Sustainability In Motion

Episode 10: The Corporate Sustainability Reporting Directive

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Sustainability in Motion Podcast –Episode 10: The Corporate Sustainability Reporting Directive

Hosts:

Guest:

Episode Overview:
In this episode, Matt and Nawar discuss the EU’s Corporate Sustainability Reporting Directive (CSRD) with Erin Nolles from Position Green, diving into what it means for companies inside and outside of the EU, and the preparation necessary for compliance. Erin provides insights on Position Green’s approach to helping companies align with these new, rigorous reporting standards, sharing Position Green’s own journey in navigating CSRD.

Key Takeaways:

  1. What is CSRD?

    • The CSRD replaces the Non-Financial Reporting Directive (NFRD), with expanded requirements for sustainability reporting that must be integrated alongside financial disclosures. This regulation applies to EU-based companies and international companies with substantial EU business, marking a transformative shift to align sustainability reporting on par with financial reporting.

  2. Double Materiality as a Core Principle:

    • A unique feature of CSRD is the double materiality assessment, which requires companies to evaluate both the financial impacts of sustainability issues and their environmental and social impacts. This ensures companies report on their outward sustainability impacts alongside financial risks they face due to sustainability factors.

  3. Preparation and Timelines:

    • CSRD compliance will be phased in over several years, with some non-EU companies affected by 2028-2029. Erin stresses the importance of starting early to manage the extensive data collection and stakeholder engagement processes required. Position Green recommends companies perform a “foundational report” ahead of formal compliance deadlines to identify gaps and prepare for required external assurance.

  4. Implications for Global Companies and Investors:

    • Companies outside the EU may still be affected if they are part of the value chain for EU-based companies. Additionally, investors benefit as CSRD aims to create more consistent, comparable sustainability data, reducing “greenwashing” and providing credible data for investment decisions.

  5. Position Green’s Approach and Resources:

    • Position Green combines consulting and software to streamline CSRD compliance, providing tools to track and organize sustainability metrics effectively. The company has also published resources, guides, and webinars to assist companies in understanding and preparing for CSRD’s requirements.

Conclusion:
This episode underscores the need for companies to prioritize CSRD preparation, starting with a robust double materiality assessment and engagement across their organizations. By tackling this early, companies can ensure compliance and set themselves up for more sustainable and transparent operations that align with growing investor expectations.

 

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Transcript:

Welcome to the Sustainability in Motion Podcast, brought to you by ED4S.
We focus on the fast-moving sustainability world to help the business community better understand the sustainability and environmental challenges we face.

I'm Matt Orsagh, Chief Content Officer at ED4S.
And I'm Nawar Alsaadi, Founder and CEO of Kanata Advisors and Chief Advisor to ED4S.

Today, we're going to be talking about the Corporate Sustainability Reporting Directive (CSRD). If you're a company that has to comply with CSRD, a shiver might have just gone up your spine—but we hope we can help with that! We'll be speaking with Erin Knowles, Manager at Position Green, which advises companies and helps them navigate the sustainability landscape. Many of their clients will need support with CSRD compliance.

Matt: Thanks, Erin, for talking to us today. Let's begin by setting the scene: What is the CSRD? Broadly, what does it cover, and how did we get here? Could you give us a little history?

Erin: Of course! The Corporate Sustainability Reporting Directive (CSRD) replaces the Non-Financial Reporting Directive (NFRD). The NFRD, introduced in 2014, laid the foundation for enhancing transparency in sustainability within the EU. Over the years, this evolved, and in 2021, the CSRD was officially introduced after rounds of feedback and reviews. It came into force in January 2023.

In essence, the CSRD sets requirements for annual sustainability reporting for companies in the EU or those with significant business dealings in the region. A key difference from the NFRD is that the CSRD mandates integrated reporting of the financial effects of sustainability matters, transforming how businesses handle and communicate impacts, risks, and opportunities. For the first time, sustainability information is being reported on par with financial reporting.

Nawar: That’s a significant shift. Erin, can you delve deeper into the specifics of the CSRD? How complex is it, and what exactly do companies need to report on?

Erin: The CSRD includes general requirements and topic-specific standards across environmental, social, and governance (ESG) categories. It’s industry-agnostic, so companies must conduct a double materiality assessment to determine what is most relevant for reporting.

Double materiality assesses both:

  1. The company's impact on people and the planet (inside-out materiality).
  2. Financial effects from issues like climate change or human rights concerns (outside-in materiality).

This approach provides a methodology for linking sustainability issues to financial value, transforming reporting practices.

Matt: What are the timelines and deadlines for companies, and what advice would you give to those preparing for compliance?

Erin: Time is your best ally. Our Position Green ESG100 report last year revealed that even in sustainability-leading regions like Scandinavia, companies were severely underprepared—only 54% of disclosures were met, on average.

My advice: start early. Conduct foundational assessments and advocate for resources within your organization. The CSRD process requires a lot of time, cross-departmental collaboration, and preparation.

Nawar: It seems companies outside of Europe are also impacted. How does CSRD affect non-EU companies, and what role do investors play in this ecosystem?

Erin: Non-EU companies might still fall under CSRD if they meet thresholds like revenue or operations within the EU. Additionally, businesses within global value chains might need to respond to stakeholder requests for data.

For investors, CSRD provides enhanced reporting to make more informed decisions. It aims to standardize and audit sustainability data, moving away from “wishy-washy” claims and ensuring reliability.

Matt: Speaking of preparation, Position Green decided to conduct its own CSRD exercise, even though you’re not required to. What did you learn, and how has it helped your work with clients?

Erin: We wanted to lead by example. The process involved the entire organization—over 200 people contributed data like commuting and travel information.

The report shifted our organizational mindset, fostering greater accountability and engagement across teams. It underscored the importance of specificity and data-driven reporting, focusing on measurable impacts and alignment with core business strategies.

Matt: That’s inspiring. Before we wrap up, could you share more about your role at Position Green and how you assist companies with CSRD compliance?

Erin: My work centers on double materiality assessments and sustainability reporting. Position Green combines consulting with software solutions to streamline the reporting process, breaking it into manageable steps.

We also provide resources like webinars, guides, and public insights to support sustainability professionals. Our goal is to make CSRD compliance as accessible and effective as possible.

Matt: Thank you, Erin, for sharing your expertise. And thanks to our listeners for tuning in! For more insights, visit ed4s.org or follow us on social media.

Take care!