It’s part of a broader regulatory effort which steers decisively towards a more sustainable future: the CSRD is intended to facilitate transparency and help stakeholders assess investment risks associated with climate change and other sustainability issues. The new CSRD legislation and the European Sustainability Reporting Standards will affect around 50,000 EU companies. It’s set to be a central topic for everyone in the coming years, not just CFOs and sustainability managers.
One of its pillars is the concept of ‘double materiality’. This means that companies will now have to report on how their business is financially impacted by climate change (financial materiality), in addition to identifying their impact on people and the environment (impact materiality). Moreover, the CSRD recognises the importance of a long-term outlook: companies must now set long-term ESG targets and baselines and show consistent progress toward meeting these goals. The actual emissions being measured and reported are now broader in scope, too, and reporting must include value chain emissions, commonly known as scope 3.
While all this represents a greater reporting burden, the shift is a crucial step forwards for safeguarding biodiversity and human rights. The CSRD means companies are now bound by law to disclose their impacts transparently and consistently, reducing the risk of greenwashing. This is a great chance to show a company’s positive steps toward addressing its impact on the environment – improving investor confidence and aligning with other stakeholders’ expectations around clear, objective reporting – and creating a positive, sustainable future.