Background
Although listed companies (with turnover in excess of €40 million and 500 employees) and unlisted companies (with turnover of €100 million and more than 500 employees) are already subject to non-financial reporting obligations, as set out in the NFRD, the indicators vary and the data is therefore often incomparable. Faced with this lack of clarity, bankers and investment funds pushed for a social and environmental reporting directive, which took shape as the CSRD. This requires companies to have the same level of auditability for extra-financial information as they have for financial information. Its aim is to harmonise reporting by the various players at European level and to provide a standard framework within which they can be compared.
The directive will apply according to this timetable:
- 1 January 2025: the first wave concerns listed groups with more than 500 employees and more than €40 million in turnover (or €20 million in total assets), which close their financial year on 31 December. Most of these groups began work on this subject in spring 2023: their first CSRD report will include data for the year beginning 1January 2024;
- Mid-2026: Sectoral standards, postponed for two years by an agreement between European Parliament and Council of the EU, will come into force;
- From 2027, the CSRD will apply to all European companies with turnover in excess of €50 million, assets in excess of €50 million and/or 250 employees (those meeting two out of three conditions will be subject to the CSRD);
- From 2028, it will also apply to all non-European companies generating more than €150 million in turnover within the EU.
In July 2023, the European Commission published the delegated act detailing the reporting standards (ESRS) under the CSRD. The text contains 1,178 data points that companies must follow in order to produce their sustainability report. This regulation goes far beyond what has been done until now. In social terms, it covers HR data on the workforce, working conditions, collective bargaining, living wages, training, health and safety, pay and work-life balance. The company will also have to disclose social data relating to subcontractors, as well as governance indicators. According to Julie Ravillon, global CSR and sustainability leader at Salesforce: “For companies, CSRD is an opportunity to have a complete view of the data. As this data is currently fragmented and siloed between different teams, they need help in automating data collection and monitoring their action plans.”
Requirements
The compliance process involves several stages:
- Firstly, the dual materiality analysis, which accounts for around two thirds of the work.
