The Corporate Sustainability Reporting Directive (CSRD) is an EU legislation that requires organizations to publish regular reports on their environmental, social and governance (ESG) performance. It replaces the Non-Financial Reporting Directive (NFRD), which has recently been dubbed as inadequate as it omits the financial relevance of ESG issues. The CSRD – which will enter into force starting 1st January 2024 – is a part of the European Green Deal, which aims to make Europe climate-neutral by 2050 and to promote sustainable growth.
The primary objective of CSRD is to enhance the comparability, relevance, and reliability of disclosed sustainability data. Aiming to create a culture of transparency about the impact of companies’ activities on society and the environment, the directive often brings about questions: What does it mean for my business? Do I have to report on completely new KPIs that I have not measured before? Do I have to design new and transform existing internal processes aimed at collecting, reporting, monitoring and steering on sustainability data? And if so, how do I make sure my organization has the right governance structure in place?
Multiple opportunities and implications arise from the CSRD:
1. Double materiality assessment as a strategic compass
The first essential step towards understanding the impact of CSRD and the road to compliance, is a double materiality assessment. It determines the topics your organization needs to report on, and provides value beyond compliance: it functions as a strategic compass and facilitates defining and accomplishing strategic sustainability objectives, as well as improvements in ESG areas of importance to stakeholders. This way, it enables organizations to identify and extract the potential of opportunities and risks within ESG areas, which can then be leveraged to communicate outward.
2. Reduced cost of capital
CSRD empowers investors, stakeholders, and policy makers with comprehensive and accurate information on an organization's sustainability situation and related opportunities and risks. A well-set-up sustainability report could directly reduce an organizations' cost of capital as the perceived risk for investors is lowered due to transparency in sustainability opportunities and risks. Organizations with well thought-out sustainability strategies can even use the sustainability report as an instrument for cheaper financing.
3. Non-compliance penalties
Organizations found to be non-compliant with the CSRD will face administrative sanctions with a triad of possible penalties: a public statement about the breach, an order on the name of the entity requiring changing the conduct, or fines, cease and desist orders and “naming and shaming” by the respective regulator.
BearingPoint CSRD Readiness Assessment
We support our clients in making CSRD-reporting work for their organizations. Part of the CSRD reporting drives organizations to report new KPIs that have yet to be measured. They must design new and transform existing internal processes to collect, report, monitor, and steer on sustainability data. Our approach to CSRD reporting is built on extensive sustainability and reporting experience and is strengthened by our people, digital, data and technology capabilities. We can support you from a zero-starting point.
We employ a plug-and-play 3-step solution to effectively trail and test the readiness of your organization to report for the CSRD. Our workshop-based program takes 4 to 12 weeks, depending on the chosen modules and can run from a zero starting point and be initiated overnight.
