General information
1. Why CSRD?
The CSRD is the new European Union directive concerning corporate sustainability reporting. The objective of the CSRD is to broaden the scope of application of the former NFRD and to harmonize the communication of extra-financial information by companies at European level.
This approach aims to increase the availability and quality of data disseminated to the public. This ensures better transparency as to how companies take environmental, social and governance issues into account.
2. What is the link between CSRD and the European Green Deal?
The main objective of the European Green Deal is to achieve total carbon neutrality by 2050 for the European continent. To achieve this, it is essential to promote corporate transparency on sustainability-related issues. In particular, better transparency makes it easier to direct investments towards sustainable initiatives.
It is in this context that the CSRD comes into play. As part of the European Green Deal, CSRD is one of the tools that will profoundly transform CSR reporting from 2024.
Knowing the scope of application of the CSRD
3. What changes between the NFRD and the CSRD reporting?
The CSRD will replace the NFRD as early as 2024! Here are the main changes:
- Expanded scope of application: while the NFRD only concerned large companies with more than 500 employees, many more companies are affected by the reporting provided for by the CSRD (see below)
- More accurate and more complete information is expected with the CSRD.
- The introduction and advent of the concept of double materiality in the CSRD.
4. Is my company subject to the CSRD?
The CSRD concerns companies that meet at least 2 of the following 3 criteria:
- 250 employees
- 25 million euros in balance sheet
- 50 million euros in turnover.
But also the following structures:
- Small and medium-sized enterprises (SMEs) listed on the stock exchange (excluding micro-enterprises with less than 10 employees);
- Non-European companies with an annual turnover of more than 150 million euros, on the EU market. This also applies to the subsidiaries of these groups, which will have to communicate about the CSR approach of their parent company.
The CSRD will gradually cover nearly 50,000 businesses in Europe!
Knowing the reporting timetable and the planned reductions
5. When will my company have to share its sustainability report?
The CSRD was published in the Official Journal of the European Union on 16 December 2022. It has been gradually implemented since January 1, 2024.
A deferred implementation period is planned depending on the size and type of your company.
Please note: your reporting is based on the exercise of your activities last year. For example, if you have to report in 2025, you will have to refer to your fiscal year 2024. And so on...
Here is a summary table of years during which you will have to produce and report your reports according to the size and type of your company.
Basing your reporting on the 12 ESRS and the 82 DR
6. What are the ESRS?
The ESRS (European Sustainability Reporting Standards) are the CSRD indicators.
These are the new European sustainability reporting standards developed by EFRAG and included in the delegated act of the European Commission.
They will make it possible to harmonize, supervise and make more transparent the extra-financial publications of companies within the framework of the CSRD.
The ESRS are based on the 3 CSR pillars: Environmental, Social and Governance and are divided into 12 themes.
7. What are the pillars of ESRS reporting?
The ESRS are based on the 3 traditional pillars of CSR: Environmental, Social and Governance (ESG) criteria. 12 themes are covered by the ESRS standards:
2 general criteria:
ESRS 1 General Requirement
ESRS 2 General Information “General disclosures”
5 criteria related to the environmental component :
ESRS E1 Climate Change
ESRS E2 Pollution
ESRS E3 Marine and Water Resources
ESRS E4 Biodiversity and Ecosystems
ESRS E5 Resource Use and Circular Economy
4 criteria related to the social component :
ESRS S1 Own workers
ESRS S2 Employees of the value chain
ESRS S3 Affected communities
ESRS S4 Consumer and end-users
1 criterion related to governance :
ESRS G1 Business Conduct
8. What are the “Disclosure Requirements” and what are the 82 DR?
For each ESRS there are a number of disclosure requirements. These are the various points that will have to be communicated in your company's reporting.
In all, there are 82 DRs, some are quantitative, others qualitative.
It is not mandatory to report on all of these 82 DRs. It is the double materiality analysis that you will carry out that will determine which DRs you will have to report on.
You can find on this table all 12 ESRS as well as 82 detailed DR.
You will also find on this table the nearly 1200 data points that are requested as part of the reporting. These are the data points that should be presented for each DR, in each ESRS. It can be narrative, semi-narrative, or even monetary data. Some are voluntary. Everything is specified in the table.
9. Does my company have to report on all ESRS?
The majority of the ESRS criteria of the European commission delegated act are not mandatory but they will be subject to a double materiality assessment.
In the delegated act finally adopted by the European Commission on 31 July 2023:
- Only the general information “General Disclosures, ESRS E2” is mandatory as part of the reporting.
