Tag: EU legislation

June 21, 2023

Corporate Sustainability Reporting Directive (CSRD) explained

Corporate Sustainability Reporting Directive (CSRD) is in action since January 2023. CSRD will strengthen and standardize the rules for how companies are required to report on their social and environmental activities and their impact on people and the planet. Currently Corporate Sustainability Reporting Directive impacts approximately 50 000 companies in Europe.

CSRD timeline and what to expect in the future

The Corporate Sustainability Reporting Directive applies to companies in the following order:

From January 2024, listed companies with more than 500 people (i.e. those already covered by the NFRD are obliged to prepare a statement of non-financial information and publish information according to the EU taxonomy).
From January 2025, listed and unlisted companies that meet at least two of the following criteria: more than 250 employees, revenue of 20 million euros or more than 40 million euros in turnover.
Listed SMEs from 1 January 2026.
From January 2028 CSRD expands to third-country companies with turnover over 150 million euros.

Companies subject to the CSRD will have to report according to European Sustainability Reporting Standards (ESRS).

ESRS entered a four-week feedback period for the first set of Sustainability Reporting Standards, the feedback period lasts from 9th of June to 7th of July 2023.

These mandatory reporting standards aim to ensure that companies are fully transparent about their impact on people and the environment. The standards will also be a key tool in trying to extinguish green washing. The new standards will assist companies in communicating and managing their sustainability performance more efficiently.

After the four week feedback period, the commission will consider the feedback given and then finalise the standards. When adopted, the standards will be used by companies that are subjected to CSRD (Corporate Sustainability Reporting Directive) reporting requirements. This will be another step forward to the goal to achieve a sustainable EU economy.The requirements for different companies will be phased in gradually, depending on factors such as company size and revenue.

Additionally, all sustainability reports must be verified by an independent assurance provider, to ensurereliable information. CSRD also supports and requires reporting in digital format.

Prepare now for CSRD reporting

In 2023 prepare reporting systems. Ensure you have clear Key Performance Indicators (KPI’s), goals and a plan in place for 2024 reporting requirements.

In 2024 gather data trough out the year for 2025 reporting and review it with your accountant. Note, if your company is subjected to NFRD you are required to report on 2024 data in 2025.

In 2025 review your reporting activities and systems to establish or improve for 2026 reporting. It is also good to note that many companies that are not yet in the scope of CSRD will have to report for the companies that are in the scope because they need information about their supply chain’s impacts.

Corporate Sustainability Reporting Directive reporting requirements

CSRD is adding requirements on top of the Non-Financial Reporting Directive (NFRD). According to the NFRD, large companies must report on:

environmental matters
social matters and treatment of employees
respect for human rights
anti-corruption and bribery
diversity on company boards (in terms of age, gender, educational and professional background)

With the Corporate Sustainability Reporting Directive companies need to also report on:

governance relating to sustainability impacts, risks and opportunities
impacts of sustainability-related risks and opportunities on the company’s strategy, business and financial planning
processes for identifying and assessing sustainability impacts, risks and opportunities
metrics and targets that are used to assess and manage sustainability risks and opportunities

Corporate Sustainability Reporting Directive impact on business strategy

Sustainability will in the future have a bigger role in the evaluation of companies. In addition to the reporting obligations, CSRD sets other requirements for companies. For example, in the future companies must plan how to take climate and other sustainability risks into account in the business model and strategy, as well as the transition to a climate-neutral economy.

The role of the company’s management and board of directors must now be strengthened in accordance with sustainability goals. The interest of customers and investors in responsible and environmentally sustainable businesses has grown. This contributes to the financing companies receive for sustainable and responsible projects.

The direction is clear even for those who have not yet been able to participate in creating responsible businesses. Common sustainable development rules accelerate the market, creating new growth opportunities for companies.

Large companies are already obliged to annually publish information on how much of their operations are in line with the EU taxonomy’s climate and environmental goals. The first EU taxonomy reporting was due in the first months of 2023.

Benefits of CSRD directive

According to the European Parliament, The CSRD will improve the existing legislation (NFRD) by requiring more detailed information from companies’ impact on the environment, human rights and social standards, that are in line with the EU’s climate goals.

What we can expect from adapting to CSRD is

Standardized reporting on companies’ activities on people and the planet, therefore providing the opportunity to compare sustainability reports to one another.
Direct finances and investments to activities and businesses that create a positive or ‘net-zero’ impact on the planet and people.
CSRD pushes management to adapt to or improve their strategies to be aligned with sustainability and EU climate goals.
CSRD enforces companies’ capability to mitigate risks, such as climate risks that will help companies to ensure longevity.

Adapting to CSRD requirements as soon as possible is recommended, due to the vast scope of the directive. Where to start from depends on the company’s status with sustainability matters and how well they are documented and reported in the past.

Building a reporting system with Double Materiality assessment is a highly recommended starting point as it is required in the directive to be analysed.

If you wish to talk more about CSRD, don’t hesitate to contact us below or send an email to info@ecobio.fi.

