🌱 What is the CSRD?
The CSRD mandates that enterprises disclose sustainability information (including information on environmental rights, social rights, human rights, and governance factors) in their financial reports. The intention of the CSRD is to make sure investors and other stakeholders are better equipped to make informed decisions on sustainability issues.
🌱 Which companies will the CSRD apply to?
The CSRD will apply to all large companies and to all companies listed on regulated markets (except listed micro undertakings) in the EU. Notably, information on subsidiaries must also be disclosed. The first set of standards for large enterprises will be adopted by June 2023, and large enterprises will have to start reporting as of January 2025. The CSRD will also apply to listed small and medium enterprises (SMEs) based in the EU. Yet, for SMEs, the regulation is more lenient, and it will only come into force in 2027 – with the possibility of an opt-out during the transitional period until 2028. Finally, the CSRD will also apply to non-EU enterprises, which generate a net turnover of at least EUR 150 million in the EU, and which have at least one subsidiary or branch in the EU exceeding certain thresholds.
🌱 What impact will the CSRD have on e-waste and mineral mining?
Under the CSRD, the European Financial Reporting Advisory Group (EFRAG) has been appointed as the technical adviser to the European Commission in developing draft “European Sustainability Reporting Standards” (ESRS). Disclosure Requirement 5 of the draft ESRS E5 sets out that there need to be measurable targets for resource use and circular economy. Under clause 29, there will be “(a) targets to eliminate waste (including in use phase); (b) targets for circular material use rate; (c) targets to eliminate the use of virgin raw material; (d) targets for reduction/reversal in the depletion of the stock of renewable resources.”
🌱 What will reporting and auditing look like?
Under clause 30 of the draft ESRS E5, “[t]he disclosure required [regarding resource use and circular economy] shall include: (a) a description of how targets are tightly connected with material impacts disclosed in the section ‘risks and opportunities’ and if they are not, a comprehensive justification as to why a material impact is not covered by a target; (b) a description of how the targets contribute to the objectives of the EU Circular Economy Action Plan; […]”. All reported information under the CSRD will be given a “digital tag” and it will be audited. Breaching the regulation will result in penalties. Compliance, on the other hand, promises to bring about benefits – such as the monetization of sustainability efforts, increased green investment, and a harmonization of reporting processes.
Read more about the CSRD here:
- https://www.circularise.com/blog/corporate-sustainability-reporting-directive-csrd-explained