The Race to Sustainability - Elevation needed?
The key pillar of the effort to protect the environment from harm is the obligatory sustainability reporting of companies operating in the Union. The Corporate Sustainability Reporting Directive (CSRD) and the EU Taxonomy are the elements driving this effort and are here to make sustainability and green financing tangible for everyone.
Companies must act now!
75% of the companies are not well-prepared for mandatory ESG reporting!
While the first deadlines for large companies to report according to the CSRD, including the EU Taxonomy, are approaching extremely fast (1st mandatory CSRD report for 2024), KPMG revealed in a recent study that 75% of companies are still in the early stages of their ESG reporting efforts. These companies will face difficulties in performing the necessary pre-steps, setting up ESG strategies and collecting the enormous amount of audit-ready ESG data as demanded by the CSRD and ESRS if they don’t start now.
Update on the CSRD and the EU Taxonomy
The sustainability data to be reported is expanding since two key regulatory pillars of the Green Deal were adopted last year (2023) and now pave the way to a sustainable future. These two regulations are the European Sustainability Reporting Standard (ESRS) – the key ESG framework under the CSRD - enacted on July 31st, 2023, and the four remaining environmental objectives of the EU Taxonomy which were adopted on November 21st, 2023. In the following, we will examine the general information on the ESRS and the EU Taxonomy.
The core of the ESRS – Adoption of the sector-agnostic standards
The adoption of the ESRS, including the first set of sector-agnostic disclosure requirements, marks a decisive accomplishment for the entire sustainability community. The ESRS, as a delegated act, comes into effect immediately and applies to the companies obliged to report according to the Corporate Sustainability Reporting Directive (CSRD) from reporting year 2024 onwards. According to the ESRS, reporting companies will have to disclose environmental, social, and governance (ESG) matters based on the possible and actual impacts of their own business activities on the environment and society and vice versa.
Sector-agnostic disclosures of the ESRS, applicable for all economic sectors, will in the future be expanded by sector-specific standards, designed specifically for every economic sector. The EFRAG (European Financial Reporting Advisory Group) is in the process of drafting these standards in close cooperation with the European Commission. Stay tuned for further updates. Furthermore, the European Commission has published guidelines on how to conduct the materiality assessment and the reporting of value chain activities, which will be the subject of one of the next blog posts. This additional supplementary information is much needed, since the ESRS contains an overall total of 1,178 data points, divided into 12 draft standards with 84 disclosure requirements, addressing over 37 sub-topics.
EU Taxonomy completed – Adoption of the remaining four environmental objectives
One of the cornerstones of the environmental disclosures prescribed by the ESRS are the requirements of the EU Taxonomy. The European Commission completed this regulation to drive green investments into sustainable economic activities by enacting the remaining four of the total six environmental objectives recently. Simultaneously, this recent regulatory development also improves the clarity on the reporting obligations of the ESRS. Further details on the dynamic and harmonization between the EU Taxonomy and the ESRS will be elaborated in one of the next blog episodes.
These two regulatory novelties in the realm of corporate sustainability reporting are the right step in the right direction to achieve our goals to attempt the saving of our planet.
ACT NOW
If companies act now and dedicate themselves to the implementation of the EU Taxonomy and the CSRD, a chance exists to achieve the obligatory objectives in time. We know that resources within companies are scarce for this undertaking and for this reason, we and our partners assist with our time- and cost-saving solutions.
Find out more about:
- The EU Taxonomy
- The CSRD/ESRS
Contact us (contact@viridad.eu) to learn more about how VIRIDAD has translated the data challenges of the EU Taxonomy and the CSRD into an agile implementation process.
Follow our blog in the upcoming weeks for more insights on the ESRS and its core elements.
