Prepare for the sustainable reporting directive (CSRD)

How does your business impact the world? As of 2024, many businesses will have to answer that question by filing a required sustainability report. In it, you demonstrate your efforts to run your business in a sustainable and responsible manner. The report is a requisite under the Corporate Sustainability Reporting Directive (CSRD), which was adopted by the EU in 2021. How will the CSRD affect your business, and how should you prepare?

Running your business sustainably is no longer a nice-to-have. Customers increasingly want to know how a product was made, and governments want to battle climate change. The CSRD is a European directive that requires large companies to make sustainability reports from 2024. Listed SMEs will have to comply with the CSRD from 2026 and unlisted SMEs will follow after that. Still, as an SME, it is smart to prepare for the CSRD earlier. For instance, if you collaborate with other parties or suppliers who already have to comply with the new directive.

The CSRD: when and for whom?

For companies that are now required to file a report under the Non-Financial Reporting Directive (NFRD), the obligation to file under the CSRD will take effect as of 1 January 2024. An important difference between the NFRD and the CSRD is that the CSRD will apply to many more companies than the current NFRD. From 2025, the sustainability report will also be required for large companies that do not have to report under the NFRD. A large company meets at least two of the following criteria:

1. Over 250 employees
2. Over €40 million annual turnover
3. More than €20 million on the balance sheet

Sustainability reporting for SMEs

Listed companies will have to start filing CSRD reports from 1 January 2026. Bas de Gooijer, an adviser at De Duurzame Adviseurs, expects that non-listed companies will follow shortly afterwards. He advises businesses to start reading up on the directive so they are prepared. "If you provide services or products to a large company that is required to report, you will be dealing with the CSRD indirectly", explains De Gooijer. "Large companies will become much stricter in their supplier and service provider selection processes. They will have to, if they want to meet the requirements for the sustainability report."

There are also online tools, such as the CSR Risk Check, which you can use to check products and procurement.

What should I do as an SME?

How is your product made, transported and processed? "If you have a quiet hour in your business or you are busy with administration, write down on paper how your chain is put together," advises de Gooijer. Consider where your products come from, what materials are used, and how sustainably it is done. "Some questions you may not be able to answer yourself. Then ask your supplier or importer," de Gooijer advises.

CSRD: filing and checking

The CSRD regulation was adopted by the European Commission, and is now part of EU legislation. What the sustainability report should look like is determined on the basis of a number of standards: the European Sustainability Reporting Standards (ESRS). Through these standards, companies know exactly what sustainability information should be in the report. Such as information on pollution and employees. The ESRS ensures that everyone reports in the same way. This makes it easier to compare reports from different companies.

Companies have to submit the report in an online portal. The report is then audited. "In the Netherlands, it seems that accountants take on this checking role. They check the sustainability reports, just like they check the annual accounts," de Gooijer explains. He adds, "The CSRD actually says: healthy financial figures are indispensable, but healthy sustainablity figures are just as important."