Sustainability: more on the corporate agenda than ever!

Why is the E of ESG also relevant for your company? Paul Josephus Jitta and Ingrid Cools of BUREN explain what you need to know about the new sustainability gradient CSRD.

Introduction
Although the environment and climate have both been on the agenda for a long time, the 2021 IPCC climate report was a wake-up call for the international community  and the IPCC report released at the beginning of this month only exhorts for more and faster action.

In this article, we discuss the European Commission's published proposal for the Corporate Sustainability Reporting Directive ("CSRD") and how it will impact virtually every company.

Environmental reporting obligations
On 21 April 2021, the European Commission published a proposal for the CSRD. After approval of the CSRD by the European Parliament and the European Council, all listed and non-listed large companies (which meet at least two of the following criteria: more than 250 employees, more than 40 million turnover and more than 20 million balance sheet value) will have to report on sustainability. In concrete terms, this concerns about 3,000 Dutch and about 50,000 European companies. This is a considerably larger number than the 100 companies that currently have to report on their policies on the environment and climate on the basis of the Decree on the Disclosure of Non-Financial Information (in Dutch: Besluit bekendmaking niet-financiele informatie). So there is a good chance that your company now has to report.

Impact CSRD
Companies that fall within the scope of the CSRD must report on the risks of sustainability aspects on the company and on the effects of the company on the environment. The sustainability information must be published as part of the management report. The CSRD obliges companies to have the reported sustainability information externally audited. This will probably be the task of the external auditor.

If the CSRD is approved, the EU member states must implement it in their national legislation before the end of this year. The European Commission aims to require large companies to report on their sustainability policy as of 2024. Small and medium-sized (listed) companies will get a postponement until 2026.

If you think that the impact of the CSRD will be limited for your company, you are probably wrong. Not only companies that fall directly under the scope of the CSRD will have to become more sustainable and report on this, but also other companies will have to put environment and climate (higher) on the agenda, for three reasons. First of all, because there is a good chance that these companies, as suppliers, customers or business partners, do business with companies which do fall within the scope of the CSRD. CSRD-compliant companies are expected to measure their relationships against the same CSRD bar. Thus, there will be a CSRD reflex effect. Secondly, conformity to the CSRD increases a company's own degree of sustainability. As awareness of the need to combat climate change continues to grow, your customers will also increasingly opt for companies that perform more sustainably. Your company does not want to miss the boat. Thirdly, more sustainable companies become more valuable to all their stakeholders. No one can argue with that.

Work to do
The impact of the CSRD on a company is great. Does your company have to report itself? Or can it be expected that it will be asked by important suppliers or customers? What exactly is your company required to report on? You probably should start thinking about these questions.

The CSRD is not the only driver for environmental action. Now that the Supreme Court confirmed last year in the Shell case that companies operating in the Netherlands have a private-law duty of care for the climate, there really is work to be done for (almost) everyone!

Do you want to know if your company falls within the scope of the CSRD and what the next steps should be? Please do not hesitate to contact us.