Regulation guidance: Corporate Sustainability Reporting Directive

The Corporate Sustainability Reporting Directive (CSRD) is now in effect, but with further changes on the horizon, what does it mean for printers? Sustainability consultant Rachel England outlines everything you need to know and talks to Apigraf about how your business may be affected.

The European Union’s Corporate Sustainability Reporting Directive (CSRD) came into effect in January 2024, requiring thousands of companies inside and outside the EU to publicly disclose details on their sustainability risks and impacts.

Designed to give investors, customers and other stakeholders full view of company sustainability data, the directive aims to catalyse decarbonisation and encourage organisations to balance business performance with wellbeing for people and planet.

The directive builds on and replaces the earlier Non-Financial Reporting Directive (NFRD), which also required companies to report on sustainability issues, but didn’t stipulate how, leading to confusion and inconsistencies.

Who does the CSRD apply to?

Based on current criteria (see details on the Omnibus Package below), the CSRD is set to impact 12,000 of the EU’s biggest publicly listed companies and will add in an estimated 50,000 further businesses over the next three years – including thousands outside EU borders. Your company falls into scope if it is:

An EU listed or non-listed ‘large undertaking’ that meets two of the following criteria:
 

• An annual turnover of more than €50m
• Balance sheet assets greater than €525m
• 250+ employees

A listed EU SME that meets the following criteria:

• An annual turnover of more than €8m
• Balance sheet assets greater than €4m
• 50+ employees

A non-EU company that has more than €150m turnover within the EU and meets one the following criteria:

• It serves as the ultimate parent of EU subsidiaries classified as large undertakings or listed SMEs
• It has an EU branch with a net turnover exceeding €40m in the previous financial year

Micro-listed SMEs (those with no more than €450,000 on their balance sheet, no more than €900,000 in net turnover, and no more than 10 employees) are not required to comply.

What does the CSRD involve?

Complying with the CSRD means reporting on sustainability risks and impacts. Because its purpose is to support investors, customers and other stakeholders in making informed decisions, the directive calls for a ‘double materiality’ approach. This means businesses have to disclose their exposure to ESG risks, as well as the material impacts their companies have on the environment and society. 

Companies must disclose this information as part of their annual reports, which must be presented digitally in alignment with the European Single Electronic Format.

Reporting must follow the European Sustainability Reporting Standards (ESRS), which act as a template for data collection. For large companies, 12 different ESG topics have been set:

1. General requirements
2. General disclosures
3. Climate change
4. Pollution
5. Water and marine resources
6. Biodiversity and ecosystems
7. Resource use and the circular economy
8. Own workforce
9. Workers in the value chain
10. Affected communities
11. Consumers and end-users
12. Business conduct

SMEs will report against a tailored set of ESRS, although these are currently in consultation.
To provide this information, companies will have to engage their entire supply chains, so even if a business is not within scope of CSRD, it may have to provide relevant sustainability information to suppliers and customers that are.

Timescales for CSRD reporting

Currently, deadlines for CSRD reporting are as follows:

• 2024: Large undertakings already subject to the NFRD begin reporting
• 2025: All other large undertakings not previously covered by NFRD must start reporting
• 2026: Listed SMEs and small credit institutions must report
• 2029: Non-EU companies meeting the thresholds must begin reporting

However, these timescales – along with reporting criteria – may yet change, thanks to the proposed Omnibus Package.

What is the Omnibus Package?

The Omnibus Simplification Package follows calls to reduce the regulatory burden on businesses in the EU, and will affect CSRD, the Corporate Sustainability Due Diligence Directive (CS3D) and the EU Taxonomy. The Omnibus will ostensibly bring about a series of reforms to streamline these directives, and for the CSRD could see the postponement of reporting requirements, changes to the thresholds for applicability and revisions to the ESRS. 

The proposal needs to make its way through Europe’s legislative process and gain the support of the European Parliament and Council, so expected timelines for change are at least 12 months. However, the EU Commission is calling for some elements of the package to be fast-tracked as affected businesses need certainty on their obligations. 

What are the penalties for non-compliance with CSRD?

It will be up to member states to decide any penalties for non-compliance, although we can expect to see financial sanctions imposed. Looking at NFRD rules in Germany, for example, non-compliance means a fine of up to either €10m, 5% of the annual turnover, or twice the amount of the profits gained or losses avoided because of the breach. In France, regulations impose penalties such as fines of up to €18,750 for failing to publish required sustainability reports, while more severe violations can lead to fines of up to €375,000 and prison terms of up to five years.

What’s the difference between CSRD and CS3D?

The CSRD and Corporate Sustainability Due Diligence Directive (CS3D) are designed to complement each other as critical building blocks of the EU’s Green Deal. There are key differences, however. While the CSRD is designed to focus on reporting, transparency and anti-greenwashing, CS3D focuses on tangible action, with companies required to work with suppliers and stakeholders to actively mitigate sustainability risks in their chain of activities.

How will CSRD affect printers?

Regardless of the outcome of the Omnibus Package, many printers will fall outside the scope of compliance due to their size. But as Teresa Borba, Director General of APIGRAF, says, that doesn’t mean they should be complacent. 

“The print industry in Europe is one of mostly SMEs and micro-SMEs whose turnovers don’t fall within the directive’s scope, so CSRD won’t affect them directly,” she says. “However, printers in the supply chain of companies that are within scope will be affected, and they will be required to provide information, data and values that will allow these larger companies to comply.”

It’s for this reason that Borba welcomes the Omnibus Package, as long as it considers the effect of CSRD on smaller companies. “If this system is to work and produce effective, useful, and precise data, the Omnibus Package must take into consideration the actual ability of SMEs to comply not only with what legally binds them, but also with what their clients have to comply with.”

For companies even outside the scope of CSRD, then, this means getting a handle on sustainability data sooner rather than later. “Understand what can be done in-house and what you need help with to build the systems that will meet these demanding requirements,” she says. “Those able to withstand the pressure they face now will emerge stronger.”