- For the rest of the ESRS, the double materiality assessment carried out by the company will determine the themes that will have to be taken into account and therefore what will be published as part of the reporting. It is therefore up to the company to specify, following its materiality analysis, what it considers appropriate to publish.
- Please note: for the ESRS E1 devoted to climate change, it is up to the company to prove that the climate subject does not concern it if it chooses not to report on this question.
Even if it is not mandatory to report on all ESRS and DR, you will not be able to avoid the double materiality assessment!
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10. When do I have to report on the various DRs? What phasing-in relief is planned?
The delegated act published by the Commission allows for the gradual implementation of standards. Indeed, to facilitate compliance with the ESRS, there are exceptions for the reporting of some Disclosure Requirements. The objective is to lighten the burden on companies, to be more flexible and to facilitate reporting by leaving more time for companies, especially smaller ones, to comply.
For example:
- For the ESRS E1 on climate change, companies with less than 750 employees can omit all data on scope 3 emissions and total GHG emissions in the first year.
- For the first year of reporting, companies can omit all information relating to the anticipated financial effects for environmental topics. In the first 3 years, companies can only report on qualitative information by omitting quantitative information.
- Small businesses (those with fewer than 750 employees) will benefit from a grace period for the gradual introduction of certain thematic standards.
These reliefs are listed and detailed comprehensively in our ESRS checklist table (last column)
Report on climate criteria: the ESRS E1 - Climate change
11. What are the 9 DR of ESRS E1 climate change?
Below is the detailed list of the 9 DRs of ESRS E1:
- DR n° 1: Transition plan for climate change mitigation.
You can build and manage your climate action plan via our dedicated platform.
- DR no. 2: Policies related to climate change mitigation and adaptation
- DR no. 3: Actions and resources related to policies implemented in connection with climate change.
- DR no. 4: Objectives related to climate change mitigation and adaptation.
- DR no. 5: Energy consumption and energy mix.
- DR no. 6: Gross GHG emissions from scopes 1, 2, 3 and total GHGs
- DR no. 7: GHG removals and financed GHG mitigation projects thanks to carbon credits.
- DR no. 8: Internal carbon pricing
- DR no. 9: Anticipated financial effects of physical and transition risks and potential climate-related opportunities.
12. Does my company have to report to ESRS E1?
The European Commission did not consider that reporting to this ESRS was mandatory for companies. However, it believes, unlike other ESRS, that it is up to the company to prove that the climate issue does not concern it if it makes the choice not to report on this topic! For this ESRS, the burden of proof is reversed.
Even if ESRS E1 is not considered mandatory in theory, in fact, it is difficult to find an economic activity that does not lead to greenhouse gas emissions!
13. Does my company have to carry out its carbon footprint?
Carrying out the carbon footprint constitutes DR No. 6 of ESRS E1 climate change.
In theory, a company may not have to carry out its carbon footprint if it can prove that its activity does not have an impact on climate change. In practice, there are almost no companies that do not have an impact on the climate.
Therefore, in fact, it will be mandatory for almost all companies to carry out their carbon footprint in order to meet the ESRS E1 standard and more generally to be in compliance with the CSRD directive.
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Carry out your double materiality assessment
The double materiality assessment is the starting point of CSRD. Let's go through the questions around this concept!
14. What is double materiality assessment? What is the difference between simple and double materiality?
The CSRD is based on the analysis of double materiality: companies must report both on the impact of society and the environment on the financial performance of their company but also on the impact of their activities on society and the environment.
The concept of double materiality corresponds to the analysis of two types of materiality: financial materiality and impact (or extra-financial) materiality.
- Financial materiality or simple materiality corresponds to the “Outside-In” vision: this materiality only takes into account the positive impacts (opportunities) and negative (risks) generated by the economic, social and natural environment on the development, performance and results of the company. This first dimension therefore concerns financial aspects: income, profits, cash flow, etc.
- Impact materiality or socio-environmental extra-financial materiality corresponds to the “Inside-Out” vision. This materiality takes into account the negative or positive impacts of the company on its economic, social and natural environment and therefore includes environmental, social and governance (ESG) impacts.
The concept of double materiality highlights that the two dimensions, financial and impact, are interdependent and must be taken into account jointly in the overall assessment of a company's performance. Companies must therefore report both on the impact of society and the environment on the financial performance of their company but also on the impact of their activities on society and the environment!
15. How do I do my double materiality assessment?
To carry out an effective and useful double materiality assessment, several essential steps should be followed:
- Identify and involve stakeholders. This requires dialogue with stakeholders directly or indirectly impacted by the company's activities in order to gather information to know the impact of these activities.
