• The Corporate Sustainability Reporting Directive (CSRD) is an EU regulation aimed at enhancing transparency and formalizing sustainability reporting for companies.
• Requirements of the CSRD include publishing regular reports on environmental and social impact activities throughout a company’s operations.
• Non-compliance with the directive will result in sanctions and/or financial penalties for the company, underscoring the need for early preparation and a solid CSRD tech or partner.

At a time when the EU is rapidly formalizing sustainability requirements for companies, the Corporate Sustainability Reporting Directive (CSRD) marks a significant reporting milestone. In this guide, we dive into the details of the CSRD, best practices for compliance, and the attributes to look for in a CSRD solution or partner. Learn more about CSRD requirements, reporting, and compliance in this guide.

What is the CSRD?

“Smart, resilient business has a good (data-driven) handle on its performance and impact. Identifying and tackling environmental & social impacts will get you ahead — and drive revenue.” — Katelyn Thacker, Chief of Staff at BanQu.

The Corporate Sustainability Reporting Directive (CSRD) is an EU regulation aimed at enhancing transparency in sustainability reporting among companies. It extends the non-financial reporting requirements (NFRD), ensuring businesses disclose even more detailed environmental and social impact information. The directive affects a broad spectrum of EU and non-EU entities, from large public-interest companies to listed companies, with the goal of increasing accountability and sustainability integration into corporate strategies.

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Who is Affected?

All large EU companies and large companies operating in the EU are required to comply. Meaning, they must disclose yearly risks and opportunities they find in their operations that impact both people and planet.

Implementation Timeline

The CSRD will be implemented in phases from 2024, starting with companies already subject to the Non-Financial Reporting Directive (NFRD), followed by other large companies in 2025, and listed SMEs by 2026.

Here is a quick snapshot of the companies affected and their respective implementation timelines:
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EU companies already subject to NFRD

• EU companies with 500+ employees
• 2024 financial year reporting in 2025

All EU companies that meet updated requirements

• Total assets exceed 25M Euros and/or
• Annual revenue exceed 50M Euros and/or
• 250+ Employees
• 2025 financial year reporting in 2026

Small & medium sized listed on an EU-regulated exchange

• List to be released
• 2026 financial year reporting in 2027

Non-EU entities operating in the EU that meet requirements

• Annual EU revenue over 150M Euros in two most recent years OR one of two criteria met:
  • An EU subsidiary meets the updated requirements from row 2
  • EU branch with 40M+ in revenue
  • 2028 financial year reporting in 2029

CSRD vs. NFRD

At a glance, the CSRD brings a broader scope, more detailed reporting requirements, and mandatory assurance when compared to its predecessor (NFRD). Unlike the NFRD, CSRD also mandates the use of European Sustainability Reporting Standards (ESRS).

Here’s a high-level overview of CSRD vs. NFRD requirements:

NFRD Reporting Requirements

• Environmental protection
• Corporate social responsibility and treatment of employees
• Respect for human rights
• Anti-corruption & bribery
• Diversity of company boards:some text
  • Age
  • Gender
  • Educational & Professional Background
• Reporting format: not set

CSRD Reporting Requirements

NFRD requirements PLUS:

• Double materiality: both societal and environmental impacts
• Long-term ESG objectives & policies
• Supply chain due diligence
• Social, human, and intellectual capital (“intangibles”)
• Mandatory external assurance
• Report in line with Sustainable Finance Disclosure Regulation (SFDR) & EU Taxonomy Regulation
• Reporting format: European Single Electronic Format (“ESEF” / “XHTML”, uploaded to database

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CSRD vs. CSDDD

When considering CSRD vs. CSDDD (Corporate Sustainability Due Diligence Directive) - while there is some overlap - the latter focuses more on the due diligence process for identifying and preventing adverse sustainability impacts, whereas CSRD is about reporting those impacts. The CSRD and CSDDD are complementary regulations with some overlap.

