Understanding CSRD: A strategic turning point for French companies
In today's globalized and ecologically conscious world, sustainability has become a central issue for businesses. The Corporate Sustainability Reporting Directive (CSRD), recently adopted by the European Union, marks a significant shift in how French companies must approach sustainability reporting. But what exactly is the CSRD, and what concrete changes will it bring to French businesses?
What is the CSRD?
The CSRD is a European directive designed to enhance and standardize non-financial reporting, with a strong focus on Environmental, Social, and Governance (ESG) criteria. This directive replaces the Non-Financial Reporting Directive (NFRD) and significantly expands its scope, now covering a much larger number of companies, including listed SMEs.
Starting from 2024, companies will need to comply with this new requirement and publish detailed reports on their sustainability performance. Reporting will no longer be just about compliance; it will become a strategic element integrated into corporate management.
CSRD Implementation Timeline
The CSRD introduces new requirements that will be implemented progressively, allowing companies to adapt to these significant changes. Here is the structured timeline for the implementation of the CSRD:
From January 1, 2024:
- Large companies already subject to the NFRD: These companies must apply the CSRD for reports related to the year 2024, with the first publications scheduled for 2025. This mainly concerns companies with more than 500 employees that were already required to publish non-financial information.
From January 1, 2025:
- Large companies not covered by the NFRD: Those that meet at least two of the following three criteria: more than 250 employees, a turnover exceeding 40 million euros, or a balance sheet total exceeding 20 million euros. They will need to comply with the CSRD for reports related to the year 2025, with publication in 2026.
From January 1, 2026:
- Listed SMEs: These companies will need to comply with the CSRD for reports related to the year 2026, with the first publication in 2027. However, they can request a one-year postponement, allowing them to start in 2027 for a 2028 publication.
From January 1, 2028:
- Non-European companies: Those with significant subsidiaries or branches in the EU will also need to comply with the CSRD, ensuring consistency in reporting on a global scale.
Concrete Changes Brought by the CSRD
Broadened Scope: Unlike the NFRD, which only applied to large companies, the CSRD now applies to a broader range of entities, including certain SMEs. Affected companies will need to be transparent about a wider range of ESG criteria.
More Stringent Reporting Standards: The CSRD mandates the use of specific reporting standards, based on global frameworks such as those developed by the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB). This means companies will need to adopt a more rigorous, systematic, and verifiable approach to their ESG reporting.
Mandatory Audits: Another novelty introduced by the CSRD is the requirement for companies to have their sustainability reports verified by a third-party auditor. This enhances the credibility of the information published and imposes a verification standard similar to that of traditional financial reports.
Double Materiality: The CSRD introduces the concept of double materiality, requiring companies to assess not only the impact of their activities on the environment and society but also the impact of sustainability-related risks and opportunities on their own financial performance.
Strategic and Organizational Transformation: Implementing the CSRD goes beyond simple reporting. Companies will need to rethink their overall strategy to integrate ESG issues across the board. This involves reorganizing internal processes, increasing staff training, and strengthening collaboration with external stakeholders.
Strategic Implications for French Companies
For French companies, the CSRD represents both a challenge and an opportunity. On one hand, the cost of compliance can be high, especially for SMEs. On the other, those who can adapt quickly and effectively can gain significant competitive advantages.
Competitive Advantage: Companies that integrate ESG practices into their overall strategy will benefit from better reputations, attract investors and talent more easily, and access new markets where sustainability is a key criterion.
Risk Management: The CSRD encourages better identification and management of sustainability-related risks, which can reduce exposure to environmental or social crises.
Innovation and Value Creation: By integrating ESG criteria into their strategy, companies will be encouraged to innovate and develop new, more sustainable products or services, meeting the growing expectations of consumers.
Conclusion
The CSRD marks a turning point for French companies in terms of sustainability reporting. Although compliance may pose a challenge, it also offers a unique opportunity to stand out in the market, improve risk management, and contribute to a more sustainable future. To successfully navigate this transition, it is essential for companies to take a proactive approach, integrating ESG issues at the heart of their corporate strategy.
Has this article helped you understand the challenges of the CSRD for your business? Feel free to share your thoughts in the comments or contact our team to discuss it further.