Deadline for companies to comply with CSRD is approaching

The CSRD illustrates a new way in which numerous different stakeholders look at business. Operating sustainably is no longer an option, but an obligation that every company must embrace sooner or later. The EU is giving companies until 2028 to comply with the rules, and that deadline is fast approaching.

Until then, companies have the opportunity to innovate and invest in solutions that not only meet regulatory requirements but also pave the way to a future of sustainable business. It offers companies an opportunity to have a positive impact on the environment while strengthening their reputation and competitive position.

Ramp up your sustainability digitization journey with our QuickScan, sign up here. 

To ensure you take the right next steps in your sustainability journey, we offer a QuickScan to help you better understand your company's current maturity and how well-prepared you are to comply with sustainability-related regulations, such as the CSRD.

During the QuickScan, we assess several crucial aspects of sustainability and your ESG data estate. Ultimately, you will have a personalized ESG digitization roadmap based on Microsoft technologies and an action plan containing concrete next steps in your sustainability journey. With our help, you can discover the true business value of ESG data beyond compliance.

Understanding the CSRD

The Corporate Sustainability Reporting Directive (CSRD) is a directive that requires companies to report on the impact of their activities on people and the environment. It modernizes and strengthens the regulations governing the social and environmental information companies are required to disclose.

Who does the CSRD apply to?

The CSRD will be mandatory from 2024 for listed companies that fall under the Non-Financial Reporting Directive (NFRD). For large companies that are not yet covered, the CSRD will apply from 2025 fiscal year. From 1 January 2026, the CSRD will also be mandatory for listed SMEs.

Non-EU parent companies with a combined group-level turnover in the EU exceeding EUR 150 million for each of the last two consecutive financial years will apply from 2028 fiscal year.

When do companies need to apply?

The CSRD mandates that large businesses report on their 2024 financial year in 2025, with the rollout extending to additional companies through 2028. The chart outlines a timeline for various types of companies that will need to comply with the CSRD, though these requirements may vary across EU countries. Companies will need to consult local resources to determine when the business must begin reporting.

The CSRD must be audited before submission. The auditor will conduct a review of the information and processes. By October 2028, a more extensive review process, known as Reasonable Auditing, will be introduced to enhance the accuracy of the reporting.

If a company fails the audit of its CSRD report corrections will need to be made. To maintain the quality, accuracy, and consistency of disclosures, there are penalties for inaccurate or incomplete CSRD reporting. The specific consequences of non-compliance with the CSRD differ based on the severity of the violation and the laws of the EU member state where the business operates.

EU member states are empowered to impose fines for non-compliance, with the amount varying according to the seriousness of the infraction and the applicable national laws. For instance, in Germany, these fines can reach up to €10 million, 5% of a company’s global annual turnover, or twice the profits gained, or losses avoided through non-compliance. 

What does the CSRD mean in practice?

Under CSRD regulations, companies are required to actively implement sustainability reporting. This includes not only reporting on CO2 emissions and climate change mitigation, but also providing information on issues such as the workforce, legal disputes, grievance procedures, biodiversity etcetera. Companies that are subject to CSRD reporting requirements are obligated to run a double materiality assessment (DMA). This examines how sustainability issues affect the company financially, as well as how the company’s activities impact environmental, social and governance criteria. From their DMA assessments, companies will have a solid set of material topics that they have to report on according to the standards. Simply complying with this sustainability report means a new and challenging task for many companies requiring robust solutions for collecting and managing extensive sustainability data, that also needs to be traceable and auditable in the end.

How Fellowmind Can Help

Fellowmind established its Center of Excellence for Sustainability in 2022 to support customers in building data-driven sustainable processes and initiatives. This company-wide competence center comprises experts from all of the six countries where Fellowmind operates. The team focuses on building specific knowledge in areas such as ESG legislation and greenhouse gas (GHG) measurement. It has closely partnered with Microsoft and actively shares insights on sustainability with Fellowmind's customers.

Fellowmind supports companies in the field of sustainability with products such as Microsoft Cloud for Sustainability and Emissions Impact Dashboard for Azure and Dynamics 365. With Microsoft Cloud for Sustainability, Fellowmind helps companies with digitizing and automating ESG data collection and management in compliance with EU regulations. The Emissions Impact Dashboard provides insight into emissions related to consumption of Azure Cloud and Dynamics 365 services and applications.

Fellowmind Footprint 365

In addition, Fellowmind Footprint 365 has been developed, which offers companies an integrated capture of the CO2 footprint in Microsoft Dynamics 365 Finance & Operations. Footprint 365 helps companies measure, improve, and automate their environmental performance.

It can be used stand-alone within Dynamics 365 or in combination with Cloud for Sustainability to reach real-time target monitoring by pulling data from existing systems leveraging the Cloud for Sustainability data models and its interoperability with other Microsoft solutions.Footprint 365 provides an audit trail that links each emission to its source, enabling immediate impact reduction and fostering a reduction-focused mindset within the company. It also enhances the company’s reputation as a green partner. Using various methods, including spend-based, average-based, and hybrid approaches, Footprint 365 offers detailed analytics for financial audits and CSRD reporting.

Nick Spelthan, Pre-sales consultant at Fellowmind: "This is a unique product where we offer companies the opportunity to capture emissions in accordance with the scope of EU climate laws and regulations when it comes to capturing their carbon footprint. Whereas CO2 is still often looked at as something that is regulated by the purchasing department, it will soon play a role in the entire organization. It is not inconceivable that in the future companies will send an invoice with the CO2 emissions. That's why it's interesting that they can record the carbon footprint directly in Dynamics."

Be prepared to meet the sustainability reporting guidelines

As the CSRD heralds a new era of corporate sustainability, Fellowmind is aiming to guide organizations through the challenges and opportunities of data strategy to foster a sustainable, accountable, and transparent future.

At Fellowmind, we recognize the complexities involved and are here to assist you.