Understanding the Corporate Sustainability Reporting Directive (CSRD)

Understanding the Corporate Sustainability Reporting Directive (CSRD)

The Corporate Sustainability Reporting Directive (CSRD) marks a significant milestone in the European Union's initiative to enhance and standardize sustainability reporting across companies. This directive replaces the Non-Financial Reporting Directive (NFRD) and introduces more stringent and comprehensive requirements. The goal of the CSRD is to provide stakeholders, including investors, customers, and employees, with reliable and comparable information on companies' environmental, social, and governance (ESG) performance.

Key Features of the CSRD

Expanded Scope and Standardized Framework The CSRD extends the scope of reporting and establishes a standardized framework developed by the European Financial Reporting Advisory Group (EFRAG). This framework includes detailed sustainability reporting standards that cover a broad range of topics:

  • Environmental protection
  • Social responsibility
  • Employee treatment
  • Human rights
  • Anti-corruption and bribery
  • Board diversity

The directive emphasizes the "double materiality" perspective, which requires companies to disclose how sustainability issues affect their business and how their operations impact society and the environment.

Enhanced Transparency and Accountability The CSRD mandates that sustainability data be integrated into management reports and be processed digitally to ensure accessibility and comparability. Additionally, this information must be verified by an independent auditor or certifier to enhance the credibility and reliability of the reported data.

Who is Affected by the CSRD?

The CSRD applies to a broader range of companies compared to the NFRD. It includes all large companies and those listed on EU-regulated markets, excluding listed micro-enterprises. A large company is defined as meeting at least two of the following criteria:

  • More than 250 employees
  • Net turnover exceeding €40 million
  • Total assets over €20 million

Approximately 50,000 companies will be subject to the CSRD, a significant increase from the 11,700 under the NFRD.

Implementation Timeline

The CSRD rollout is structured to give companies adequate time to prepare for the new requirements:

  • 2024: Companies currently subject to the NFRD will transition to CSRD requirements, with reports covering 2024 to be published in 2025.
  • 2025: Large companies newly covered by CSRD will begin reporting for the 2025 financial year, with first reports published in 2026.
  • 2026: Listed SMEs, small and non-complex credit institutions, and insurance undertakings will start reporting for the 2026 financial year, with reports published in 2027.
  • 2028: Non-European companies with significant EU turnover and at least one subsidiary or branch in the EU will start reporting for the 2028 financial year, with reports published in 2029.

Preparing for CSRD Reporting in 2025

With the CSRD poised to transform corporate transparency in Europe, companies must act swiftly and strategically to meet the new reporting requirements. Here are key steps to prepare:

Implement Advanced Data Management Systems A robust data management system is crucial for handling the extensive data required by the CSRD. Companies should invest in advanced ESG reporting platforms that can collect, store, and analyze large volumes of data, ensuring efficient data flow across departments and value chains.

Ensure Real-Time Data Collection To comply with CSRD, companies need to capture data in real-time or near-real-time. This requires deploying IoT sensors and smart devices to monitor sustainability metrics like energy consumption, emissions, and waste management. Real-time data collection ensures accurate and timely reporting.

Utilize Big Data Analytics Big data analytics can provide valuable insights into a company’s sustainability performance. By analyzing large datasets, companies can identify trends, predict outcomes, and uncover inefficiencies. Advanced analytics tools facilitate better decision-making and more accurate reporting.

Integrate AI and Machine Learning AI and machine learning can automate many aspects of sustainability reporting, reducing manual effort. These technologies can help in data collection, processing, and analysis, ensuring higher accuracy and reliability.

TCS Intelligent Urban Exchange? for Sustainability

TCS Intelligent Urban Exchange? for sustainability is a cutting-edge tool designed to simplify and streamline sustainability reporting, aligning seamlessly with CSRD regulations. It offers robust solutions for both seasoned organizations and newcomers to sustainability reporting.

For Established Systems:

  • Automation: Connects with existing tools to automate CSRD reporting, reducing manual efforts.
  • Data Collection: Conducts automated assessments to gather data from stakeholders.
  • Data Governance: Ensures rigorous data governance with maker-checker functionality.
  • Auditability: Provides built-in audit reports for transparency and traceability.
  • Versatile Reporting: Generates reports in various formats, including PDF and Word.
  • XBRL Support: Facilitates digital filing of reports as required by regulators.

For Newcomers:

  • Automated Metrics Calculation: Calculates sustainability metrics using existing activity data.
  • Integrated Reporting: Automatically populates sustainability metrics into CSRD reports.
  • Stakeholder Data Capture: Efficiently captures data from various stakeholders.
  • Digitized Governance: Ensures robust data governance with digitized processes.
  • Regulatory Flexibility: Adapts to evolving regulatory environments.
  • Built-in Traceability: Enhances transparency and accountability.

By choosing TCS Intelligent Urban Exchange? for sustainability, organizations can ensure compliance with CSRD requirements and enhance their overall sustainability reporting process. Embrace this solution to navigate the complexities of CSRD reporting with ease and confidence.

About Tata Consultancy Services

Tata Consultancy Services is an IT services, consulting and business solutions organization that has been partnering with many of the world’s largest businesses in their transformation journeys for over 56 years. Its consulting-led, cognitive powered, portfolio of business, technology and engineering services and solutions is delivered through its unique Location Independent Agile? delivery model, recognized as a benchmark of excellence in software development. A part of the Tata group, India's largest multinational business group, TCS has over 601,000 of the world’s best-trained consultants in 55 countries. The company generated consolidated revenues of US $29 billion in the fiscal year ended March 31, 2024, and is listed on the BSE and the NSE in India. TCS' proactive stance on climate change and award-winning work with communities across the world have earned it a place in leading sustainability indices such as the MSCI Global Sustainability Index and the FTSE4Good Emerging Index.

Learn More:

Visit the TCS Intelligent Urban Exchange? page on https://www.tcs.com

Email us to request a demo or more information: [email protected]

About the Author:

Douglas Tinning is the Director of Product Marketing for the TCS Intelligent Urban Exchange? solution suite at Tata Consultancy Services.? In over 20 years of experience Douglas has held number of technical and sales roles at a number of tech companies ranging from startups to Fortune 50 organizations.

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