1
Transparency & comparability
The CSRD aims to improve the transparency and comparability of sustainability information.
- 2
Double materiality
The CSRD brings with it a new understanding of materiality. In the future, companies will report from two perspectives: First, how their business affects people and the environment (inside-out perspective). On the other hand, how sustainability aspects affect the company (outside-in perspective).
- 3
Simple, automated reporting
The CSRD also promotes efficient and automated reporting. This enables companies and institutions to spend fewer resources on reporting. For our customers, this means they can save time and effort while still maintaining the highest standard of reporting.
CSRD requirements for companies
CSRD: Who is affected and how is the control done?
For EU countries, the CSRD will become mandatory from 01.01.2024 for all companies that meet at least two of the following criteria:
> 500
Employees
> 200
EUR million in retained profit
> 400
EUR million in sales
In 2025, the next phase is imminent, in which the requirements for companies will be further tightened. This time, the number of employees will be used as a reference criterion, for companies with at least 250 employees. From 2026, the obligation will then affect a large proportion of medium-sized businesses. Specifically, all companies that meet at least two of the following three criteria will be affected:
> 10
Employees
> 350.000.-
EUR retained earnings
> 700.000.-
EUR Revenue
How is compliance with the CSRD monitored?
Compliance with the CSRD is monitored through various mechanisms located at both the EU and national levels. These include:
- Standardization
- The audit
- The monitoring
We are here to help you meet the increasing ESG requirements with innovative solutions and Microsoft technologies
Read our white paper to learn how we're partnering with Microsoft to enable the integration of sustainability factors. Get to know Microsoft Sustainability Manager – the software module for tracking your CO2 emissions.
ESG Reporting: The tool for sustainability reporting and progress monitoring
ESG reporting as a central tool for CSRD.
These criteria alone make it clear how important ESG reporting is. It requires the continuous collection and analysis of extensive information from different areas of the company. However, ESG reporting is more than just sustainability reporting. It provides you with a comprehensive tool to shape your ESG strategy. It allows you to constantly monitor your sustainability efforts and identify the direct impact of various measures and activities on different areas of the company. As a result, you are always well-informed.
The benefits of ESG reporting:
- 1
Trust is strengthened through transparency
In all directions - whether with customers, business partners, shareholders or employees - great importance is attached to transparency.
- 2
Transparency shows potential for improvement
An evidence-based ESG strategy paves the way for long-term opportunities and potential.
- 3
Transparency leads to better decisions
Providing complete information helps customers and business partners make informed decisions.
- 4
Transparency reduces costs
Significant cost-saving potential can be tapped into in the three ESG areas.
The good news is that with modern technologies and our expertise in ESG, creating your ESG reporting is a hassle-free step. Your satisfaction is our top priority!
Sign up for an ESG Assessment
What are you waiting for?
Let's work together in a workshop format to assess your sustainability maturity and determine the required course of action. We are here to help you successfully implement ESG reporting.
Request more information on HSO's ESG Assessment
And tackle the 2024 increased regulatory reporting requirements.
Dive deep into the knowledge
Learn more
HSO recognized as a finalist for 2022 Dynamics 365 Finance Microsoft Partner of the Year
Receives global recognition by Microsoft for the third consecutive year in the Dynamics 365 Finance category
Why We’re Part of Microsoft’s #Buildfor2030 Sustainability Initiative
Addressing the Weak Points of Supply Chain Sustainability
You can build the factory of the future right now
Leveraging Technology to Compete in the Insurance Industry: 3 Keys to Success
Sustainable Corporate Governance
Sustainability – Health Check
Are you ready for the new ESG requirements? Learn how HSO's Sustainability Health Check can help prepare you for efficient and reliable reporting practices.
HSO Wins 2023 Microsoft Dynamics 365 Finance Global Partner of the Year Award
HSO's Data-First Playbook
As the ultimate digital transformation partner, we enable our clients to leverage their data to its maximum potential.
Navigating Sustainability Regulations: Mitigating Risk for US-Based Manufacturers with Global Operations
Lunch & Learn The HSO Environmental Social & Governance (ESG) Reporting Framework
The HSO ESG Reporting Framework helps companies tackle the 2024 increased regulatory reporting requirements, driven by many investment organisations and governmental bodies such as the EU Corporate Sustainability Reporting Directive (CSRD).
ESG Assessment
We analyse your ESG reporting and support you in closing gaps to enable automated reporting.
Microsoft Sustainability Manager
Companies that are striving for professional ESG reporting, due to new legal environmental regulations and their own sustainability requirements, often use the Microsoft Sustainability Manager solution. In this blog article, we answer the most frequently asked questions about ESG reporting with the Microsoft Sustainability Manager solution.