But How Will it Impact Us? Understanding the Corporate Sustainability Reporting Directive (CSRD)

The European Union’s Corporate Sustainability Reporting Directive (CSRD) marks a pivotal shift in the landscape of corporate sustainability, setting new standards for transparency and inclusion in the reporting of environmental, social, and governance (ESG) topics. Focused on standardizing and improving the quality of sustainability reporting, the CSRD provides stakeholders with detailed insights into how companies affect both people and the planet. The CSRD led to the creation of the European Sustainability Reporting Standards (ESRS), a new set of reporting standards for European and multinational companies operating in the EU market.??

A Framework for Disability Inclusion??

The CSRD takes a comprehensive approach to reporting on people and planet with a particular focus on the workforce. The inclusion of people with disabilities is directly mentioned several times in the ESRS. The standards require companies to articulate workplace policies, assess the value chain, and report commitments for inclusion of persons with disabilities.?

Double Materiality?

In preparation for reporting, companies must conduct a double materiality assessment (DMA) to determine whether disability is a material sustainability topic. Double materiality requires?companies to assess both financial and impact materiality.??

Financial materiality focuses on understanding how sustainability issues affect a company’s financial performance. Financial materiality, on the other hand, relates to the potential financial impact of disability-related risks and/or opportunities on the company. In general, these are the types of financial metrics that investors look for to understand financial outcomes – such as shareholder returns, productivity, compliance, workforce development and retention, and consumer sentiment. ?This double materiality framework highlights the significance of Europe’s 101 million people with disabilities and their societal and financial impact.?

Impact materiality examines how a company’s operations affect society and the environment. It measures?a company’s influence on people with disabilities within its operations and across its value chain.?In general,?it captures the?types of social impact metrics that individual consumers, prospective employees, and members of civil society look for to understand values alignment – such as benchmark scores, policy commitments, and incident reports.??

It is essential to note that new compulsory accessibility regulations go into effect in June 2025?alongside the European Accessibility Act (EAA), which will affect materiality of disability topics in the?offering of?products and services in the EU market. The European Accessibility Act?presents a new dimension of risk by imposing associated with inaccessible products and services in the EU. Starting in June 2025, products and services manufactured, distributed, imported and offered in the EU must be accessible to people with disabilities. This creates both financial and impact risks and opportunities for businesses operating in the EU.??

[ID: Green background with a blue banner up top reading Defining Double Materiality for Disability. Below is a green and blue venn diagram. The blue section on the right reads Impact Materiality: Potential positive or negative impact on people with disabilities in the company's own operations and/or in the upstream (consumer or downstream (supplier) value chain. The green section on the left reads Financial Materiality: People with disabilities could reasonably be expected to trigger financial effects on the company if the group generates risks or opportunities that could have a material influence on the company's financial performance. The center light green portion reads Double Materiality: impact on & impact of 101m people with disabilities in Europe.]

Disability Disclosures in the European Sustainability Reporting Standards (ESRS)???

If?disability is?deemed?to be?a material sustainability topic, companies must report against nine standards that enhance workplace inclusivity and make demonstrable progress towards an equitable work environment.???

• S1-1?– Policies related to own workforce?

• S1-2?– Processes for engaging with own workforce?

• S1-11?– Social protection against loss of income?

• S1-12?– Persons with disabilities (quantitative disclosures)?

• S1-17?– Incidents, complaints, and severe human rights impact?

• S2-2?– Processes for engaging with value chain workers about impacts

• S4-2?– Processes for engaging with consumers and end users about impacts?

• S4-5?– Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities

Scope and Timeline for Compliance?

The CSRD’s scope is broad, covering large EU companies, subsidiaries of non-EU companies, listed small and medium enterprises (SMEs), and non-EU companies with significant EU operations. The timeline for reporting is as follows:?

• 2024: Large companies already covered under the Non-Financial Reporting Directive (NFRD) must begin reporting for the 2024 financial year.?

• 2025: Large companies that were not previously covered by the NFRD are required to start reporting.?

• 2026: Reporting obligations expand to include listed SMEs, as well as other entities that meet certain size and operational criteria.?

• 2028: Non-EU Companies with a significant EU presence are required to comply, specifically those generating substantial revenue within the EU market.

Penalties for Non-Compliance?

To ensure adherence, the CSRD allows each EU member state to define penalties for non-compliance, which may include fines, public statements of non-compliance, or restrictions on business activities within the EU. These penalties underscore the EU’s commitment to enforcing this directive and ensuring transparency in corporate sustainability. For example, France’s penalties for non-compliance include up to EUR 75,000 and the additional threat of up to five years in prison for directors of in-scope entities.??

Impact and Implications?

By promoting standardized and comprehensive ESG reporting, the CSRD is set to reshape corporate sustainability across the EU and make waves globally. It will affect some 50,000 companies, including multinationals operating in or generating significant revenue in the European Union. The CSRD is a landmark piece of legislation that will strengthen sustainability reporting, increase transparency, accountability, and inclusivity at every level of business from supply chain to management. With this directive, companies around the world will be required to disclose and account for the employment of people with disabilities.??

Resources?

For more information on the Corporate Sustainability Reporting Directive (CSRD), the European Sustainability Reporting Directive (ESRS), the Corporate Sustainability Reporting Due Diligence Directive (CSDDD), the European Accessibility Act (EAA), and how they specifically impact people with disabilities, read Disability:IN’s report in partnership with White & Case -?Disability Inclusion in the EU: A Legal Analysis to Guide Corporate Responsibilities Under New EU Disability Inclusive Legislation.?

Looking to find out more on how disability has been mentioned in current sustainability reporting throughout the European Union? Read Disability:IN’s analysis of sustainability reporting practices in the European Fortune 500 –?On the Verge: Disability and Sustainability Reporting.

Transparency is key in creating an equitable workplace and our partner organization Windō is helping drive this change forward. Check out their?Disability Transparency Tiles of 2024, as they evaluated public data from over 600 of the largest U.S. and European companies, focusing on workforce and leadership representation, pay equity, and other indicators of inclusion.??

You can explore these resources, along with dozens of others, through Disability:IN's Research and Policy program.

Author & Research Contributor: Jacob Wilson | Research & Policy Analyst at Disability:IN

About Disability:IN

Disability:IN is a global organization driving disability inclusion and equality in business. More than 500 corporations trust Disability:IN to activate and achieve disability inclusion across their enterprise and in the broader corporate mainstream. Through the world’s most comprehensive disability inclusion benchmarking; best-in-class conferences and programs; and expert counsel and engagement, Disability:IN works with leading businesses to create long-term business and societal impact. Join us at?disabilityin.org/AreYouIN?#AreYouIN

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