The sustainable reporting directive CSRD: what does it mean for you?

How does your business impact the world? Since the beginning of 2024, many large organisations are required to answer that question in their Corporate Sustainability Report. The report needs to contain information on how a company affects the environment and human rights, for example. This is laid down in the European Corporate Sustainability Reporting Directive (CSRD). In the Netherlands, the minister responsible has sent a bill for this purpose to the House of Representatives.

The rules apply from 2024 to businesses that were already required to include a non-financial statement in their annual report. From 2027, other large businesses will also have to prepare an annual sustainability report.

The CSRD: when and for whom?

Since 2024, the CSRD applies to large companies. A large company is legally defined as a company that meets at least 2 of these 3 criteria:

1. Over 250 employees
2. Over €50 million annual turnover
3. More than €25 million on the balance sheet

For SMEs listed on the stock exchange, the CSRD will take effect on 1 January 2028.

Sustainability reporting for SMEs

Even if your business is not yet required to report, you may be asked questions about sustainability. This is because large businesses are also required to provide information on the sustainability of their suppliers in their reports. So you can expect questions from larger businesses that buy your products. For example, about how your product is made and by whom. And whether that is done in a fair way. The European Sustainability Reporting Standards (ESRS). state what information must be included in the report. 

What should I do as an SME?

Make sure you can answer your customers' questions. Otherwise, they may choose to do business with a competitor who can. Where do your products come from, what materials do you use, and how sustainable are they? Ask your supplier or importer questions you cannot answer yourself. There are also online tools, such as the CSR Risk Check, which you can use to check products and procurement.

Voluntary reporting standards for SMEs

There are separate standards for SMEs that wish to report voluntarily, the Voluntary reporting standards for SMEs (VSME ESRS). These are simpler than the standards for large businesses. Separate standards will also be introduced for listed SMEs, the ESRS for listed SMEs.

The standards are not yet final and may still change. Further information about these standards will be published on this page as soon as it is available.

European Sustainability Reporting Standards (ESRS)

The ESRS consist of 2 sets of standards:

• Standards for all sectors: for all businesses covered by the CSRD directive.
  These include the general standards (ESRS 1 and ESRS 2) and the 10 standards divided into the topics environmental, social, and governance.
• Standards by sector: these are not yet known.

CSDDD: additional rules on sustainability

The EU wants businesses to do more than just report on their sustainability performance. Businesses must also work to reduce their negative impact on people and the environment.

This is what the European legislation Corporate Sustainability Due Diligence Directive (CSDDD) is about. The law obliges businesses to detect, address, and counteract problems and illegal activities. As with CSRD, the introduction of CSDDD will be done in phases, with the largest businesses being first. The first businesses are expected to have to comply with CSDDD rules by 2026.