Exploring the impact of CSRD so far
04 Sep 2024
In this blog we explore the current CSRD landscape and the key actions and learnings to date
Introduced in January last year by the European Union (EU), the CSRD is aimed at standardising EU sustainability reporting, setting new standards aimed at driving greater transparency and encouraging organisations to be more sustainability-focused on a global scale. It’s been a month since all 27 EU Member States and three EEA countries were required to transpose the Corporate Sustainability Reporting Directive (CSRD) into national law.
But four weeks on from Member States being required to incorporate the legislation, industry insight, including this dedicated CSRD Transposition Tracker, has revealed that just nine EU Member States and two out of the three EEA countries have adopted the directive into their national legislative policies.
Where the CSRD has been implemented to date:*
EU Member States
- Denmark.
- Finland.
- France.
- Hungary.
- Ireland.
- Lithuania.
- Romania.
- Slovakia.
- Sweden.
EEA countries
- Liechtenstein.
- Norway.
However, this means six EU Member States (Austria, Belgium, Germany, Greece, Malta and Portugal) and one EEA country, Iceland, are yet to take notable action. And while the first CSRD-compliant reports are not required to start being submitted until next year, adopting the directive into national law invariably takes considerable effort, time and resources.
Is there still time for these countries to take action given the fact the end of this year is rapidly approaching? What potential barriers could they be facing? And what lessons can be learnt from those who are leading the way?
Catherine Beare, Intertek Regional Director for Business Assurance UKI & Iberia comments:
“Overall, we’ve seen varying levels of change happening in terms of where countries are in relation to transposing the law, with some making significantly more progress than others. Some have gone ahead and led the way by adopting the directive, many have been consulting on it and exploring how it fits alongside their existing legislation, and others have left it to the last minute, which is to be expected,” she explains.
“Interestingly, of all the countries, Germany is yet to fully embrace the CSRD. Presumably, this is because it has been focusing on its current national policies; identifying if there are any crossovers with the CSRD and ensuring absolute alignment.”
Leading the way
Of all the current adopters, one country in particular, France, has stood out for leaving the CSRD starting blocks faster than other countries. It was the first EU Member State to adopt the directive into French law, which it officially published in December last year.
“France has undoubtedly been ahead of the race to get the CSRD transposed locally, which isn’t surprising given their strong CSR regulatory framework and environmental reporting activity to date,” explains Catherine.
“As a country, France has a strong tradition of CSR and stringent reporting requirements. But what’s worth noting here, is how the French regulatory authorities haven’t held back in relation to leveraging their power to compel companies to rectify their reporting practices.
Ensuring compliance
While specific penalties are determined at a national level, the EU encourages Member States to ensure effective, proportionate and dissuasive penalties for non-compliance. This means that while the exact nature of penalties may vary from country-to-country, they are intended to be substantial enough to enforce compliance.
France has set the CSRD tone for the Member States that are yet to follow in its footsteps by introducing a raft of hefty penalties for non-compliance. This includes companies being fined €3,750 for not publishing sustainability reports or for disseminating partial or erroneous information. Companies can also be fined up to €75,000 and company directors imprisoned for up to five years for non-compliance.
“France has made it very clear that it doesn’t intend to play games with companies that attempt to spin a positive sustainability narrative,” adds Catherine.
How companies are embracing the CSRD
Shifting from a country to an organisational perspective, there are numerous examples of sector-wide companies that have taken the CSRD and expertly weaved it into their reporting activities. This includes one of our clients, Arla Foods.
Arla Foods: Shining a light on immaterial and material elements
Showcased in We Mean Business Coalition’s Early Adopters CSRD Report, Arla Foods has used illustrations within its 2023 Annual Report to not just clearly show readers where material elements can be found, but also highlight immaterial elements. In addition, the report delves that bit deeper by sharing details of the compliance status and quality of each material element. (View the full report: https://tinyurl.com/3zxe7un8)
AkzoNobel: Illustrating their full business lifecycle
Meanwhile, AkzoNobel produced an alternative Double Materiality Assessment (DMA) outcome assessment in its 2023 Annual Report that methodically maps out the cycle of their business by upstream, own operations performance and downstream:
BW Offshore: Demonstrating a clear thought process
Finally, BW Offshore’s 2023 Annual Report features an overview of all omitted ESRS disclosure requirements with explanations for omitting each requirement, which demonstrates a clear and considered thought process. (View the full report, visit: https://tinyurl.com/mryvauth)
Key learnings from progress to date
“Countries and companies that have been waiting to do something to embrace the CSRD, need to stop waiting and take action because they are only delaying the inevitable. There are already countless examples of organisations that have taken the initiative and embarked on their own CSRD journeys; some more rapidly than others,” adds Catherine.
In addition to triggering a seismic shift towards greater transparency, consistency and accountability within sustainability reporting practices, the CSRD is generating a wealth of widespread benefits that include:
Benefit #1: Enhanced investor confidence & more informed decision-making
Investors have access to more reliable and comparable ESG data, enabling them to make more informed investment decisions. At the same time, investors are increasingly considering sustainability performance as a critical factor in their investment choices, fuelling a shift towards sustainable investments
Benefit #2: Standardised reporting = improved sustainability benchmarking
The CSRD is underpinned by a set of standardised reporting frameworks, making it easier to compare company and sector-wide sustainability reports. This standardised approach also enables better sustainability performance benchmarking to take place and for companies to identify and adopt best practice solutions with ease.
Benefit #3: More consistent reporting practices & greater recognition
By implementing the CSRD, the EU has levelled the reporting standards playing field, reducing competitive disadvantages for companies that are proactively striving to turn their sustainability vision into reality. The CSRD is recognised as the global benchmark for all future sustainability reporting, with those who successfully adopt it helping encourage other companies outside the EU to follow suit.
Benefit #4: More accurate and reliable sustainability data reporting
The directive’s requirement for the audit and assurance of sustainability reports has increased the demand for services in this area, ensuring the accuracy and reliability of data that is shared and reported.
MORE INFORMATION
For more information about the CSRD and the implications for organisations, visit our dedicated Corporate Sustainability Reporting Directive Resource Hub, which includes a wealth of webinars and podcasts with our experts, FAQs, factsheets and more.
