The Corporate Sustainability Reporting Directive (CSRD) is a crucial piece of European legislation that requires companies to disclose their sustainability efforts according to standardised definitions. By ensuring transparency in reporting, CSRD allows investors to assess and compare companies’ performance on key Environmental, Social, and Governance (ESG) criteria.
As part of our commitment to sustainability, Slimstock is preparing to meet CSRD compliance by 2025. In this article series, we aim to explain the directive and share our journey toward becoming fully compliant.
CSRD: What It Is and Why It Matters
The journey towards CSRD compliance begins with a landmark global agreement: the Paris Agreement. Signed in 2016, it brought nearly every country on earth together with a shared goal: to limit global warming to well below 2 degrees Celsius, ideally aiming for 1.5 degrees. To achieve this, greenhouse gas emissions must be significantly reduced, with a target of a 50% reduction by 2030 and net-zero emissions by 2050.
Building on this momentum, in 2020 the European Commission introduced the European Green Deal—a comprehensive set of measures designed to make the EU climate neutral by 2050. CSRD is one of the initiatives within this framework, ensuring that businesses disclose a broad array of sustainability metrics.
While the directive certainly includes environmental reporting, it goes much further, incorporating social and governance aspects as well. The main objective is to provide investors with the data needed to consider ESG factors when evaluating companies, enabling more informed decision-making and supporting the transition to a sustainable economy.
Who Needs to Comply with CSRD?
The CSRD applies to various categories of companies. The main criteria are:
- Large Companies: These must meet at least two of the following three criteria:
- More than 250 employees
- Annual turnover exceeding €50 million
- Total assets over €25 million
- Publicly Listed Companies: Firms listed on EU-regulated markets are subject to CSRD. However, small companies with fewer than 10 employees or a turnover below €700,000 are excluded.
- Non-EU Companies: Non-EU businesses with substantial operations in the EU, including a net turnover of €150 million within the EU and at least one EU subsidiary or branch, will also be required to comply.
- Small and Medium-Sized Enterprises (SMEs): While SMEs listed on EU-regulated markets are subject to CSRD, they will face less stringent reporting requirements and a delayed deadline.
CSRD Compliance Timeline
The timeline for compliance varies based on company size and listing status:
- Large, Listed Companies: These must start producing CSRD-compliant reports covering the 2024 financial year, which will be due in 2025.
- Large, Unlisted Companies: These will follow a year later, with reports covering the 2025 financial year due in 2026.
- Mid-market Companies and Non-EU Firms: In 2026, publicly traded mid-market companies and non-EU businesses with significant EU operations must comply.
To help ease the transition, the first few years will have more relaxed reporting requirements. However, from 2028, all companies must comply with the full scope of the directive, with no phased-in provisions.
What You Need to Do Now
Start now—the sooner you begin preparing for CSRD compliance, the smoother the process will be. The first step is to determine which reporting group your company falls into and understand the specific requirements and deadlines.
Key considerations include:
- Incorporating sustainability reporting into your financial statement: The sustainability report will need to be approved alongside your financial accounts, so it’s essential to integrate these two processes.
- Planning ahead: Start preparing for your first report well in advance. Ideally, begin gathering data before the financial year it will cover.
In the next part of this article series, we will outline practical steps to help you get started on your first CSRD report, providing guidance on what to focus on and how to structure your reporting approach.
By embracing CSRD and preparing early, you ensure that your business is not only compliant but also well-positioned to take advantage of the growing emphasis on ESG factors in investment decisions.