Benefits and Risks of CSRD

Benefits to People & Planet

1. Enhanced Transparency. Transparency is at the heart of the CSRD, aiming to provide stakeholders with clear, detailed insights into a company's sustainability practices. This level of disclosure helps in assessing the true impact of corporate activities on environmental and social issues.
2. Accountability in Corporate Activities. CSRD ensures companies are not only responsible for reporting their sustainability practices but also accountable for their actions. This accountability pressures organizations to adopt more sustainable and ethical business models.
3. Better Risk Management. The CSRD encourages companies to proactively identify, assess, and manage sustainability-related risks. This foresight can lead to more resilient and adaptive business strategies.

Potential Risks to Companies

1. Increased Reporting Complexity. The detailed and comprehensive reporting requirements set forth by the CSRD introduce a layer of complexity to corporate reporting processes. Especially when compared to its predecessor NFRD. Companies must navigate these intricacies to ensure accurate and compliant reporting.
2. Potential for Non-compliance Penalties. Failure to comply with the CSRD's stringent reporting requirements can lead to penalties, including fines and reputational damage. The risk of non-compliance underscores the need for meticulous attention to the directive's requirements.

By understanding these benefits and risks, companies can better navigate the complexities of CSRD compliance, leveraging the advantages while mitigating the challenges. Integrating sustainable practices into corporate strategies not only aligns with global sustainability goals but also positions companies favorably in the eyes of investors, consumers, and regulators.

Achieving CSRD Compliance: Best Practices

“This is not a one-time exercise that you have to get straight away. Rather, it demands a strategic approach. Demonstrate you have a plan and take incremental steps to improve areas that are not sufficiently addressed…” — Magdalena Krzysztofik, Sr. Consultant at Steward Redqueen 

Compliance with the CSRD demands a structured approach and a deep understanding of its requirements and implications for your business. Here are refined best practices for achieving CSRD compliance:

1. Understand the Requirements

Begin by delving into the specifics of the CSRD, which significantly expands the scope of reporting beyond the NFRD it replaces. The CSRD introduces detailed reporting requirements that cover environmental impact, social responsibility, and governance practices. Companies are encouraged to consult the official EU finance page on corporate sustainability reporting for comprehensive guidelines and - as applicable - their in-house legal team.

2. Integrate Sustainability into Core Strategy

Sustainability should be more than a checkbox exercise; it requires integration into your company's DNA to be more than just for show. This involves gaining full visibility into your business model, operations, and supply chain to ensure they align with sustainable - and business - development goals. Embedding sustainability considerations into strategic decision-making not only aids compliance but also drives innovation and long-term value creation for your business.

3. Develop a Reliable Data Management System

Accurate and verifiable data is the cornerstone of CSRD compliance. Implementing a comprehensive data management system ensures the integrity and transparency of your sustainability reporting. This system should facilitate the capture, storage, and analysis of data related to environmental impact and social initiatives. Consider leveraging technology solutions, such as BanQu's blockchain software, for secure and immutable record-keeping.

4. Stakeholder & Supplier Engagement

Regular interaction with stakeholders—including employees, customers, investors, and the wider community— as well as suppliers— is crucial. These engagements offer valuable feedback on your sustainability initiatives and reporting, providing insights into areas for improvement and helping to build trust and transparency. Stakeholder feedback can also guide the development of more relevant and impactful sustainability strategies.

5. Continuous Improvement

Sustainability reporting under the CSRD is not a one-time activity but a continuous journey toward improvement. Establish a process for regularly reviewing and updating your sustainability practices and reporting methods. This should include a mechanism for incorporating stakeholder feedback, monitoring regulatory updates, and integrating emerging sustainability trends into your reporting. Continuous improvement not only ensures compliance with current standards but also prepares your company for future sustainability challenges and opportunities.

By adopting these best practices, companies can navigate the complexities of CSRD compliance more effectively, ensuring their reporting is not only compliant but also meaningful and impactful.

