The EU’s Corporate Sustainability Reporting Directive (CSRD), which came into force in January 2023, will change the reporting requirements of hundreds of Finnish companies between 2024 and 2026, replacing the previous NFR Directive, that regulated sustainability reporting standards. The CSRD has a broader scope than the NFRD and aims to address the shortcomings of its predecessor. The aim of the new regulation is to make sustainability information more transparent and comparable. Sustainability information will be disclosed as part of the Board’s annual report, and verification will be mandatory.
The CSRD will be implemented in three phases. First, reporting will apply to companies that were covered by the NFR Directive. For these companies, data will be collected from 2024 onwards and reported in spring 2025. In the second phase, companies that meet at least two of the following criteria will be covered by the CSRD:
These companies will report their data for 2025 under the new Directive in Spring 2026. In the third and final phase, the Directive will apply to all listed companies. The first reporting year for listed SMEs will be 2027.
The NFRD stood for “non-financial” reporting. This definition was thought of as vague and untrue, because the sustainability actions of companies have started to have an ever growing impact on their finances as well.
The CSRD is essentially a ESG directive. The Directive sets out in great specificity the level of detail and the way in which companies should in future monitor and report on the impact of their activities on issues such as the environment, human resources, human rights and supply chains. The reporting also covers the impact of activities on society, key risks arising from activities, sustainability strategy and good governance.
The Sustainability Reporting Directive will be implemented in phases from 2024, but companies should start preparing well in advance. It is advisable to start by analysing the reporting systems already in place and carefully scheduling the future transition. The sustainability reporting data should be audited before publication, so the timeline is strict. The information gathered at the outset should be used to conduct a GAP analysis to determine who is responsible for reporting and how management is involved in the process. Above all, good planning is sound risk management.
Before the data is published, the company’s CFO or sustainability manager is responsible for collecting data on more than 450 different indicators. The reporting package includes HR issues, health and safety topics, and for example carbon footprint calculations and a plan to reduce the carbon footprint. Once the information is compiled, it is verified by an independent auditor.
At DGE, we have prepared for the demand for CSRD services with our partner denxpert. Denxpert provides an easy-to-use ESG and EHS reporting software for companies of all sizes. You can read more about the CSRD software developed by Denxpert at https://csrdsoftware.com/en/