- Identify relevant ESRS in connection with the company. This means determining which topics should be considered based on their relevance and importance. The ESRS developed by EFRAG are sustainability topics that can be included in its double materiality assessment. For example: climate change, air pollution, water pollution, biodiversity, etc.
- Collect and centralize the data collected. Taking into account the severity of the impact is a key element in the analysis of double materiality.
- Create your double materiality matrix. To visually represent the results of your double materiality assessment, you can use a materiality matrix that will allow you to prioritize and visualize the importance of the various topics.
- Take action using the double materiality assessment to guide its business strategy and actions.
16. Is double-materiality analysis mandatory? What sanctions are there if I don't do it?
Double materiality assessment is truly the starting point of CSRD and as such it is not possible to derogate from it! The double materiality analysis may be the subject of an external audit.
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17. Simple or double materiality? What are the differences of vision between the ISSB and the EFRAG?
Diverging views persist at the international level as to what type of materiality should be taken into account. The Anglo-Saxon vision of the ISSB (The International Sustainability Standards Board or International Sustainability Standards Board) created in 2021 by the IFRS (International Financial Reporting Standards) is opposed to EFRAG's European vision as to the type of materiality to be taken into account.
- The ISSB organization affirms that carrying out a simple materiality analysis is sufficient. They have recently developed a set of international reporting standards (IFRS S1 and IFRS S2) that do not take into account the measurement of the company's environmental impacts.
- EFRAG considers that the analysis of simple financial materiality is insufficient and that it is necessary to apply the concept of double materiality, that is, materiality that is both financial and impact.
Formalize your sustainability report
18. What form should your sustainability report take to comply with the requirements of the CSRD directive?
The directive requires companies to include the sustainability report in their management report.
Companies will need to digitally tag the information reported according to the taxonomy system under development (digital categorization system).
This will make it possible to feed directly into the European business information platform, the ESAP (European Single Access Point).
The report must be reported in accordance with ESRS and contain all relevant environmental, social and governance information revealed by the double materiality assessment.
Sustainability report audit and sanctions
19. Will the sustainability report be audited?
Yes, as this sustainability report is an integral part of the management report, it is expected that it will be audited.
20. What form will the compliance audit take?
Several points will be checked during the audit:
- Compliance of the sustainability report with the requirements of the CSRD and the ESRS.
- Compliance with sustainability information tagging requirements.
- Compliance with the reporting requirements referred to in art. 8 of the Taxonomy Regulation.
21. What sanctions are there in case of incorrect application of the CSRD?
Penalties for infringements are defined by each Member State.
For example, in France, in the transposition ordinance published in the Official Journal on 7 December 2023, the following sanctions are indicated:
- Non-publication of the report or publication of partial or erroneous information: 3,750 euros fine
- No audit: fine of 30,000 euros and 2 years in prison
- Obstructing auditors' verifications or controls: 75,000 euros fine and 5 years in prison
Juggling with other existing standards
22. Are the ESRS criteria compatible with the ISSB criteria?
The answer is yes! In concrete terms, this means that if your sustainability reporting complies with the ESRS criteria, you also meet the international criteria of the ISSB (International Sustainability Standards Board).
EFRAG has also published a mapping table to comply with the international ISSB standards that you can find it here.
23. What is the link with the ISO 26000 standard?
Please note, just because your reporting complies with the ISO 26000 standard does not mean that it will meet the new European ESRS reporting standards!
Your current reporting will have to be adjusted to take into account the ESRS criteria and to comply with the CSRD directive.
However, during the development of the ESRS, the ISO 26,000 standard was studied and partly reintegrated into the ESRS, in particular on the climate impact part, which should make your task a bit easier.
To go further
24. What are useful articles and links on the subject?
If you want to understand everything at ESRS, we have created a new document: the ESRS checklist! The table shows all the standards, the associated indicators, the qualitative and quantitative information that is expected as well as the implementation schedule: CSRD: ESRS checklist
And here's some other content that's particularly useful:
- Double materiality analysis: the basis of the CSRD
- ESRS standards: understanding everything about the new European reporting criteria
- Everything about the CSRD: extra-financial reporting obligations
- Focus ESRS E1 Climate Change
- ESRS application guide for French companies, Accounting Standards Authority, December 2023
- The table of expected datapoints for each ESRS
- First version of the ESRS adapted to SMEs not concerned by the CSRD, EFRAG, November 2023
- Implementation guidance for materiality assessment, EFRAG, November 2023
25. Who are the people to follow?
To make sure you don't miss any of the next news, we advise you to follow these various people who are specialists in the subject:
- Pauline Roulleau
- Pascal Durand
- Abrial Gilbert
- Chiara Del Prete
- Elsa Boniface
- Bertrand Desmier
- Jules Pigassou
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