Companies in the EU are preparing for the first round of reporting under the CSRD. Starting in 2025, companies that were previously subject to the NFRD must report under the new legislation. Companies are currently figuring out what data to collect and how, as 2025 reporting will be based on 2024 data. Responsible Investor recently reported on the mounting confusion as EU companies struggle to wrap their heads around the new reporting requirements. The article states:
“Ultimately, this is a complete rethink in corporate reporting, and there is a lot at stake. The Corporate Sustainability Reporting Directive (CRSD) is the biggest push for mandatory wide-ranging sustainability disclosures seen to date, with more than 50,000 companies to be covered. Investors are hoping it will generate a treasure trove of new, comparable double materiality data.”
RI reports that the CSRD could require companies to report on as many as 1,144 data points depending on the results of that company’s double materiality assessment. Materiality assessments as the threshold for reporting are relatively new. This was the result of a last-minute lobbying push that removed mandatory reporting regardless of materiality from the law limiting companies to only reporting on issues deemed “material” by their assessments. The trouble is, no one knows what the threshold for materiality is. For now, it would appear that companies can set their own thresholds as long as they explain their reasoning and provide ample data to support their conclusions. So while companies may not have to report on every one of the 1,144 data points, at a minimum, they will have to consider the materiality of those data points and report on their conclusions.
CSRD reporting is complex and extensive. The first several years of reporting are expected to yield less than stellar results as companies struggle to establish best practices. Hopefully, a mix of experience and additional EU guidance will stabilize the reporting landscape in time.
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