The CSRD compliance has become a major challenge for businesses of all sizes. The CSRD directive, or Corporate Sustainability Reporting Directive, is a new European regulation that requires companies to publish detailed information on their sustainability and social responsibility activities. Although this approach may seem complex at first glance, it represents a unique opportunity to strengthen your commitment to ESG criteria and to contribute to a more sustainable future.

But then, how do you go about it in concrete terms? What are the essential steps for a successful transition to a transparent extra-financial reporting and compliant with CSRD requirements? How a CSRD software can he help you in this process?

In this article, we'll discuss the ins and outs of CSRD compliance, by answering the most relevant questions and by giving you the keys to transform this obligation into a real performance driver for your business.

So are you ready to dive into the heart of CSRD and discover how it can transform your approach to sustainability?

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What is CSRD and why is it important?

The CSRD, or Corporate Sustainability Reporting Directive, is an ambitious European directive that marks a real revolution in the world of corporate reporting. It replaces the old Non-Financial Reporting Directive (NFRD) and goes well beyond that by imposing much more stringent and detailed requirements for the publication of sustainability information.

The main objective of the CSRD is to strengthen the transparency and comparability of extra-financial corporate data. The aim is to enable investors, stakeholders (customers, employees, NGOs, etc.) and the general public to better understand the environmental and social impact of corporate activities, as well as their risks and opportunities related to sustainability issues.

Why is CSRD so important?

• Fight against greenwashing: The CSRD aims to end greenwashing by requiring companies to provide verifiable and reliable information about their sustainability practices.
• Informed decision making: By providing access to comparable and transparent data, CSRD allows investors to make more informed decisions and direct their capital towards more sustainable businesses.
• Corporate accountability: The CSRD encourages companies to integrate sustainability issues into the heart of their strategy and operations, by making them responsible for their environmental and social impacts.
• Competitive advantage: Businesses that comply with the CSRD and publish transparent and reliable information on their sustainability can gain a competitive advantage by attracting investors and consumers who care about the environment and society.

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Who is affected by the CSRD?

The CSRD concerns a broad range of companies, well beyond the large listed companies that were already subject to the NFRD. In particular, the following are concerned:

• All major companies listed on a regulated EU market (with the exception of listed micro-enterprises).
• Unlisted companies that exceed at least two of the following three thresholds:
  
  • 250 employees
  • 50 million euros in turnover
  • 25 million euros in balance sheet total
• Businesses established outside the EU who have a subsidiary or branch in the EU and who exceed the thresholds mentioned above.

It is important to note that the CSRD applies gradually. Businesses already subject to the NFRD will have to apply the new CSRD requirements from 1 January 2024. The other companies concerned will have to comply with it from 1 January 2025 or 1 January 2026, depending on their size and situation.

Attention, these thresholds may change with the Omnibus bill. For more information, contact our teams.

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How to comply with the CSRD?

Compliance with the CSRD is a complex process. which requires a structured approach and the involvement of all stakeholders in the company. Here are the key steps to follow:

1. Understand the requirements of the CSRD: It is essential to fully understand the new reporting standards and the information to be published.
2. Carry out a double materiality analysis: This analysis consists in identifying the sustainability issues on which the company has an impact, or on which the company depends and which generate a risk or an opportunity for its business.
3. Gap analysis: Understand thevariance detailed between the company's current reporting practices and CSRD requirements.
4. Collect and analyze data: The company needs to set up reliable and robust data collection systems to measure its sustainability performance.
5. Writing the sustainability report: The report must comply with CSRD reporting standards, also known as ESRS, and contain detailed and verifiable information on material sustainability issues for the company.
6. Have the report audited: The sustainability report must be subject to an external audit to ensure its reliability and credibility.
7. Publish the report: The sustainability report should be published in an accessible and transparent manner, for example on the company's website.

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To facilitate this process, many companies are turning to CSRD software that make it possible to centralize and automate the collection of data and the production of the sustainability report.

