The clock is ticking. By 2024, nearly 71,000 companies across Europe will face mandatory sustainability reporting. Besides avoiding fines and legal action, understanding the latest directives and standards can help your business manage risks, boost competitiveness, and prepare for long-term success. 

In this blog post, we’ll explore the most important frameworks you need to know including the Corporate Sustainability Reporting Directive (CSRD), Non-Financial Reporting Directive (NFRD), and Greenhouse Gas Protocol (GHGP). We’ll also uncover the decarbonization certifications and tools to help you take your first steps toward compliance. So, let’s dive in.

CSRD, NFRD, GHGP: navigating decarbonization terminology

Keeping up with the latest laws and regulations can be challenging for any business – especially with the constant changes and complex terminology involved. Here’s an overview of the CSRD, NFRD, and GHGP, without the confusing legal jargon.

Corporate Sustainability Reporting Directive (CSRD)

The CSRD is a new EU climate regulation requiring many companies to report on their environmental and social impact. It aims to improve transparency and corporate accountability, helping stakeholders like investors and customers better understand a company's sustainability efforts and impact.

Has the CSRD been passed, definitively?

Yes, the CSRD officially entered into force on January 5, 2023. This new directive modernizes and strengthens the rules around the environmental, social, and governance (ESG) information companies must report. 

What are the CSRD standards and reporting requirements?

The CSRD sets out several key standards and reporting requirements for companies. Here's a breakdown:

• Scope: The CSRD applies to large companies and publicly listed mid-market companies​. 
• Requirements: Businesses are required to report on a wide array of topics including environmental, social, human rights, and governance matters.
• Adherence to ESRS: Companies should prepare reports in line with the European Sustainability Reporting Standards (ESRS), based on the first approved drafts. 
• Comparability: The CSRD makes it easier for stakeholders to compare data across different companies and sectors. 
• Auditing: Sustainability reports must undergo an audit for reliability and accuracy.
• Digital and accessible: Reports must be presented digitally in an accessible format. 
• Digital tagging: Businesses must ‘tag' sustainability information according to a digital categorization system for easier reference and analysis.
• Integration with financial data: Sustainability information must be presented alongside financial data.

CSRD reporting timeline

The CSRD will be phased in over time depending on company size, turnover, and location. Here’s a summary:

• Large companies currently subject to the NFRD must comply with the CSRD in 2024 (reporting in 2025).
• Large companies that meet two of the following criteria must comply with the CSRD in 2025 (reporting in 2026): 250+ employees, €50m+ net turnover, €25m+ total assets.
• Listed mid-market companies that meet two of the following criteria must comply with the CSRD in 2026 (reporting in 2027): small-sized (50-249 employees, €10-50m net turnover, €5-25m total assets) or micro-sized (10-49 employees, €900k-10m net turnover, €450k-5m total assets).
• Third-country undertakings must comply with the CSRD in 2028 (reporting in 2029)

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Will CSRD replace SFDR?

No, the CSRD will not replace the Sustainable Finance Disclosure Regulation (SFDR). These are distinct EU regulations that work together to advance sustainable finance.

The SFDR requires financial market participants to disclose how their products and investment strategies align with the EU Taxonomy’s objectives. This helps to prevent misleading claims like greenwashing and encourages more responsible investment practices.

The CSRD extends beyond the financial sector, requiring a wider range of businesses to report information about their sustainability practices and impacts. It aims to enhance the quality and scope of corporate sustainability reporting.

In short: the CSRD and SFRD complement each other to help investors make more informed and ethical choices.

Non-Financial Reporting Directive

The NFRD is an EU directive that came into force in 2014. It applies to specific large companies – mainly public-interest companies with 500+ employees and either a balance total of €20+ million or a net turnover of €40+ million. 

Its goal was to improve transparency and promote more responsible business practices across Europe. It does this by requiring large companies to report on non-financial and diversity aspects of their performance. 

In 2021, the European Commission reviewed the NFRD and identified various shortcomings. These included its limited scope, inconsistent standards, vague requirements, and no audit requirement, among other things. The CSRD was developed to address the limitations.

Is CSRD replacing NFRD?

Yes, the CSRD is replacing the NFRD. The CSRD expands upon and strengthens the NFRD reporting requirements.

