Because the CSRD requirements are far more detailed than those of the NFRD, companies will need to gather vast amounts of data, which all needs to be accurate and verifiable. Scope 3 emissions—which extend beyond a company’s direct CO2 output and look at everything from up- and downstream transportation and distribution, to the use of sold products—are particularly difficult to track. Companies already reporting under the NFRD will therefore have a steep learning curve to tackle, while those needing to produce their first ESG report under the CSRD face an even bigger challenge.
In the future, smaller organisations will also need to report in accordance with the CSRD. Modified regulations tailored for SMEs will be published, and those listed on a regulated market will need to start reporting from 2028.
Importantly, the CSRD is being incorporated into national law throughout the EU. Depending on how stringent individual countries choose to be regarding enforcement, non-compliance could lead to penalties or prosecution, potentially posing a serious business risk for organisations.
To many, the CSRD will be a game changer in ESG reporting. But what is it, who will it affect, and when does it come into force? This introduction breaks it all down.
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