The Importance of Implementing CSRD Reporting for 2024: A Guide for Companies Ahead of the Q1 2025 Deadline

As sustainability becomes a key driver in business decision-making, the Corporate Sustainability Reporting Directive (CSRD) is set to significantly impact companies across Europe starting in 2024. With its implementation in the audit year of 2024 and the first reports due early in Q1 2025, businesses must begin preparing to ensure compliance. This directive represents a major shift in the regulatory landscape for corporate sustainability, affecting how companies report on non-financial information.

This article will cover the key aspects of the CSRD, how companies can prepare for its requirements, and why early action is essential to avoid compliance pitfalls.

What Is CSRD and Why Does It Matter?

The CSRD is an update to the Non-Financial Reporting Directive (NFRD), significantly expanding the scope and requirements for sustainability reporting. The directive aims to improve the consistency, comparability, and reliability of sustainability data across the EU by mandating more comprehensive and standardized reporting.

Key changes under CSRD include:

• Broader Scope: CSRD applies to all large companies (250+ employees or €40 million in turnover) and all listed companies, including non-EU companies with significant operations in the EU.

• Double Materiality: Companies must report on how sustainability issues affect their business and how their operations impact people and the environment.

• Auditable Sustainability Data: The sustainability reports will be subject to mandatory auditing and assurance, ensuring the accuracy of the information provided.

• Alignment with EU Taxonomy: Companies must disclose how their activities align with the EU Taxonomy and other regulatory frameworks such as the Sustainable Finance Disclosure Regulation (SFDR).

The shift toward mandatory, standardized reporting on environmental, social, and governance (ESG) metrics will make CSRD compliance a complex and critical process for businesses.

What Does the Timeline Look Like?

The first set of CSRD reports will cover the 2024 financial year, meaning that companies need to have systems in place to collect and report sustainability data throughout the year. These reports must be completed by early Q1 of 2025, coinciding with the annual financial reporting timelines. Given the increased level of detail required in these sustainability reports, preparation must begin well in advance of the submission deadline.

Steps to Prepare for CSRD Compliance

To ensure compliance with CSRD by early 2025, companies should follow these essential steps:

1. Understand the Reporting Requirements

Companies need to familiarize themselves with the full scope of the CSRD requirements, particularly around double materiality and the need for reliable, verifiable data. Internal teams must align on what information needs to be collected and how it should be presented.

2. Audit Current Reporting Practices

Many companies have already been conducting sustainability reporting, but the CSRD will likely require more extensive and standardized data. Conduct an internal audit of current reporting practices to identify gaps and areas needing improvement, such as data accuracy, alignment with the EU Taxonomy, or the ability to verify the reported data.

3. Build or Update Internal Systems

Given the complexity of CSRD reporting, companies should implement or update systems for ESG data collection and management. This could involve dedicated ESG software solutions that automate data gathering, ensure compliance with reporting standards, and streamline the audit process.

Companies that act early to build strong systems will be better positioned to deliver accurate, timely, and auditable reports by the Q1 2025 deadline.

4. Engage with Stakeholders

Engage with key stakeholders, including investors, regulators, and internal teams, to align on CSRD reporting expectations. Transparency is critical, and engaging stakeholders early will help ensure the reporting aligns with broader company goals and external expectations.

5. Prepare for Third-Party Audits

Under the CSRD, sustainability reports will be subject to third-party audits to verify the accuracy of the information. Companies should work closely with their auditors to ensure their data collection and reporting processes are audit-ready.

6. Use the First Report as a Benchmark

The first CSRD report, due in Q1 2025, will serve as a benchmark for future years. Companies should view this as an opportunity to refine their processes and improve the accuracy and depth of their sustainability data.

Why Early Action is Critical

Delaying preparations for CSRD compliance can result in rushed reporting, inaccurate data, or incomplete submissions, leading to financial and reputational risks. Given the level of detail required and the need for auditability, companies that start preparing now will be better positioned to meet the Q1 2025 deadline confidently.

Moreover, proactive companies that embrace CSRD early will likely benefit from enhanced investor confidence and brand reputation. Transparency in sustainability reporting can serve as a competitive advantage, attracting sustainability-minded investors and customers.

Conclusion

The Corporate Sustainability Reporting Directive is set to reshape how companies approach sustainability reporting, demanding greater transparency, accuracy, and alignment with EU-wide standards. With the first CSRD reports due in Q1 2025, now is the time for businesses to begin preparing. By understanding the requirements, auditing current practices, and implementing robust data management systems, companies can ensure they are well-prepared for this new regulatory era.

Taking early action will not only ensure compliance but also position companies to succeed in the evolving landscape of sustainability and ESG reporting.