It extends the scope to include more companies (approximately four times the amount currently subject under the NFRD) and aims to improve the quality, consistency, and comparability of sustainability reporting.  

Greenhouse Gas Protocol

The GHGP is a widely used emissions accounting framework created by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD). 

It helps businesses to measure, manage, and report on their carbon footprint. It is also used by governments, NGOs, and other stakeholders to determine the effectiveness of climate policies and initiatives. 

It offers standardized methods for calculating emissions from various sources. These include direct emissions from company operations (Scope 1), indirect emissions from energy purchase or generation (Scope 2), and other indirect emissions throughout the value chain (Scope 3).

While the GHGP is a voluntary framework, it’s seen as the gold standard when it comes to aligning with sustainability best practices. Understanding and following the framework can help your business comply with many of the CSRD requirements.

How to comply with the CSRD directive in 4 simple steps

1. Get a grasp on the scope and requirements of the CSRD

Familiarize yourself with the CSRD's coverage, including its impact on your business and the specific reporting requirements.

2. Identify and gather relevant corporate sustainability data

Identify the relevant ESG information within your company, and gather this data systematically. Using a sustainability compliance platform can help you measure data to the highest of standards and achieve full GHGP and CSRD compliance in a matter of days.

3. Draft and review your CSRD reporting

Create a comprehensive CSRD report that includes all required information. Then, review the report to ensure accuracy and completeness. Again, sustainability reporting tools can help to ensure your reports are accurate and meet complex and evolving requirements.

4. Publish your CSRD and communicate it through relevant channels 

Once finalized, distribute your CSRD report to stakeholders, investors, and regulators via the appropriate channels. Take a moment to celebrate this achievement. Meeting CSRD compliance is a huge accomplishment.

What other decarbonization certifications can you receive?

Decarbonization certifications acknowledge the direct actions you take to actively reduce emissions. From switching to renewable energy to electrifying your fleet, each addresses a different aspect of sustainability and environmental impact.

Here are some common certifications to consider:

• Carbon footprint certifications: these help businesses measure and certify their direct and indirect GHG emissions. Examples include the Greenhouse Gas Protocol or ISO 14064.
• Energy efficiency certifications: these aim to decrease energy use and boost energy efficiency. For instance, ISO 50001 provides a practical way for businesses to manage energy efficiently. 
• Carbon neutral or net-zero certifications: these apply to businesses that have managed to balance emissions by reduction or offsetting measures. Notable programs include the Climate Neutral Certification Standard and PAS 2060.
• Green building certifications: these are for companies looking to improve the sustainability of their buildings and infrastructure. The LEED green building rating system is a well-known example.
• Product lifecycle certifications: these help businesses assess the environmental impact of their products from creation to end-of-life. Certifications like the EU Ecolabel help companies meet the highest environmental standards.

What tools do I need to get CSRD compliant?

To achieve CSRD compliance, there are several tools and resources we recommend:

1. Sustainability reporting software like Coolset can help you manage and report sustainability data efficiently.
2. ESG data providers like Bloomberg ESG Data Service offer benchmarks and best practices in ESG data.
3. Audit and assurance firms such as KPMG’s Sustainability Audit Services provide essential auditing.
4. Legal and compliance advisory services like Deloitte offer guidance and resources  (see their handy CSRD briefing pack) to ensure you achieve CSRD compliance.
5. CSRD-focused workshops and webinars can boost awareness around CSRD requirements.
6. Internal data management systems can help you accurately track ESG data.
7. Stakeholder engagement tools like Typeform or SurveyMonkey allow you to communicate and gather feedback for sustainability reporting.
8. Carbon footprint calculators and sustainability assessment tools help you to precisely measure your environmental impact.
9. Well-known reporting frameworks and guidelines can help your business exceed minimum requirements and satisfy stakeholder expectations.

Take your first steps towards CSRD compliance with Coolset

Sustainability reporting is no longer a nice-to-have – it's a requirement under the CSRD for many businesses from 2024. With time running out fast, starting your compliance journey now is crucial. 

Expert CSRD tools like Coolset can ensure the actions you take are accurate and meet complex regulations. Fast-track your business's CSRD compliance efforts by requesting a free demo today.