By 2025 around 49,000 companies will be required to report their ESG performance as part of the EU Corporate Sustainability Reporting Directive (CSRD). Think this does not apply to you because your company is UK based? Here are a few things to consider:
Reporting is required for large or listed EU companies but also companies which have significant operations in the EU.
This means your UK company could be required to produce a CSRD aligned report.
Your clients or investors may want to see you reporting in this manner regardless.
The Directive aims to standardise the way companies disclose ESG information and make transparent and comparable their efforts to improve performance. As this will be happening right across the EU, UK based companies can expect to see clients, investors and shareholders wanting them to align their reporting to this significant standard - whether they are EU based or not. Getting one step ahead of this requirement now will stand companies in good stead when the conversations start up later.
So, if you are now considering reporting underneath the CSRD what do you need to do? Here are some of the major elements you will need to work through:
Conducting double materiality:
An evolution from standard materiality, double materiality asks a business to assess its impact inside to out (eg how it impacts people and the environment)as well as outside to in (financial considerations of ESG for the organisation).
Reporting via your management report:
For many businesses this will be the first time ESG information has been formally integrated into management reporting. Work will need to be undertaken to ensure this integration strengthens rather than dilutes the quality of reporting.
Limited assurance will be mandatory for all companies reporting under CSRD. If they don't have it in place already it is recommended companies start exploring assurance now (for example conducting readiness reviews) in order to be in good shape for the process.
Setting targets: The Directive requires companies to set ESG related targets, via a baseline, and report against these targets. To set well informed and reliable targets (and avoid having to restate them later down the line) companies first need to work on data quality and conduct stakeholder consultation.
Ensuring you have a good run up to be able to complete these tasks will be key. At Burges Salmon we are expert in helping you review, mitigate and manage the legal risks associated with ESG. But we can do more than that for you. We will help you identify upcoming regulation, trends and market forces that could shape your product and service development – and work with you to define strategies to turn them to your advantage. We will also help with your knowledge planning, to ensure you are always ahead of the curve and proactive in your ESG methodology. To find out more about how we can help click here.
49,000 companies will be required to report their ESG performance as part of the Directive. Think this does not apply to you because your company is UK based? Here are a few things to consider.