The CSRD (Corporate Sustainability Reporting Directive) is an ESG standard designed to make corporate sustainability reporting more familiar and consistent as financial accounting and reporting. With the implementation of CSRD, sustainability reporting has become compatible with financial reporting. Before CSRD, the Non-Financial Reporting Directive (NFRD) is used. With the NFRD created by large companies, basic reporting principles have been determined. However, due to the increasing debate, the European Commission decided that the information reported by the companies needed to be increased.
With the CSRD sustainability reporting, which the European Union adopted in November 2022, the scope of information companies must report has increased from 11,000 to 50,000. The amount of information to be notified by companies has been increased. At the same time, an audit requirement has been introduced to secure the data. The CSRD will be implemented in a phased approach from 2024. Companies must now report on how sustainability issues that drive climate change affect their business. Thus, their activities and how they affect people and the planet will be reported transparently.
The NFRD only applied to approximately 11,600 companies with more than 500 employees. This number mainly included listed companies, banks, and insurance companies of a specific size. Reports on basic ESG situations, such as companies' environmental measures, social responsibility and employee behavior, and respect for human rights, were provided. Companies are allowed to choose from a variety of reporting frameworks. A complex system has been created by presenting report frameworks such as CDP, GRI, SASB, CDSB, and IR to companies. Because no unified and comprehensive framework was brought into a single correct one, comparing different data was difficult. For similar reasons, the CSRD was accepted by the European Commission. Thus, both the companies it covers were increased, and a uniform system was introduced. Within the scope of CSRD, the ESG activities of companies with a turnover of over 40 million Euros and a stock market asset of 20 million Euros have become transparent. It was a regulation covering approximately 75% of the turnover of companies serving throughout the European Union. Companies that meet the criteria must comply with the CSRD by 2024.
Author:
Çağın Ergün
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