This article provides an overview of some of the most essential elements of CSRD/ESRS, which many companies will encounter either through direct legislation or as part of a value chain.
What is CSRD?
The Corporate Sustainability Reporting Directive (CSRD) is the EU's new directive on sustainability reporting, replacing the EU's Non-financial Reporting Directive (NFRD). The directive was adopted by the Danish Parliament in early 2024. Therefore, as a business, you need to address this directive, as you or parts of your value chain are likely to be affected within the next few years.
Who is covered by CSRD?
There will be a gradual expansion of which companies are covered:
- 2024: Class D companies
- 2025: Large Class C companies
- 2026: Small and medium-sized publicly listed companies
What is ESRS?
The European Sustainability Reporting Standards (ESRS) are the reporting standards that companies subject to CSRD must follow. ESRS covers general points on environmental and climate issues (E), social matters (S), and governance (G).
Double Materiality Analysis
Your company’s reporting must be based on what is known as a double materiality analysis (DMA). The "double" in DMA involves assessing both the sustainable impact (ESG) and the financial impact on the company, and vice versa. This involves:
- Identifying significant ESG and financial issues, which can be done through shareholder and stakeholder engagement or desk research.
- Assessing significant impacts, risks, and opportunities.
- Documenting the process.
What elements must you report on?
Based on your DMA, you should assess which topics in the ESRS are relevant and necessary for you to report on. Note! If you have identified issues not included in the ESRS, you must also report on these.
Below you can see the different topics covered in the ESRS:
Many are unsure where to start. ESRS 2, E1, S1, and G1 are a good place, as they are more tangible and often significant. Afterward, you can move on to other topics and assess their relevance to your business.
In addition to the four main topics, ESRS is divided into subtopics and sub-subtopics. You can get an overview of them here: https://codegaia.io/en/esrs-full-list-of-sustainability-matters/
How can Valified help with reporting?
Valified makes it easy for companies in various industries to report by conducting materiality analyses at the industry level. We have developed Baselines, which provide a qualified recommendation of what companies in your industry should report on according to ESRS. This means you don’t have to dive into complex legal texts or understand extensive data points – we’ve done the groundwork for you. Your task is simply to report, follow up, and communicate your efforts. We also offer policy templates so you can quickly get started with your sustainability work. Policies, goals, and strategies create direction and momentum, as numbers alone are rarely sufficient.
CSRD requires each company to conduct its own materiality analysis. Our solution is particularly aimed at SMEs, where, in collaboration with industry associations, banks, or insurance companies, we conduct materiality analyses across the industry. This significantly reduces the workload for the company, but it’s important to emphasize that using Valified’s platform is not a guarantee that the individual company fully meets CSRD requirements or reports correctly according to ESRS. It is always the company’s responsibility to ensure compliance with CSRD and to report on the significant points in ESRS.
Interested in using Valified? You can read more about our subscription types here or create a company profile directly at Valified.com.
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