Sustainability guide:

The CSRD is a European Directive on reporting on the sustainability of business activities on the basis of various sustainability criteria which large companies must adhere to. As of 2024, large companies previously subject to the NFRD are required to draw up this sustainability report. From 2025, large companies previously not subject to the NFRD will also be required to report under the CSRD. You are a ‘large company’ if your business ticks at least two of the three following boxes:

1. More than 250 employees
2. Annual turnover of more than €50 million
3. More than €25 million on the balance sheet

From 2026, the CSRD will also apply to listed SMEs, and it’s expected that unlisted SMEs will follow after that.

If you don’t have to comply with the CSRD (are at least not yet), that does not mean this legislation won’t have any impact on you. Your relations may have to deal with it and may also need information from your company to get their reporting in order.

The CSRD is based on ESG aspects and particularly focuses on the specific reporting and transparency requirements related to sustainability efforts in large companies. These requirements are detailed in the European Sustainabilty Reporting Standards (ESRS).

Both the SFDR and the CSRD are part of the EU’s Sustainable Finance Action Plan (SFAP).

If you are getting started with CSRD and looking for ESRS-compliant carbon reporting, CFP can support you in this. Find out how our experts can help you comply with the reporting legislation.

IFRS provides the foundation for the laws on financial reporting enacted worldwide. Financial materiality plays a major role in this. The institute that manages IFRS also rolled out the International Sustianability Standards Board (ISSB), which includes the Sustainability Accounting Standards Board (SASB).

The Sustainability Accounting Standards Board (SASB) is working on clear sustainability standards for financial reporting. To this end, the SASB takes a sector-based approach and develops standards for specific sectors. The SASB Materiality Map is a good example: this tool makes it easy to display the relevance of sustainability issues. This helps companies find out what factors affect their financial performance and what they therefore need to focus on. It also provides investors with important information for making decisions.

The SASB sets sustainability guidelines by sector, which largely correspond to the GRI requirements. One difference is that the SASB looks more at the external factors affecting a company’s financial status, whereas GRI takes the opposite approach and looks more at how business decisions impact the environment and society.

In 2021, the COP26 climate conference decided to incorporate the SASB, along with other entities, into the Value Reporting Foundation.

The GRI is an international organisation that creates guidelines for sustainability reporting. It’s a framework that helps companies and organisations worldwide “identify, gather and report ESG information in a clear and comparable manner”. GRI thus facilitates communication about ESG factors and how companies deal with them, regardless of their size, industry or country of establishment. A CSRD report often includes reporting under guidelines such as the GRI. The GRI is the most widely used standard for sustainability reporting and was developed in 1997.

The TCFD also stems from the 2015 Paris Agreement. The TCFD was created by the G20 – an international forum comprising 19 countries, the European Union and the African Union – together with the international Financial Stability Board (FSB). The TCFD is a framework that makes recommendations on managing and reporting climate risks. It mainly addresses financial risks, in order to ensure that banks, shareholders and investors can monitor a company’s ESG efforts. It was created with the aim of helping companies understand how climate change could affect their business.

Whereas the TCFD focuses on guidelines for measuring and reporting the financial impact of climate risks, the GRI has a broader scope that includes social factors.

The SFDR is a European Regulation that aims to increase the transparency of financial institutions, particularly with regard to how they consider sustainability risks and opportunities in their investment decisions. It also requires institutions to adjusted their remuneration policy on the basis of sustainability risks.

One of the key differences between the SFDR and the TCFD is the target group. The TCFD is aimed at companies worldwide and the guidelines serve their stakeholders, such as investors. The SFDR operates at the European rather than global level and applies to financial actors such as banks, investment advisers and managers of large assets. Like the TCFD, the SFDR serves investors by facilitating fair and comparable reporting, thus putting an end to greenwashing.

The NFRD is the precursor to the CSRD; both are European Union Directives. The NFRD operated on a much smaller scope and focused only on public interest entities (PIEs) with more than 500 employees. So the scope of the CSRD is a lot wider.

The NFRD was created in 2014 with the aim to “strengthen accountability and help stakeholders monitor and assess companies’ ESG performance”. That meant it also focused on how sustainability factors affect companies’ operations and vice versa.

The EU Taxonomy provides guidance on investments in sustainability. It clarifies which economic activities are and are not allowed to be called ‘sustainable’ based on their “scientifically tested contribution to preventing climate change or mitigating its effects”. Technical screening criteria have been established to determine whether an activity contributes to at least one of the goals set by the EU Taxonomy. This is called the ‘substantial contribution’ requirement.

Besides this requirement, two conditions apply. First of all, the ‘Do no significant harm’ principle. This ensures a focus on preventing damage to the environment.

The other condition focuses on social sustainability and is called ‘Minimum social safeguards’. To be allowed to be called sustainable, an activity must be in line with various guidelines on human rights, working conditions, social responsibility and anti-corruption.

The CSRD is a reporting framework belonging to the EU Taxonomy classification system. The CSRD thus requires companies to report on their sustainability performance based on this guidance. The SFDR also expects financial institutions to be transparent about how their products follow EU Taxonomy standards.

Valuers must also consider ESG and climate risks when valuing an office, distribution centre or shop. This can be done based on the Sustainability Paragraph, also referred to as the DuPa 2.0. It comprises eighty criteria focused on sustainability and climate risks.

CFP’s DuPa module provides instant insight into a building’s sustainability characteristics and how this translates into energy efficiency, climate resilience and the business case.

With the SP Module, our experts can show you which innovative and cost-saving sustainability measures can be implemented in a building. If you are interested, contact us here.