CSRD Data Capture & Reporting Best Practices with BanQu

“In a world riddled with greenwashing, the CSRD offers an unmatched opportunity for companies. Businesses can make a choice to continue the status quo, or to get ahead by getting a handle on their supply chain data to grow their business while proving sustainability claims. So you want to enable transparency & traceability in a way that’s authentic and auditable? BanQu can help.” — Ashish Gadnis, CEO & Co-founder

BanQu's innovative platform addresses the core challenges of CSRD compliance by leveraging advanced technologies and a user-centric approach to capture the data needed for compliance and simplifying the data to streamline reporting. Here’s a quick look at how BanQu supports each critical area of CSRD compliance:

1. Reliable Data Capture

Importance for CSRD: For CSRD compliance, capturing accurate sustainability data is crucial. It forms the foundation for transparent reporting and ensures that the information disclosed reflects the company's actual environmental and social impact. The CSRD emphasizes the need for reliability and accuracy in reported data, making robust data capture systems essential.

How BanQu Helps: BanQu employs blockchain technology to enhance the accuracy and security of data capture throughout your operations and supply chain. So you can capture the social, environmental, and compliance data needed for CSRD. You can also rest assured that your data is safe and compliant with data laws (e.g., GDPR and SSA16) thanks to blockchain's inherent security characteristics. The decentralization, immutability, and transparency of blockchain data capture ensures that once data is recorded, it cannot be altered or tampered with. This provides a verifiable and trustworthy record of a company's sustainability activities, directly aligning with the CSRD's requirements for accurate and reliable data.

2. Simplified Reporting

Importance for CSRD: The CSRD mandates comprehensive reporting on sustainability matters, which quickly feel complex, overwhelming, and resource-intensive. Simplifying this process is key to ensuring that companies can comply efficiently without being overwhelmed by the administrative burden.

How BanQu Helps: BanQu simplifies the reporting process by offering an intuitive platform that integrates seamlessly with your existing corporate systems. This platform automates the collection and aggregation of sustainability data, aligning it with CSRD reporting standards. By streamlining data management and reporting processes, BanQu enables companies to focus on their sustainability goals rather than the intricacies of compliance, ensuring that their reports meet the latest standards and requirements with less effort.

3. Stakeholder Engagement

Importance for CSRD: Engaging with stakeholders is a fundamental aspect of CSRD compliance. Transparent communication about sustainability practices and impacts fosters trust and accountability — key elements that the CSRD aims to strengthen across the corporate landscape.

How BanQu Helps: BanQu's platform facilitates transparent communication and data sharing with stakeholders, including investors, customers, and regulatory bodies. By providing our clients with access to real-time, verifiable sustainability data, BanQu enhances trust and accountability between companies and their stakeholders. This level of transparency is critical for meeting CSRD requirements and building stronger stakeholder relationships.

4. Scalability

Importance for CSRD: The ability to scale sustainability practices and reporting is essential as a company grows and regulations evolve. The CSRD applies to a broad range of companies, and its requirements will likely expand over time. Scalability ensures that companies can adapt to these changes and continue to comply with the directive.

How BanQu Helps: BanQu's solutions are designed to be scalable, accommodating companies of various sizes and across sectors. Whether a business is just beginning its sustainability journey or looking to enhance its existing practices, BanQu's platform can adapt to its specific needs. This adaptability ensures that as a company's sustainability efforts can start small, then grow and evolve its ability to capture and report data in compliance with the CSRD without compromising quality.

By addressing these key areas, BanQu not only aids companies in meeting the current requirements of the CSRD but also prepares them for future sustainability challenges. The platform's focus on accurate data capture, simplified reporting, stakeholder engagement, and scalability makes it a powerful tool for companies committed to achieving and maintaining CSRD compliance.

Simplify and scale your CSRD reporting, while growing your business, with BanQu.

Adopting sustainable practices and transparent reporting is no longer optional but a strategic imperative. The CSRD presents both a challenge and an opportunity for companies to lead in sustainability. With BanQu, navigating the complexities of CSRD compliance becomes more manageable, enabling companies to not only meet regulatory requirements but also optimize their supply chains while contributing to positive change for people and planet. Schedule a consult with BanQu today to streamline your sustainability reporting and embrace a sustainable future more confidently.

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