A. Introduction and extended scope of the CSRD
The Corporate Sustainability Reporting Directive (CSRD) ushers in an era of greater transparency for European companies and those operating within the EU, by significantly extending sustainability reporting obligations. With the CSRD, the EU aims to harmonise sustainability reporting practices, providing stakeholders with detailed and reliable information on the environmental and social impacts of companies.
This directive replaces the previous Non-Financial Reporting Directive (NFRD) and lowers the application thresholds. It now applies to companies with more than 250 employees that exceed at least one of the following criteria:
- 25 million euros balance sheet
- or €50 million in sales.
This change also includes listed SMEs (with the exception of micro-enterprises with fewer than 10 employees) and non-European entities generating more than €150 million in sales in the EU, including reporting obligations for subsidiaries of international groups on their parent company's CSR approach. These thresholds are very low and therefore apply to more and more companies.
B. Challenges and opportunities for ETIs
The directive represents both a challenge and an opportunity for mid-sized companies, which now fall within the scope of the CSRD.
On the one hand, the requirement to comply with stricter and more detailed reporting criteria necessitates upgrading internal systems for collecting and managing sustainability data, as well as potential investment in team training and external sustainability audits. On the other hand, alignment with CSRD standards offers TSEs a chance to reassess and improve their business and sustainability practices, enhance their reputation in the marketplace, and attract investment through increased transparency.
SMIs can use the CSRD framework as a lever to further integrate sustainability into their business strategy, identify potential savings through resource optimisation and uncover opportunities for green innovation. The ability to communicate openly about sustainability practices can also improve relations with employees, customers, suppliers and business partners, who increasingly value ESG criteria in their decisions.
Preparing ETIs for the era of CSRD
Adapting to the CSRD is a necessary step for SMIs, which must now prepare to meet more demanding reporting requirements. This transition, although demanding, is a crucial step towards a deeper integration of sustainability at the heart of business practices. To succeed, TSEs need to consider strategic approaches to sustainability reporting, including investment in advanced data systems, ongoing team training, and the development of transparent and authentic communication about their sustainability commitments and performance. By anticipating these changes, SMIs can not only comply with new regulations but also position themselves advantageously in a business landscape that is increasingly focused on sustainability.
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