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The 8 key steps to CSRD compliance

Compliance with the CSRD is a large-scale project that requires careful planning and methodical execution. Here are the 7 key steps to CSRD compliance to follow:

1. Preliminary assessment:
   
   • Determine if your company is concerned by the CSRD.
   • Assess the gap between your current reporting practices and CSRD requirements.
   • Identify key stakeholders and their sustainability expectations.
2. Double materiality analysis:
   
   • Identify the ESG issues that are important for your business (financial materiality) and for your stakeholders (impact materiality).
   • Evaluate the risks and opportunities associated with these issues.
3. Gap analysis: Initial compliance diagnosis
   
   • Conduct an in-depth gap analysis to establish an accurate diagnosis of your current situation in the face of CSRD requirements.
   • Identify discrepancies between your existing reporting processes and ESRS standards, highlighting the needs to adapt your processes and what needs to be created.
   • Determine what resources are needed and what priorities are needed to close these gaps.
4. Data collection and analysis:
   
   • Establish reliable and robust data collection systems.
   • Collect quantitative and qualitative data on your ESG performance.
   • Analyze data to identify trends and areas for improvement.
5. Definition of the sustainability strategy:
   
   • Integrate material ESG issues into your business strategy.
   • Set clear and measurable ESG performance goals.
   • Define the actions to be implemented to achieve these goals.
6. Writing the sustainability report:
   
   • Write a sustainability report that meets CSRD reporting standards (ESRS).
   • Provide transparent, comparable, and verifiable information.
   • Use relevant ESG performance indicators
7. Verification and publication of the report:
   
   • Have your sustainability report (CSRD audit) audited by a CAC or an independent third party organization.
   • Publish your sustainability report in an accessible and transparent manner (for example, on your website).
8. Continuous improvement:
   
   • Track your ESG performance and analyze the results.
   • Identify areas for improvement and implement corrective actions.
   • Communicate your progress to your stakeholders.

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The 5 challenges of CSRD compliance

Compliance with CSRD can also present a number of challenges for businesses:

1. Complexity of requirements: CSRD reporting standards are detailed and complex, which can make compliance difficult, especially for small and medium-sized businesses.
2. Double materiality analysis: Conducting a dual materiality analysis can be complex and require specific expertise.
3. Data collection and management: Collecting and managing ESG data can be complex and expensive, especially if the business doesn't have the right systems and processes in place.
4. Audit of the sustainability report: The audit of the sustainability report by an independent third party organization can be a significant cost.
5. Lack of resources: Many businesses, especially SMEs, may lack the financial, human, or technical resources to comply with the CSRD.

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The 6 benefits of CSRD compliance

Compliance with the CSRD can be a significant investment, but it offers numerous advantages for businesses:

1. Improving reputation and brand image: Transparency and a commitment to sustainability build stakeholder trust and improve the company's brand image.
2. Easy access to finance: Investors are paying more and more attention to ESG criteria. CSRD compliance can facilitate access to finance and reduce the cost of capital.
3. Risk reduction: Identifying and managing ESG risks helps to reduce financial, operational and reputational risks.
4. Performance improvement: Integrating sustainability issues into company strategy and operations can lead to improved overall performance.
5. Competitive advantage: Businesses that comply with the CSRD can differentiate themselves from competitors and attract customers and talent who care about sustainability.
6. Employee engagement: Transparency and a commitment to sustainability can increase employee engagement and motivation.

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Frequently asked questions about the CSRD

Here are some of the most frequently asked questions about CSRD:

When does the CSRD come into force?

The CSRD is gradually being applied from 1 January 2024 for companies already subject to the NFRD, of January 1, 2025 for other large companies, and of January 1, 2026 for certain specific companies.

What are the reporting standards to follow?

Businesses need to follow the ESRS standards (European Sustainability Reporting Standards) to prepare their sustainability report.

Where can I get help to become compliant?

Numerous resources are available, including guides, training, specialized software, and consultants.

What is the role of stakeholders?

Stakeholders (investors, customers, employees, NGOs, etc.) play an essential role in the CSRD approach by expressing their expectations and holding companies to account.

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Conclusion on CSRD compliance

Compliance with the CSRD is a major challenge for companies, but it is also a unique opportunity to strengthen their commitment to sustainability, to improve their performance and to differentiate themselves from their competitors. While this can be challenging, the long-term benefits are significant.

By adopting a proactive and structured approach, by relying on appropriate tools and resources, and by involving all stakeholders, companies can transform this obligation into a real lever for creating value and contributing to a more sustainable future.

So are you ready to take on the CSRD challenge and make your business an actor of positive change?

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