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. 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 has been 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.
Preparing an ESG report that meets CSRD requirements presents its challenges and opportunities. Dual materiality assessment is an essential element in the CSRD report. During the assessment, the company must identify issues that affect both people and the environment and financially affect the company. In addition to disclosing initiatives, the company should report its goals, benchmarks, and progress. All information must be within the entire value chain and include forward and retrospective information. It is not based on the short, medium, and long term.
Companies must disclose information aligned with the Climate-Related Financial Disclosures Task Force, the transition to a sustainable economy, limiting global warming to 1.5°C, and climate neutrality by 2050. Environmental issues within the scope of the report should include science-based targets. Reports on the European Union Taxonomy and climate risk should be included. Social issues, the value given to employees, and respect for human rights are essential in the report. The fight against corruption and bribery, one of the vital parts of the ESG, is also one of the report's pillars. There should also be diversity in company boards of directors. CSRD also requires an independent assurance service provider to process the report according to its standards.
According to the European Commission, CSRD aims to reduce the reporting costs of companies, such as the ESG structure, in the medium and long term. Although the initial costs will increase, it will meet the increasing demand for corporate sustainability information from investors and other stakeholders. As a result of the growing demands of the companies, it is seen that most companies will enter the cost item. CSRD is a necessary need as it avoids these costs.
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