The Corporate Sustainability Reporting Directive (CSRD) officially came into effect on January 1. Recently, the European Union granted a two-year reporting delay for corporations based outside the EU and those from certain sectors, extending the compliance deadline to June 30, 2026.
Scope and Impact of the CSRD
The CSRD impacts all companies listed on the EU’s regulated markets, including non-EU entities. U.S. companies with EU-based subsidiaries must comply if they meet specific employee and revenue thresholds. Despite these requirements, many companies are proactively aligning their standards with the CSRD's stringent criteria.
Mandi McReynolds, Workiva’s chief sustainability officer and global vice president of ESG, mentioned in an interview with ESG Dive that individuals are aligning with the CSRD even in the absence of the Securities and Exchange Commission’s paused climate disclosure rule, as they perceive it as becoming the accepted standard by their customers.
Proactive Alignment with CSRD Standards
A recent study by Workiva revealed that 86% of North American respondents not covered by the CSRD plan to align their reporting strategies with the directive. The CSRD's dual focus on climate change’s impact on finances and the environment is prompting companies to rethink their traditional reporting practices. Major players such as PwC offer comprehensive services to help companies comply with CSRD requirements, including consulting on ESG reporting, risk management, and leveraging technology for data collection and reporting.
Key Areas of Focus for Companies
This re-evaluation is occurring in three main areas: 1. Disclosing Both Quantitative and Qualitative Data 2. Reporting Risk Assessment Strategies 3. Obtaining Third-Party Assurance
Companies are particularly concerned about gathering the necessary qualitative information, with 83% of respondents identifying data collection as an organizational challenge.
Study Insights and Demographics
The study, commissioned by Workiva and conducted by Ascend2, surveyed 2,204 professionals involved in ESG reporting at companies with over 250 employees and $250 million in annual revenue. The survey's demographic breakdown included:
- 28% from dedicated sustainability or ESG teams
- 25% from executive leadership
- 20% from operations
- 17% from finance or accounting
- 6% from internal audit or risk management
- 3% from legal or compliance teams
Challenges and Future Outlook
In a separate survey on integrated reporting, Workiva found that 74% of executives believe regulatory compliance will become significantly more challenging in the next year, and 67% are concerned about their company's ability to meet new regulatory requirements.
Investment in Technology and Collaboration
To address these challenges, companies are increasingly investing in staffing and collaboration across teams, focusing heavily on technological solutions. An overwhelming 92% of companies reported initiating investments in technology to meet their reporting needs.
Companies are exploring how tools and teams can collaborate to manage global reporting complexities. As global sustainability reporting regulations evolve, businesses must be ready for transformative changes in both financial and ESG reporting. Embracing technology and innovation, such as generative AI, will be crucial in navigating these complexities and enhancing efficiency and effectiveness in reporting practices.
Conclusion
The CSRD is setting a new standard for sustainability reporting, driving companies worldwide to elevate their practices. As the regulatory landscape becomes more complex, proactive alignment, investment in technology, and cross-team collaboration will be key to achieving compliance and maintaining a competitive edge.