September 12, 2022

EU taxonomy in a nutshell

EU taxonomy is part of the EU Green Deal, which aims to promote the EU carbon neutrality targets by 2050. EU taxonomy requires companies to classify their environmentally sustainable activities and investments. The aim of the Taxonomy is to get the financial market to direct investments towards more environmentally sustainable solutions.

EU taxonomy raises uncertainty because the Taxonomy Regulation and its obligations as well as the classification system and reporting are constantly evolving. Therefore, possible effects on your business may change every year.

EU taxonomy – frequently asked questions

What?

EU taxonomy is a classification system for sustainable economic activities. It lists economic activities that significantly contribute to the climate and environmental goals and their evaluation criteria. In practice, EU taxonomy is EU’s sustainability tool based on the Taxonomy Regulation. This allows companies to plan their activities in preparing for the green transition. In addition it also enables them to get financing when moving to a low-carbon and resource-efficient economy.

“EU taxonomy is gradually developing, and it increases companies’ transparency as it requires companies to disclose their sustainability information. Sustainability reporting will be an integral part of companies’ annual reporting in the future, in addition to the traditional financial reporting.” says Terhi Valtonen, Senior sustainability consultant at Ecobio.

To whom?

In addition to financial market participants, the Taxonomy Regulation applies to large companies that annually publish a non-financial statement as part of their management report in accordance with the NFRD (Non-Financial Reporting Directive).

EU taxonomy is constantly developing. Because of this the classification system and reporting requirements will cover many other companies in the future. This will happen when the corporate sustainability reporting directive CSRD becomes applicable and replaces the NFRD.

How?

Companies must identify which of their own economic activities can be classified as sustainable according to EU taxonomy. Companies must screen each activity in accordance with the do-no-significant-harm principle.

A company’s activities can only be sustainable if it does not harm other environmental goals or human rights at the same time. Companies must annually report on how much of their operations are in line with the EU taxonomy’s climate and environmental goals and also disclose the key performance indicators.

“Large, listed companies already publish a non-financial statement, but the relevant sustainability information on company’s operations and its impacts can easily get lost in the pile of annually published reports, unless you know where to search for them. With the help of CSRD we will clearly talk about corporate sustainability reporting in the future.” says Terhi.

When?

The Taxonomy Regulation and its technical criteria for climate goals have been applied since January 2022. Companies affected by this must annually disclose the share of sustainable activities in their turnover, capital expenditures and operating expenditures.

As of January 2023, companies must assess the sustainability of their economic activities. This must happen in accordance with the technical screening criteria for the EU taxonomy climate goals. The EU Commission will publish the remaining environmental objectives and their technical screening criteria in the fall of 2022.

“Companies are advised to start preparing for the EU taxonomy classification and reporting of their sustainable activities in time, because it is a time-consuming process to finally be compliant with EU taxonomy requirements. Your company should also start preparing now.” says Terhi.

Why?

EU taxonomy is a companies’, investors’ and financiers’ sustainability tool, which strict technical screening criteria are based on science. It provides methods that can be used to assess how much of a company’s economic activities that have a significant impact on the climate and environmental goals of the EU Green Deal.

The taxonomy also provides common definitions that allow companies and investors to communicate credibly through their financial numbers about their green and sustainable operations and plans to transition to a low-carbon economy. A common language in sustainability matters is necessary to be able to compare the data and set sustainability goals.

“ EU taxonomy is not only the reporting obligation, but companies can use the taxonomy in integrating the the climate and environmental goals into company’s sustainability strategy and ESG goals.”

-Terhi Valtonen, Senior sustainability consultant, Ecobio

Additionally EU taxonomy serves as a basis for many actions of the EU sustainable finance strategy. For example green bonds, companies’ sustainable business and strategy targets, and reporting of material sustainability data.

Ask Ecobio experts – Contact us below:

August 12, 2019

Directive on the reduction of the impact of certain plastic products on the environment has entered into force

Directive (EU) 2019/904 of the European Parliament and of the Council of 5 June 2019 on the reduction of the impact of certain plastic products on the environment has entered into force on 2nd of July 2019.

The objectives of the Directive are to prevent and reduce the impact of certain plastic products on the environment, in particular the aquatic environment, and on human health, as well as to promote the transition to a circular economy with innovative and sustainable business models, products and materials, thus also contributing to the efficient functioning of the internal market.

The Directive applies to certain single-use plastic products, to products made from oxo-degradable plastic and to fishing gear containing plastic. The plastic products, which fall within the scope of the Directive, are listed in the Annex. The scope of the Directive also takes into a consideration the tendency of certain types of food containers to become litter. Requirements stated in the Directive apply to consumer products. Commission shall publish guidelines including examples of what is considered to be a single-use plastic product by 3rd of July 2020.

Implementation of the Directive demands a significant decrease in the consumption of the certain plastic products and a prohibition of placing on the market certain plastic products on the national level. In addition, product and marking requirements are to be tighten.

The implementation of the Directive requirements in the national legislation is to be brought into force by 3rd of July 2021.

Ecobio Manager – Effortlessly stay on track of the legislation amendments

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