The Corporate Sustainability Reporting Directive (CSRD)
What to expect as from 2025?
The Corporate Sustainability Reporting Directive (CSRD) is an important piece of legislation set to enhance sustainability reporting across the European Union. It aims to improve transparency and accountability in corporate sustainability practices, enabling stakeholders to make informed decisions. The CSRD expands the scope of the previous Non-Financial Reporting Directive (NFRD) by requiring more companies to disclose relevant environmental, social, and governance (ESG) information.
The CSRD is positioned as a crucial tool in the EU’s strategy to transition towards a more sustainable economy. By holding companies accountable for their sustainability practices, the directive not only promotes responsible corporate behavior but also encourages investors to make informed decisions based on a company’s long-term sustainability performance. As businesses adapt to these new reporting requirements, they will likely enhance their focus on sustainable practices, ultimately contributing to a greener and more equitable future.
“By 2026, the CSRD will apply to all listed small and medium-sized enterprises (SMEs)”
Timeline
The implementation timeline for the CSRD is structured to ensure a smooth transition for companies. In 2024, the directive will come into effect for large public-interest entities with over 500 employees, requiring them to report on their sustainability practices for the financial year 2023. Moving forward to 2025, the directive will extend its reach to large companies that meet two out of three criteria: a net turnover of over €40 million, total assets exceeding €20 million, or more than 250 employees. These companies will be required to publish their sustainability reports for the financial year 2024.
By 2026, the CSRD will apply to all listed small and medium-sized enterprises (SMEs), significantly broadening the range of businesses obligated to report on sustainability. This expansion aims to ensure that even smaller entities contribute to the EU’s sustainability goals. In 2027, the directive will also address the reporting requirements for non-EU companies with substantial operations within the EU market, further enhancing the global reach of sustainability reporting standards.
Finally, by 2028 and 2029, the CSRD will refine its guidelines and expectations based on the feedback and data collected during the initial years of implementation. This iterative process will help to solidify a robust framework for sustainability reporting, ensuring that it evolves in response to the changing landscape of corporate responsibility and stakeholder expectations. As businesses gear up for compliance, the CSRD stands to transform the landscape of corporate accountability in the EU, promoting a culture of sustainability that resonates across sectors and borders.
Sustainability reporting standards
In terms of its form, the CSRD mandates that companies prepare their sustainability reports in accordance with a set of European sustainability reporting standards, which are currently being developed. Companies will need to provide their sustainability data in a standardized digital format, which will undergo limited third-party assurance, involving an auditor's evaluation. This standardization will facilitate greater uniformity in reporting practices and improve the reliability of sustainability data.
Who is concerned in real estate?
Real estate owners and investors need to ensure their properties comply with CSRD standards, as they may be required to report under these regulations. This compliance is also vital to meet the expectations of tenants who have their own reporting obligations.
Properties that follow ESG principles are more likely to remain competitive and resilient in the market. Non-compliance could result in losing tenants who prioritize sustainability, which would negatively impact occupancy rates and rental income. Adhering to ESG principles through CSRD compliance not only enhances the reputation of real estate owners and investors but also builds trust with stakeholders, investors, and tenants by demonstrating transparency and accountability and engaging stakeholders effectively. This trust is crucial for long-term success.
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