CSRD compliance driving business value

In Europe, the EU Corporate Sustainability Reporting Directive (CSRD) is a game-changer in how businesses need to report sustainability data. The CSRD raises the status of sustainability reporting, requiring it to be on par with financial reporting, meaning that it will be scrutinised for its accuracy, reliability, and origin (transparency). Auditors will audit sustainability reports in a similar way to financial reports, making it crucial to trust the data you report.

Scope and Applicability

The CSRD applies to all large companies and all companies listed on EU-regulated markets, except micro-enterprises. A company is considered large if it meets at least two of the following criteria:

• More than 250 employees

• A net turnover exceeding €40 million

• Total assets over €20 million

Implementation timeline

The CSRD implementation is structured in phases:

• January 1, 2024: Reporting begins for large public-interest entities with over 500 employees, with reports due in 2025.

• January 1, 2025: Other large companies must start reporting, with disclosures due in 2026.

• January 1, 2026: Listed small and medium-sized enterprises (SMEs) are required to begin reporting, with reports due in 2027.

The impacts of the CSRD extend beyond the companies directly covered by the directive. Businesses within the supply chains of these companies will also face pressure to provide high-quality sustainability data if they want to continue doing business and to meet the reporting requirements. This ripple effect ensures that the Directive's influence reaches a broader network, really changing the way that we think about sustainability data, transparency and accountability.

Risks of non-compliance

Non-compliance with the CSRD introduces a range of risks for companies. Legally, failure to adhere to the directive can result in fines and sanctions imposed by national authorities, potentially leading to costly financial penalties.
Beyond legal repercussions, non-compliance can severely damage a company’s reputation among consumers, investors, and other stakeholders, undermining trust and market position. Operationally, it can lead to heightened scrutiny from regulators and disrupted business processes.

Moreover, the CSRD elevates sustainability reporting to a strategic priority within organisations, moving the conversation into the boardroom. Senior management and boards are now required to ensure accurate and transparent reporting (as they are with financial reporting), embedding sustainability into core decision-making.
This shift emphasises accountability at C-suite level, and highlighting the business relevance of good quality, transparent sustainability data.

Business advantages of high-quality sustainability data

The global green technology and sustainability market is experiencing rapid growth, reflecting the increasing importance of sustainable business practices. Worth billions of USD, the market expects a sustained growth, exhibiting a compound annual growth rate (CAGR) above 20% according to analysts from Forbes.
The importance of this market underscores the role of sustainability in modern business strategies. Accurate data enables informed decision-making that aligns with sustainability goals and regulatory requirements. By collecting and analysing quality sustainability data, businesses can set realistic, science-based targets and reduce the risk of greenwashing.
Data can often have dual purpose in both supporting sustainability and also identifying inefficiencies that can lead to significant cost savings and improved resource management.

This means that the incorporation of sustainability into core business strategies is not only a regulatory obligation but also increasingly a driver of innovation and long-term profitability. Companies that proactively adapt to sustainability standards and integrate them strategically into their operations are likely to thrive in the transitioning economy.
A strong commitment to sustainability also enhances a company's reputation among consumers, investors, employees and other stakeholders, providing a competitive edge in the market. At the basis of this is sustainability data management that supports trustworthy and transparent reporting.

References

• Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting. Link

• European Commission. "Corporate Sustainability Reporting." Link

• GRESB. "What Defines Data Quality in Sustainable Business Practices?" Link

• Forbes. "18 Reasons Why Sustainability Can Be a Strategic Business Advantage." Link

• Grant Thornton. "CSRD Reporting: What You Need to Know." Link

• CoreFiling. "CSRD Timeline." Link

• PwC. "Sustainability Data: From Reporting to Value Creation." Link

• European Parliament. "Green claims directive proposal". Link

• Fortune Business Insights. "Green Technology and Sustainability Market Size." Link