A straightforward overview of the CSRD without jargon

Katrine Tjølsen

,

October 17, 2023

4

min read

Just like you, we have no idea why nearly every description of the Corporate Sustainability Reporting Directive (CSRD) insists on confusing explanations 🤯

But unlike other writers, we're giving you the simple overview of the new CSRD legislation 😎

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What’s the deal?

Simply put, the CSRD forces companies to be transparent with its social and environmental impact. The idea is that if investors know more about how sustainably companies act, they will channel money to the more sustainable companies.

On top of that, the CSRD forces companies to report their action plans and progress to become more sustainable! Yes, we’re using an exclamation mark, because this is radical development in the world of sustainability reporting.

Until now, it’s been hard for investors, lenders, and journalists to understand what impact a particular company has on its workforce, its local environment, the climate, and more. Companies have largely had freedom to share just what they want to share, and to cherry-pick the most positive facts.

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Okay, but what about all the complicated words?

The EU tackles this problem in enormous documents filled with technical language. After all, that’s how law is, even though it’s a hassle for us non-lawyers!

The trick is to learn the main vocabulary of the CSRD legislation upfront. That makes it much easier to understand both EU’s own documents, and anything else you find online about the CSRD.

If you get familiar with these words, you’re doing great!

Glossary	Definition
“Topics”	This refers to different social and environmental areas that your company might have an impact on. For example, topics could be water consumption, biodiversity loss, waste, working conditions, rights of indigenous communities, and more.
“Material”	Dictionaries typically define this as “significant” or “important,” and it has a similar meaning in the CSRD. The word is used to say that companies only have to report on “material topics,” i.e. relevant topics, as opposed to all possible topics.
“Materiality assessment”	This means to identify which topics your company has a material impact on. This is a major requirement of the CSRD.
“Double materiality assessment”	The word “double” is introduced because the CSRD sets two requirements: 1) Companies must assess which topics they as a company have a material impact on 2) Companies must assess which topics have a material impact on them as a company
“Stakeholders”	This refers to interested parties, both within and outside your company. We mostly use it to refer to parties outside your company. Stakeholders could, for example, include environmental groups, workers’ unions, or indigenous groups.
“Targets”	The CSRD requires companies to define metrics for their impact on various sustainability topics and to set targets (i.e., goals) for improvement. Those targets should be time-bound and measurable.
“Actions”	The CSRD requires companies to define actions (i.e., tasks) for how to reach their targets.
“Policies”	The CSRD requires companies to define policies (i.e., binding guidelines) for the overall approach the company takes to address the material (i.e., relevant) sustainability topics (i.e., issues like water consumption, waste, etc.). Each so-called policy should — amongst others — have an objective, a defined scope, a description of who’s responsible for what, and a description of how the interests of stakeholders are considered.

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So what specifically do I have to do?

Well, now that you’re familiar with the terms above 👆, we can distill the CSRD reporting process into three phases:

Do a double materiality assessment in a way which involves stakeholders
Define policies, targets, and actions for topics identified in your materiality assessment
Track how you’re progressing towards the targets you set

Each of these phases can again be split into concrete actions. After helping customers through the CSRD reporting process, we’ve proven that this can be straightforward.

If you want to replicate our process, check out our 20-step process and many more insights in our Ultimate Guide to the CSRD!

👇 Get it below 👇

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Not sure where to start?

Checkout our guide to the EU Taxonomy to get on top of timelines, requirements, and the steps needed to get your report ready.

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