CSRD – The rubber hits the road!

What are the standards in place in Europe?

• 12 European Sustainability Reporting Standards
  • ESRS 1, 2 Cross cutting standards
  • ESRS EI-E5 Environmental standards
  • ESRS S1-S4 social standards
  • ESRS G1 Governance standards
• These are all set out in law which means they’ll be harder to change.
• The ultimate arbiter is the European Court of Justice.

The international context to the development of sustainability standards:

• Europe has taken the lead.
• They’ll be mandatory from the end of 2024.
• There are several jurisdictions looking at adding IFRS but it’s anticipated that these won’t be brought into law like ESRS has in the EU.
• SEC was introduced in the US in March 2024 to apply by the end of 2025.
• There is some work happening in the background to develop standards internationally.

What’s happening right now?

• Wave 1: There are companies that have an NFRD reporting obligation in 2024 for their end-of-year reporting.
• They’ve known they’ve had to do this since January 2024.
• The EU intent is for full reporting from early 2025.

What will reporting look like?

• There have been various forms of early adoption.
• IAASA have seen anything up to 80 pages of sustainability disclosures among early adopters.
• There’s a lot of text, description of compliance, charts, and tables.
• Identification of material items, and identification of stakeholders.
• Double materiality assessment appears to be challenging and there appear to be widespread approaches.

What are the problems identified?

• There are lots of problems already, from the type of reporting framework to technical questions around how the legislation is being implemented.
• CSRD needs to be implemented individually by each jurisdiction within the EU.
• Organisations are advised to get their own legal advice to know if they’re in scope or not of CSRD.
• As the legislation is put in place across each jurisdiction, more questions will arise.

What will happen in 2025?

• Wave 2: Includes all large companies as defined in company law for the year end 31 December 2025.
• They’ll need to start recording all relevant data from 1 January 2025.
• There are exemptions for some companies, subsidiaries of EU companies who report, and subsidiaries of non-EU companies who report in an equivalent manner (tbd).
• What is critical for companies to know is what is going to hit them and when.

What does the C-suite need to do now?

• If you’re in wave 1, you’re already recording relevant material data points.
• If you’re in wave 1, this will take your auditor longer so you need to decide a reasonable and sensible reporting deadline.
• You’ll be devising text and graphics to communicate the required information.
• If you’re in wave 2: 
  • You’ll need to ensure whether you’re in or out of scope i.e. do you have an exemption?
  • You’ll need to commence your double materiality assessment straight away, this is critical as it will determine what data points you’ll need to record.
  • You need to be talking with your auditor now.

The SME sector

• Currently, there’s no intent for mandatory reporting (outside of SME listed)
• Voluntary standards for SME’s is being developed but large companies are being asked to provide information from their value chain. This will be on a phased basis.
• If you’re an SME and you’re dealing with a large company in your value chain, you should start reaching out to find out their plans for reporting.

Looking beyond 2025

• Various exemptions and scope out of standards will unwind.
• There are proposals for sector-specific standards: oil and gas, mining, road transport, textiles/accessories/footwear/jewellery (to tackle fast fashion).
• Move to reasonable assurance by 2028 which is the equivalent to your corporate reporting.

Key takeaways

• If you’re in wave 2, if you haven’t started, start NOW.
• Talk to your auditor/legal advisors to check if you’re in scope.
• Complete stakeholder identification and double materiality assessment to assess what standards apply.
• Identify data requirements for 1 January 2025 and put in place a system to record, report and manage.
• Start thinking about what your corporate report will look like for the year-end 31 December 2025.

• ESRS – The big picture: Get an overview of the ESRS standards and how they fit into the broader context of sustainability reporting.
• Preparing for 2025: Learn what’s happening now, what changes are coming in 2025, and the critical steps your organisation should take immediately.
• Beyond 2025: Discover what the future holds beyond the initial CSRD compliance deadline and how to stay ahead of the curve.
• Practical guidance: Find out who you should be engaging with now, what questions to ask, and where to find the answers.

Kevin Prendergast is Chief Executive of the Irish Auditing and Accounting Supervisory Authority (IAASA). He is Vice Chair of  IFIAR, the International Forum for Independent Audit Regulators, and also a member of the Consultative Group of the Committee of European Audit Oversight Bodies (CEAOB).  Kevin joined IAASA in 2016 from his role as Head of Enforcement with the Office of the Director of Corporate Enforcement. There he had overall responsibility for the office’s white collar crime investigations, as well as its compliance and director education mandate. Kevin worked in the Large Cases Division of the Irish Revenue Commissioners and also has several years’ experience in the private sector including a number of years working in an audit firm. Kevin is a Fellow of Chartered Accountants Ireland. As well as a holding a Bachelor’s Degree and a Masters in Accounting from University College Dublin, he also holds an MSc in Executive Leadership from the University of Ulster.