Navigating CSRD compliance: what businesses need to know

The CSRD Directive requires certain companies to report non-financial information by producing a sustainability report.

In this edition of Biodiversity Talks, 3Bee’s weekly newsletter, we take a closer look at KPMG's study analysing the progress of sustainability reporting worldwide.

Progress in ESG reporting: KPMG research

Currently, 95% of the world's top 250 companies have set carbon reduction targets and 56% have a sustainability manager. Nearly a third of the world's top 100 companies have integrated sustainability into executive compensation systems, a percentage that rises to 41% in the top 250. These figures come from KPMG's Sustainability Reporting 2024 study, which analyses progress in sustainability reporting practices around the world. The findings highlight the growing importance of sustainability in corporate strategies and the role of regulations and standards in shaping ESG reporting approaches.

KPMG's analysis of corporate sustainability reporting

KPMG's research is based on an in-depth analysis by professionals from 58 KPMG member firms who evaluated the annual sustainability reports, integrated reports and ESG disclosures of the 100 largest companies in their countries. With a sample size of 5,800 companies, the survey is the largest in the series, which began in 1993. Up to 52 data items were collected using a standardised questionnaire, resulting in more than 180,000 aggregated and validated items. The reports analysed cover the period from 1 July 2023 to 30 June 2024. This rigorous methodology ensures representative and meaningful data for understanding the ESG reporting landscape.

CSRD: sustainability reporting becomes mandatory

The CSRD is a major development in the field of sustainability reporting, increasing the number of companies required to produce a sustainability report. The main objective is to create a standardised and detailed framework for globally recognised ESG reporting. One of the requirements of the CSRD is the adoption of the European Sustainability Reporting Standards (ESRS) developed by the European Financial Reporting Advisory Group (EFRAG). These standards define clear and measurable indicators for each sustainability area. In addition, companies must report not only on environmental impacts, but also on issues such as human rights, gender equality, working conditions and corporate governance. Finally, verifiable reporting with independently verified data is essential to ensure the accuracy of the information provided.

CSRD: who does it apply to?

The CSRD follows a precise timetable that has already been in place since 1 January 2024 for large public interest entities with an annual average of at least 500 employees, which are already subject to the NFRD. For them, the first reporting will take place in 2025 for the financial year 2024. From 1 January 2025, the CSRD will apply to large companies that meet at least one of the following requirements: more than 250 employees; net revenue of more than EUR 50 million; fixed assets of more than EUR 25 million; reporting will start in 2026, based on the 2025 tax year. Obligation from 1 January 2026 also for listed SMEs and other entities specified in the legislation. These will have to submit their reports in 2027, based on the 2026 fiscal year. Finally, from 1 January 2028, the CSRD will apply to non-EU companies with parent companies outside the EU that have a net turnover in the EU of more than €150 million in the last two financial years.

Voluntary adoption of ESRS

Companies are preparing for the CSRD (Corporate Sustainability Reporting Directive) by voluntarily adopting the European Sustainability Reporting Standards (ESRS), which comprise 12 sectoral standards with over 120 specific measures. Although only 2% of the G250 companies report compliance with the ESRS, this figure reflects the limited presence of European companies in the sample. For the N100 European companies, the percentage rises to 12%, with Spain leading the way (66%). Countries such as Cyprus, Estonia and Portugal show signs of preparedness with at least 20% of companies complying. The voluntary adoption of ESRS indicates a growing awareness of the impact of impending mandatory regulation.

Sustainability reporting and double materiality

Double materiality, which assesses both environmental and social impacts as well as financial risks, is used by 78% of G250 companies and 45% of European companies. KPMG has identified three categories of materiality: impact, financial and double materiality. Currently, 50% of G250 companies use double materiality, compared to 42% of N100 companies. Adoption is particularly high in Asia Pacific (85%) and the Middle East (78%), while in North America 64% of companies use materiality assessments but only 25% use double materiality. Double materiality includes 'substantive materiality', which addresses the impact of companies on the climate and stakeholders, and 'financial materiality', which assesses how climate change impacts financial performance. Investors are key in this context, with sustainability playing a central role in sustainable finance and the European Green Deal.

The importance of biodiversity reporting

Companies can monitor, improve and communicate their impact on biodiversity through 'non-financial' reporting supported by specific standards. These standards, including the ESRS, provide guidelines for addressing various aspects of environmental, social and governance (ESG) sustainability. Among the best-known in Europe are the GRI standards, whose GRI Standard 101: Biodiversity 2024 is designed to help companies around the world ensure full transparency about their key biodiversity impacts, both directly in their own operations and along the entire value chain. Similarly, the ESRS standards require biodiversity reporting, in particular through ESRS E4, which aims to encourage companies to understand and communicate how their activities affect biodiversity and ecosystems, considering both positive and negative material impacts, actual and potential.

Companies are therefore faced with a new challenge: measuring and reporting their impact on nature, biodiversity and climate to increasingly stringent standards. In fact, the CSRD Directive requires a structured approach to managing ecosystem risks in line with the main international reporting standards.

3Bee's Environmental Platform was created precisely in response to these regulatory requirements and with the aim of helping companies, municipalities and nature parks to manage and report on their environmental impacts.

How does it do this? By providing objective, transparent and continuous data that is essential for developing a sound strategy to protect and restore biodiversity.

Want to learn more and discover how much your business impacts and depends on nature, climate and biodiversity? Request your demo now ?? https://www.3bee.com/en/platform/