CSRD Ripple Effect: Beyond Compliance to Enhanced Business Relationships

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What is ESG and Environmental Sustainability?

ESG is a framework used to evaluate an organisation or investment's sustainability and ethical impact. Each component of ESG represents a different aspect:

Environmental: 

‍This refers to the organisation's environmental impact, including its efforts to mitigate climate change, reduce pollution, conserve resources and biodiversity, and promote environmental sustainability.

Social:

The social aspect of ESG focuses on the organisation's relationships with employees, customers, suppliers, communities, and other stakeholders. It includes employee welfare, diversity and inclusion, labour rights, product safety, and community engagement.

Governance: 

‍Governance pertains to the company's internal structures and processes that govern its operations. This includes the composition and independence of the board of directors, executive compensation, transparency, ethics, and overall corporate governance practices. 

What is CSRD?

Sustainability has been a critical concern for the EU for many years. It has put a lot of effort into developing tools to increase the transparency of companies on the sustainability implications of their activities. This has led to significant EU legislation, including the Corporate Sustainability Reporting Directive (CSRD). The CSRD revises the sections of the Accounting Directive relating to non-financial disclosures introduced by the Non-Financial Reporting Directive (NFRD). 

CSRD requires the inclusion of a sustainability report in the management report. This sustainability report must be included in a distinct section of the management report and identified as such. The information provided must cover the sustainability impacts from the double materiality perspective to cover both financial and impact materiality. The CSRD mandates companies to report both on the effects of their operations on the environment and society and on how sustainability issues impact their business. As such, the risks and impacts of the company are each considered from a materiality perspective. In addition, the reporting is not limited solely to the company's sustainability but also includes the sustainability in the value chain of which the company is part. 

The Scope of CSRD Implementation will be: 

• 1 January 2024 for public interest entities in the scope of EU non-financial reporting rules (greater than 500 employees).
• 1 January 2025 for other larger companies and public interest entities (greater than 250 employees).
• 1 January 2026 for listed SMEs, with an 'opt out' possible until 2028.

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All companies falling within the scope of the CSRD will be required to report on a broad collection of ESG topics. This includes providing information on policies related to ensuring equal opportunities for employees, climate protection, working conditions, human rights, business ethics and corporate culture.

Even when not directly in scope, many companies will also be indirectly affected by the CSRD as they will have to provide various information to those CSRD-compliant companies as subsidiaries, suppliers or customers.

At KRA Renewables, we specialise in translating sustainability principles into actionable strategies. Our expert team can guide you through the complexities of ESG and environmental sustainability, helping your business thrive while making a positive impact. Contact our in-house Sustainability Consultant, Wangechi Cynthia Wanjau, at cynthia@kra.ie with any queries.