ESG and the Corporate Sustainability Reporting Directive (CSRD)
Jul. 8 2022
Sustainable development and topics related to CSR (Corporate Social Responsibility) or ESG (Environmental, Social and Governance criteria) have become key growth drivers and catalysts of confidence for all players in the economy. Beyond their financial performance and their ability to innovate, companies are now assessed according to their impact on the planet and people. All companies listed in the stock market are subject to the obligation to publish an ESG report every year, describing the company's social responsibility performance. This need however, can create an opportunity for companies to share a clear vision of their strategy, improving performance and building trust with their stakeholders: boards of directors, employees, shareholders, customers and society as a whole. CSR is a key issue today.
Furthermore, the new EU legislation to be published, namely the Corporate Sustainability Reporting Directive (CSRD) requires all large companies to publish regular reports on the environmental and social impact of their activities. It helps investors, consumers, policy-makers and other stakeholders evaluate non-financial performance, whilst encouraging a more responsible approach to business. Additionally, it sets the ground for all large and medium-sized companies to initiate sustainability reporting. And for the first time, the CSRD defines a common reporting framework for non-financial data. It applies to all companies meeting at least two of the following three criteria; €40m net revenue, €20m balance sheet and more than 250 employees. Most companies above this size based in the EU, as well as EU subsidiaries of foreign companies, will fall within the scope of the CSRD – approximately 50,000 companies in total.
Understanding the CSRD
The CSRD reporting standards will help companies to better measure and manage their exposure to Environmental, Social and Governance (ESG) related risks, as well as becoming better corporate citizens by measuring, disclosing and managing the sustainability impacts they create. It covers:
- Environmental – for example climate change, pollution, water and marine resources, biodiversity and ecosystems, circular economy.
- Social – for example diversity and inclusion, human rights, working conditions, health and safety, employee relations, payment gaps, related rights, workers in the value chain, affected communities, consumers and end users.
- Governance - for example policies, risk management and internal controls, ownership and structural transparency, independence and oversight, responsible business practices, ethics, anti-corruption and executive pay fairness.
Non-compliance: what’s the risk?
Companies meeting the criteria must submit their CSRD aligned report on 1 January 2024, detailing sustainability performance for the 2023 financial year. This will be a challenging process for reporting companies, because data collection and auditing will require time and also collaboration across finance, operations, human resources and sustainability teams.
Companies must act now.
- Listed companies and those meeting at least two of the above mentioned three criteria must publish a sustainability report.
- There are no sanctions specified yet for companies failing to publish their report, but the risk in terms of company image is real: ratings agencies - dedicated organizations which examine the reports assigning them a score - increasingly work with investors, potential customers or partners. Sustainability reporting is therefore not only a way of displaying its commitment to society: it is also about being transparent and giving stakeholders confidence.
What are actually the benefits of compliance?
Companies that are proactive in preparing for compliance with the new CSRD
- Gain trust and credibility
- Demonstrate sustainability performance to stakeholders
- Attract capital investment
- Gather data in a responsible and ethical way to inform strategies
- Manage risks and achieve a better long-term sustainability performance
- Identify issues or gaps to inform decision making
It is evident by now that only a qualified and independent third party can help companies and institutions give credibility to their CSR initiatives and prove that their commitment in terms of environmental and social impact is supported by facts and actions. For companies and institutions it also means implementing, monitoring, improving and communicating their commitments to improve their sustainability performance and remain competitive and reliable.
How can Bureau Veritas support?
With a qualified team of sustainability experts (engineers, scientists) operating worldwide, Bureau Veritas is well placed to provide unique understanding and insights to clients in reviewing their full range of operational activities against the new sustainability reporting standards.
Bureau Veritas Greece Industry and Facilities department operates for over 3 decades, being among the key players in the certification market and the only certification body being fully operational in Greece with local auditors, among the classification societies. This gives the advantage of fast response and at the same time awareness of the Greek market, without lacking the international experience.
Under a new leadership since the beginning of 2022, Bureau Veritas Industry and Facilities, leaded by Ms Chachali, continues to be at the heart of developments in the field of certification and verification activities. Our team works in partnership with companies, by assessing their current situation and needs and supporting the most appropriate route to achieve compliance.