The global landscape of ESG reporting is undergoing a rapid transformation, and the European Union's Corporate Sustainability Reporting Directive (CSRD) is at the forefront of this change. While enacted in the EU, the CSRD’s impact will reverberate across the Atlantic, affecting US companies with operations in the European market.
Why Should US Companies Care?
The CSRD, coupled with the detailed European Sustainability Reporting Standards (ESRS), mandates comprehensive ESG disclosures, covering environmental, social, and governance factors. This includes impacts on climate change, pollution, human rights, and business ethics, extending beyond a company's own operations to encompass its entire value chain.
Who is in Scope?
By 2025 financial year, the CSRD will apply to US companies that meet at least two of the following criteria:
- €40 million in net turnover
- €20 million on the balance sheet total
- 250 or more employees
This also includes US parent companies with subsidiaries in the EU meeting these criteria, and even companies listed on EU regulated markets, regardless of their size. As the CSRD guidance points out, a non-EU company with securities listed on an EU-regulated market is subject to the same sustainability reporting obligations as listed EU companies.
The Time to Act is Now
Although the first CSRD reports will roll out in 2026 (based on 2025 data, early preparation is crucial.
- Data Collection and Management: The ESRS demand granular data, including Scope1, 2 and 3 emissions. With less than 25% of companies reporting Scope 1 and Scope 2 emissions, and even less than 17% for Scope 3 emissions, more robust GHG data collection systems are required.
- Value Chain Engagement: US companies will need to collaborate with suppliers and partners across their value chain to obtain the necessary information, a process that requires time and strategic planning.
- Double Materiality: The CSRD emphasizes "double materiality," requiring companies to assess and disclose how sustainability issues impact their business and how their business impacts those issues.
Benefits of Early Adoption
- Competitive Edge: Aligning with the CSRD can enhance your company's reputation and attract investors who prioritize ESG performance.
- Stakeholder Trust: Transparent reporting builds trust with customers, employees, and communities.
- Improved Sustainability Performance: The reporting process itself can drive internal improvements and innovation.
Key Steps for US Companies
- Deep Dive into the CSRD and ESRS: Understand the specific requirements, timelines, and evolving interpretations; CSRD is quite complex, and the earlier you understand, the more time you’ll have to align your organization accordingly.
- Materiality Assessment: Identify the ESG issues that are most relevant to your business and stakeholders, considering both impact and financial materiality.
- Data Collection and Analysis: Establish systems to gather accurate and comprehensive data from across your value chain.
- Reporting Process Development: Ensure data quality, consistency, and alignment with the ESRS.
- Stakeholder Engagement: Communicate transparently and seek feedback to continuously improve your sustainability performance.
diginex: Your Partner in CSRD Compliance
At diginex, we understand the complexities and opportunities presented by the CSRD. We're not just talking about the CSRD; we're actively integrating it into our solutions. Our diginexESG framework library now includes the ESRS, providing you with a powerful platform to navigate this evolving landscape.
How diginex Can Help
- diginexESG: Leverage our comprehensive platform to streamline your CSRD reporting process, ensuring compliance and unlocking valuable insights.
- diginexAdvisory: Our team of sustainability experts can provide tailored support, from gap analysis and materiality assessments to data management and stakeholder engagement.
Embrace the Future of Sustainability Reporting with diginex
The CSRD is more than just a regulatory hurdle; it's a catalyst for positive change. Partner with Diginex to turn compliance into a strategic advantage, driving sustainability performance and creating long-term value.
