CSRD: Panic among accountants and SMEs
Now the English version of this P+ Special. On Special Request of our readers, made possible by Avans University of Applied Sciences.
And suddenly it is an obligation, from Europe. Some 50 thousand companies are obliged to start reporting on sustainability. Including the large group of SMEs. Starting next year, in 2024, the first round of companies must begin collecting sustainability data. In 2025, the figures should be included in the annual report over 2024.
This is resulting in panic among companies and their accountants, who are not yet ready for this compulsory Corporate Sustainability Reporting Directive (CSRD). Dutch CSR-specialist Lara Muller helped develop the directive upon the European Commission's request.
Lara Muller understands like no other how far-reaching the consequences of the European CSRD directive will be. Sustainability reports will no longer serve just as marketing tools - they will be subject to clear requirements for the provided data. "This marks the end of greenwashing," is how she explains it.
"Yes, and companies are panicking," Muller confirms. "There is major unrest in the business industry that is being confronted with it. This has various reasons. Firstly, the range of the CSRD is much broader than the current reporting obligation. Now it's only the listed companies who are required to report on their sustainability policy; they are subject to the Non-Financial Reporting Directive (NFRD)."
This earlier European legislation dating back to 2015 applied to some 1 thousand companies. With the CSRD, this is expanded to nearly 50 thousand.
Muller: "This means that the group of applicable companies is significantly expanded with the CSRD, and this includes the large group of SMEs. A great number of companies is being confronted with a reporting obligation that they never really had on their radar. So indeed, many of them think 'what's happening to us?' Imagine, when you're a company with 250 to 500 employees - which may seem like a lot to an outsider - it doesn't mean you have a full reporting department, like international Dutch companies such as Ahold or ABN AMRO bank. For those people this is completely new. They just don't have the people or the knowledge right now. They are wondering how they are going to manage."
"Secondly, the CSRD is linked to the European Taxonomy. This is a classification system, or more like an encyclopaedia. For two years, I served as advisor to the European Commission. Eventually, 50 people were selected from 7000 applications to take a permanent position within the Platform for Sustainable Finance, an official advisory body. We were tasked to initially focus on 100 economic activities, such as the development of roads or the construction of buildings, and then indicate which of these 100 activities put the most pressure on the environment, but also have the greatest potential to be made more sustainable, and have the most impact. And on which of the 6 selected environmental goals these activities have the most impact. And once this connection is made, what should be changed to make these activities as sustainable as possible? We then determined: we will define this in the most objectively measurable way, based on the scientific insights of what is possible. And: in line with the goals of a climate-neutral Europe. Our team of 50 people, supported by some 200 advisors, did our absolute best. We defined the activities as concretely and as measurably as possible in actual measurable units. We want to be able to say: what should they comply with to actually make it sustainable. As you can see, we have placed the bar quite high."
And suddenly it is an obligation, from Europe. Some 50 thousand companies are obliged to start reporting on sustainability. Including the large group of SMEs. Starting next year, in 2024, the first round of companies must begin collecting sustainability data. In 2025, the figures should be included in the annual report over 2024.
This is resulting in panic among companies and their accountants, who are not yet ready for this compulsory Corporate Sustainability Reporting Directive (CSRD). Dutch CSR-specialist Lara Muller helped develop the directive upon the European Commission's request.
Lara Muller understands like no other how far-reaching the consequences of the European CSRD directive will be. Sustainability reports will no longer serve just as marketing tools - they will be subject to clear requirements for the provided data. "This marks the end of greenwashing," is how she explains it.
"Yes, and companies are panicking," Muller confirms. "There is major unrest in the business industry that is being confronted with it. This has various reasons. Firstly, the range of the CSRD is much broader than the current reporting obligation. Now it's only the listed companies who are required to report on their sustainability policy; they are subject to the Non-Financial Reporting Directive (NFRD)."
This earlier European legislation dating back to 2015 applied to some 1 thousand companies. With the CSRD, this is expanded to nearly 50 thousand.
Muller: "This means that the group of applicable companies is significantly expanded with the CSRD, and this includes the large group of SMEs. A great number of companies is being confronted with a reporting obligation that they never really had on their radar. So indeed, many of them think 'what's happening to us?' Imagine, when you're a company with 250 to 500 employees - which may seem like a lot to an outsider - it doesn't mean you have a full reporting department, like international Dutch companies such as Ahold or ABN AMRO bank. For those people this is completely new. They just don't have the people or the knowledge right now. They are wondering how they are going to manage."
"Secondly, the CSRD is linked to the European Taxonomy. This is a classification system, or more like an encyclopaedia. For two years, I served as advisor to the European Commission. Eventually, 50 people were selected from 7000 applications to take a permanent position within the Platform for Sustainable Finance, an official advisory body. We were tasked to initially focus on 100 economic activities, such as the development of roads or the construction of buildings, and then indicate which of these 100 activities put the most pressure on the environment, but also have the greatest potential to be made more sustainable, and have the most impact. And on which of the 6 selected environmental goals these activities have the most impact. And once this connection is made, what should be changed to make these activities as sustainable as possible? We then determined: we will define this in the most objectively measurable way, based on the scientific insights of what is possible. And: in line with the goals of a climate-neutral Europe. Our team of 50 people, supported by some 200 advisors, did our absolute best. We defined the activities as concretely and as measurably as possible in actual measurable units. We want to be able to say: what should they comply with to actually make it sustainable. As you can see, we have placed the bar quite high."