The scope of the reporting requirements under the Corporate Sustainability Reporting Directive (CSRD)

The scope of the reporting requirements under the Corporate Sustainability Reporting Directive (CSRD) encompasses various aspects of sustainability reporting. The CSRD extends reporting obligations to a wide range of organizations, including large public-interest entities (PIEs) and certain smaller companies. Here’s an overview of the scope of the reporting requirements:

  1. Entities Covered: The CSRD applies to large PIEs incorporated in the European Union. It also includes certain smaller companies, but this depends on whether they meet specific criteria. The CSRD aims to ensure that organizations with a significant impact on society and the environment report on their sustainability performance.

  2. Sustainability Information: Organizations covered by the CSRD must report on a broad range of sustainability-related information, including environmental, social, and governance (ESG) factors. This includes aspects such as environmental impact, social practices, diversity, and governance structures related to sustainability.

  3. Integrated Reporting: The CSRD promotes integrated reporting, which means that sustainability information should be integrated into the organization’s annual report rather than presented separately. This integration aims to provide a holistic view of the organization’s financial and sustainability performance.

  4. External Assurance: Starting from the financial year 2024, organizations are required to obtain external (limited) assurance on their sustainability information from independent auditors. This helps ensure the credibility and reliability of the reported sustainability data.

  5. EU Taxonomy: The CSRD includes specific reporting requirements related to the EU Taxonomy Regulation. Organizations must disclose their alignment with the EU Taxonomy for environmentally sustainable economic activities.

  6. Forward-looking Information: The CSRD mandates reporting on forward-looking information, including key performance indicators (KPIs) and sustainability objectives. This provides stakeholders with insights into the organization’s future sustainability goals.

  7. Sector-specific Standards: Depending on the sector in which an organization operates, there may be sector-specific reporting requirements or standards that need to be followed.

  8. Double Materiality Assessment: Organizations are required to assess and report on both the financial and sustainability impacts of their activities. This includes considering how sustainability issues affect financial performance and vice versa.

In summary, the CSRD expands the scope of sustainability reporting by requiring a wide range of organizations, especially large PIEs, to report on various sustainability-related aspects. This reporting includes environmental, social, and governance factors and aims to provide stakeholders with a comprehensive view of an organization’s sustainability performance. The CSRD also introduces external assurance and aligns with the EU Taxonomy Regulation to enhance the credibility and transparency of sustainability reporting in the European Union.

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