CSRD: It’s not a deadline, it’s a revolution -
A practical guide

The rationale for the rule 

One of the issues with NFRD was that the sustainability data that the companies were publishing was non-standardised, non-comparable and of varied quality, hindering decisions by investors and other stakeholders.  

As a result, CSRD was adopted to improve the publication of sustainability data and to incorporate the concept of “impact”, i.e. viewing sustainability issues from the perspective of the impact of the company’s operations on people and planet, rather than only from the perspective of risk to the company’s operations. It is part of the European Green Deal, which consists of a set of proposals and regulations to reduce gas emissions by at least 55% by 2030, preserve nature and align investments with more sustainable economic growth that leaves no one behind.

Following the adoption of CSRD, the European Financial Reporting Advisory Group (EFRAG) is the body responsible for working on cross-cutting and sectoral standards (the European Sustainability Reporting Standards), the first set of which was adopted in June 2023. 

Scope expansion

The CSRD applies to a much larger number of companies than the NFRD. While NFRD was applicable to around 11,000 companies, it has been estimated that CSRD will impact around 50,000 companies. This number includes all companies listed in the EU market exchanges, large non-listed companies in the EU, and companies listed outside of the European jurisdiction but with significant operations or subsidiaries in the EU. To put this number in perspective, the total number of listed companies in the world is around 60,000.

The scope of reporting is also wider. While NFRD required non-financial data to be reported but with a certain degree of flexibility, CSRD is prescriptive as to how the data needs to be captured, presented and shared (through the European Single Access Point). The data points that may need to be reported can amount to over 1000 data points depending on what is material for the company. In addition, the sustainability data reported needs third-party verification (limited assurance). 

What this means for your reports

In practice, this means that content and information that was previously included in the sustainability report needs to now be included in the annual report or management report, as it is often called in continental Europe. As a result the annual report’s content needs to be re-organised and reshaped to include the mandatory pieces of information and the narrative accompanying them. Finally, to report on certain data points, companies need to have tracked them for the previous year. 

This raises several questions, for instance: 

• If sustainability data is now part of the annual report, is there a need for a sustainability report or should be there be one consolidated, integrated report? 
• If all sustainability information now is part of the annual report, how do we engage on sustainability issues with other stakeholders who do not read the report? 
• What happens to the rest of the reports? How do we future-proof the entire reporting suite? 
• And finally, how can website content and campaigns be used to communicate the sustainability stories that can’t be conveyed through data points?

Where to start

If all of this seems daunting, here are a few tips: 

• If in doubt, contact your legal team to check when and if your company needs to comply with CSRD
• Set up an internal working group to identify data gaps
• Conduct a materiality assessment, to understand which topics you need to report on
• Ensure that the materiality assessment is a “double” materiality assessment, which includes the lens of impact, not just risk 
• Conduct a CSRD gap analysis 
• Shape your reporting suite strategy 
• Undertake a stakeholder needs analysis 
• Revisit your engagement and communication strategies with your stakeholders

CSRD inevitably poses a challenge to companies as to how to organise their content, however it is also a huge opportunity to refresh it and reshape engagement with stakeholders. Although it is a challenge to balance data and narrative, CSRD is also an opportunity to think beyond reporting and re-evaluate the reporting suite and think creatively. The CSRD report can go beyond compliance and become a powerful tool for stakeholder engagement, reputation building, and positive impact. At the same time, stakeholder engagement can potentially move to more interactive and engaging channels.  

If you wish to discuss CSRD or other aspects of reporting, please get in touch enquiries@blacksun-global.com

About Black Sun

Black Sun is a global group of strategic advisors, consultants and stakeholder engagement specialists. We believe that brands and businesses can have a big impact on our society  – they can shape more ethical practices, build more inclusive communities and deliver more sustainable performance. Ultimately, they can spark positive change in the world.

We partner with visionary companies to define and communicate their purpose, strategy and culture and bring to life their value creation story. Our services and solutions directly address the business-critical concerns of today;  best-practice disclosure and accountability through reporting;  protecting reputation and building trust with digital communications and helping businesses to effectively communicate their long-term responsibility and sustainability story.