The Corporate Sustainability Reporting Directive (CSRD) arises from the European Green Deal’s climate change action objectives, to further enhance the disclosure by companies on climate and environmental data.
CSRD scope and timeline
Ireland and other member states have until mid-2024 to transpose the directive, with a view to mandatory requirements commencing for financial years on or after:
- 1 January 2024 for companies and public interest entities in scope of EU non-financial reporting rules (greater than 500 employees)
- 1 January 2025 for other larger companies and public interest entities (greater than 250 employees)
- 1 January 2026 for listed SMEs, with an ‘opt out’ possible until 2028
Companies in scope will be required to report on a double materiality basis. This means that companies will have to disclose not only the risks they face from a changing climate and other ESG matters, but also the impacts they themselves may have on climate and society. Companies will also have to provide information on their value chain. To assist companies with the transition to the new requirements, for the first three years of reporting, where information on the value chain is not available, they may elect to explain their inability to obtain the information.
Government supports
While smaller companies are not directly within the scope of the directive, they may need to provide information to larger companies in due course if they are part of the value chain. To begin preparations for this, businesses are encouraged to avail of government supports such as the Green Transition Fund and to use the Climate Toolkit 4 Business. The toolkit allows businesses to see their environmental impact based on information at hand and create a plan to improve it. A discussion with their accountants or auditors and large companies that they work with will also be helpful to their preparations.
Information you need to provide
CSRD introduces mandatory reporting standards developed by EFRAG (European Financial Reporting Advisory Group). There are 12 draft standards in total, and they are detailed and comprehensive – 2 cross-cutting standards and 5 on the environment, 4 on social matters and 1 on governance.
EFRAG will also develop sectoral specific standards over the coming years, with 40 different sectors due to get their own standard. EFRAG will prioritise those that have the greatest impact on people and the environment in their first phase of development. EFRAG are in the development phase for a standard that will be used to guide listed SME’s sustainability reporting. Voluntary standards will also be developed for non-listed SME’s.
What you can do now:
- assess whether you are in scope of the directive, either directly or as part of the value chain
- determine your company’s existing position on sustainability reporting by assessing and analysing your reporting processes, internal controls and governance
- if you’re within scope and due to report in 2024, discuss the directive and mandatory reporting standards with your auditor, accountant or business adviser
- sign up to the Department of Enterprise, Trade and Employment’s mailing list by emailing csrd@enterprise.gov.ie to stay up to date with developments on the transposition of the directive
- if you think you may be captured by the value chain of a large company you work with, start the conversation with them and your business adviser now to find out what this means and what information you might be asked to supply
- assess your ability to capture the data required, as a company in scope or as a business within the value chain of a large company