CSRD: Mandatory Sustainability Reporting – Also for Manufacturing Companies
The Corporate Sustainability Reporting Directive (CSRD) is the successor to the Non-Financial Reporting Directive (NFRD) and an important regulation that requires companies to transparently report on their sustainability impact. This is relevant for manufacturing companies, which often have a significant effect on the environment and society. CSRD reporting and the associated CSRD directive is a key component of the European Green Deal, a comprehensive plan by the European Union to make the economy more sustainable. For manufacturing companies, this means they must not only comply with legally required reporting, but that there are also opportunities to show how they deal with sustainability and improve it.
With the Omnibus I package, the directives have been amended, requiring EU companies with an average of more than 1,000 employees and a net annual turnover of 450 million euros to conduct sustainability reporting. Also, non‑EU companies that generate more than €450 million in net turnover within the EU are also required to report.
While smaller companies are not obligated to report, they may still face sustainability obligations. For instance, customers that are required to comply with the CSRD guidelines can inquire sustainability data on their supply chain partners. For these smaller enterprises, the voluntary VSME standard (Voluntary Sustainability Reporting Standard for SMEs) can be a good option to meet the increasing expectations around sustainability reporting.
What Does the CSRD Entail?
The CSRD is designed to enhance the quality and consistency of sustainability reporting. The aim is to oblige companies to be more transparent about their environmental, social, and governance performance.
The CSRD establishes the legal obligation for companies to report on their sustainability-related impacts, risks, and opportunities. To operationalize these legal requirements, the directive introduces the European Sustainability Reporting Standards (ESRS). These standards consist of 12 standards, including two overarching standards and ten thematic standards. The ESRS define the general reporting principles and specific reporting requirements for environmental, social, and governance issues.
The goal of the ESRS is to provide consistent, comparable, and reliable sustainability information, enabling investors and regulators to better assess the sustainability performance of companies and the associated financial risks.
Phased Implementation of the CSRD (2025-2029)
The implementation of the CSRD will occur in phases from 2025 to 2029. This means that companies will need to comply with different reporting requirements at various stages. It is crucial for your company to understand which phase you are in and what that means for your reporting obligations. By starting your preparations early, you can ensure compliance and even benefit from the advantages that sustainable practices bring.
What Must You Report Under the CSRD?
Under the CSRD, you are required to report a broad range of information, including:
Environmental Impact
How your operations affect the environment, such as CO2 emissions, energy consumption, and waste management
Social Aspects
How your company contributes to society, for example, in terms of labor conditions and social responsibility
Governance
How your company is governed and how ethical standards are maintained
It is essential to present this data transparently and reliably. This not only builds stakeholder trust but also aids improving your business processes.
Data Collection and Management
Effective data collection is crucial for successful CSRD reporting. Start by establishing a structured approach for gathering the necessary data. This may include:
- Implementing data recording systems.
- Training staff, as accurate reporting is critical.
High-quality, well-managed data is not only crucial for meeting CSRD requirements, but it also helps to more easily comply with audit demands. When you have reliable and consistent data, the audit process becomes less complex, and any shortcomings can be identified and corrected more quickly.
Additionally, it is important to consider other relevant regulations, such as the Machine Regulation, EU Data Act, and ESPR/Digital Product Passport, which may also impact your sustainability reporting.
Preparing for the CSRD: Tips for Manufacturing Companies
Here are some steps you can follow to streamline your reporting process:
- 1
Start Early
Don’t wait until the last minute to begin data collection and reporting. The sooner you start, the better prepared you will be.
- 2
Use Technology
Leverage digital tools and software for efficient data collection and reporting.
- 3
Develop a Sustainability Strategy
Ensure that your strategy aligns with the requirements of the CSRD and is widely supported within your organization.
Conclusion
The CSRD has significant implications for manufacturing companies that need to report their sustainability impact. It is crucial to take action now and prepare well for the upcoming changes. Sustainability is not only a legal obligation but also an opportunity to future-proof your business and have a positive impact on the world around you.
Frequently Asked Questions
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EU Data Act
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Machinery Regulation
