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 meant to make it possible to measure to what extent European businesses are making an effort. Bas de Gooijer, adviser with sustainability consultancy De Duurzame Adviseurs, explains: "Consumers, investors, and financiers; they all expect businesses to generate value in a sustainable manner, instead of just turning a profit."

 

CSRD: required sustainability reporting

Businesses will have to show the EU what they have done to fulfill their corporate sustainable responsibility by filing an annual report. The CSRD affects both small and larger organisations. "What it boils down to is that, no matter how small your business is, you have to prove by filing the report that it is doing all it can to have a positive impact on the world, or at least not a negative one", says De Gooijer. "The CSRD is telling us: healthy finances are important, but healthy sustainability stats are just as vital."

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. De Gooijer expects that non-listed companies will follow shortly afterwards. He advises businesses to start reading up on the directive so they are prepared. "Many entrepreneurs see the CSRD as a dark cloud, hovering over their heads. That it means a lot of work they are not necessarily waiting for, and still a long way off. But if you start preparing now, you may be at an advantage." In 2025, large companies will have to start CSRD reporting on their entire production and logistics chain. "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."

CSRD: filing and checking

The CSRD regulation was adopted by the European Commission, and is now part of EU legislation. The precise contents of the report are not yet known, as the EU still has to work these out. What is known, is that entrepreneurs will have to file their reports via an online portal. After filing, the report will be checked. "If you look at the requirements set by the CSRD, it is most likely that accountants will perform the check on sustainability reports (in Dutch) in the Netherlands, just as they do financial annual accounts", expects De Gooijer.

What can my SME do?

How sustainable is your product? How does your service impact society? How is it made, packaged, and processed? These issues will feature in the report. Make sure you can answer those questions, De Gooijer advises. "As an entrepreneur, you are probably used to having discussions with customers and suppliers about prices, deliveries, or waste disposal. You can have the same discussions about sustainability. And take note of the replies to those questions."

Start reporting

"Take some time to make a list, for example on a slow day, or when you are doing the books",  says De Gooijer. "How is my location heated, what type of energy do I use, how are my products made and transported, and what about my waste disposal and recycling? Use that list as the basis for your report on how sustainable your business is."

Being aware of the links in your chain: that is what the CSRD report is about. "Make a step-by-step plan for yourself on how to approach the required sustainability report. The better prepared you are, the less effort it will take. Don't wait until you have to do it, take the first step today. Ask questions, do research, and log the answers for yourself for future use", De Gooijer summarises. That way, you will be prepared for the CSRD requirements as an entrepreneur, and you will be able to answer questions you can expect to get increasingly from customers and suppliers.