Is CSRD required for my company?

Is CSRD required for my company? If you’re in a corporate role connected to ESG, you might want to ask yourself this question. 

CSRD – or the corporate sustainability reporting directive – is a major addition to the European Union rulebook, aimed at improving sustainability reporting across the bloc and even beyond. 

Passed in 2023, it’s now up to businesses to figure out whether the new rules apply to them and, if so, what they need to do for total compliance.

CSRD is a directive by the European Union designed to standardise how European companies report on sustainability-related information. 

CSRD requires companies to disclose detailed information on operating and managing social and environmental challenges. This includes reporting on sustainability risks and opportunities, the impact of the company’s operations on the environment, human rights, and diversity, among other ESG criteria.

As a directive, countries will transpose the principles and desired outcomes into their own national laws, which companies will have to follow.

CSRD applies to large European companies, various European SMEs and companies outside the EU that do enough business inside the bloc. 

All will eventually be bound to follow the EU’s rules on sustainability reporting. 

There are precise definitions for what makes a company fall into each category above, and if yours is one such company, the rules apply to you.

To be exempt from CSRD, your company can’t fall into any of the three categories below. All are designed to catch most large or high-growth organisations and deliberately exclude small businesses which might not have the personnel or resources to comply with reporting requirements. 

The three categories are:

• “Large companies” – your business is in this category if it meets two of the three criteria below:

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

• SMEs – your business is in this category if it meets two of the three criteria below:

• • • More than 50 employees
    • A turnover exceeding €8 million
    • Total assets exceeding €4 million

• Non-EU companies – your business is in this category if it is headquartered elsewhere but has a net turnover of €150 million inside the EU. 

If none of the above applies to you, you’re exempt.

If your company is not exempt from CSRD, it is essential to start preparing for compliance. This involves gathering and reporting data on your company’s environmental and social impacts. 

The best way to this is a two-pronged approach:

• Ensure you get the right training
• Establish robust internal processes so you can capture the right information, process it, and display it in ways that make sense.

You will bring serious risk to your organisation, with penalties up to and including monetary fines, exclusion from public contracts and reputational damage. 

The exact ramifications will depend on the country because CSRD is a directive, not a law. 

Directives only set goals, and member states are responsible for enacting the laws and penalties to achieve them. So, the precise headaches you’re going to face for non-compliance will differ from one place to the next. That said, the above three penalties are common and expected.