As the Corporate Sustainability Reporting Directive (CSRD) continues its rollout across Europe, it represents a significant shift in how companies approach transparency and sustainability. Aimed at fostering more sustainable business practices, the directive mandates extensive reporting requirements on environmental, social, and governance (ESG) issues. However, despite the July 6th deadline, only nine out of 27 EU member states and three European Economic Area (EEA) countries have fully transposed the CSRD into national law. This staggered implementation presents a complex and uncertain environment for companies, particularly those operating in countries where the directive has not yet been formalized. This article explores the current status of the CSRD implementation and outlines essential steps companies should take to ensure compliance and strategic alignment.

This article was written by Leene Timmermann and Iman Zalinyan. Leene ([email protected]) and Iman ([email protected]) are part of RSM Netherlands Business Consulting Services, with a strong focus on ESG and Strategy matters.

Why now?

It is crucial for companies to start preparing for CSRD compliance now because the reporting requirements will soon be in full effect, with large companies required to report on the year 2025. These final months of 2024 are critical because setting up the necessary structures and processes in advance is essential for smooth and timely reporting. Establishing robust data management systems, aligning ESG strategies, and conducting gap analyses now will enable companies to capture the required data throughout 2025, rather than scrambling to retroactively piece together information. Proactive preparation will not only ensure compliance but also avoid last-minute stress, allowing companies to focus on refining their sustainability practices and enhancing their competitive position. The sooner these systems are in place, the better equipped a company will be to meet the CSRD’s stringent demands and to report with accuracy and confidence.

The CSRD's implementation is progressing at varying rates across Europe, with only a limited number of EU member states and EEA countries having fully transposed the directive into national law. While this staggered approach creates complexities for companies, especially those operating across multiple jurisdictions, it’s important to note that the core requirement of reporting on the European Sustainability Reporting Standards (ESRS) based on double materiality remains unaffected. Regardless of national transposition, companies will still need to conduct thorough double materiality assessments and report accordingly. Most of the national adaptations will likely focus on the scope and application of the directive, rather than altering the fundamental reporting obligations. This means that companies cannot afford to delay their preparations and must ensure they are ready to meet these core reporting requirements,  regardless of the specific national nuances that may emerge later.

Implications for companies in countries without CSRD transposition

For companies in countries where the CSRD has not been officially transposed into national law, the situation is particularly challenging. The absence of clear, national guidelines introduces a level of uncertainty that could hinder preparation efforts. However, waiting for formal legislation is not an option. Companies must act now to prepare for eventual compliance, as delays in adaptation could lead to significant regulatory risks and competitive disadvantages.

Double Materiality: A Strategic Imperative 

To effectively navigate the CSRD, companies should begin by assessing double materiality—a core concept of the directive. Double materiality involves evaluating the environmental and social impacts of a company's operations and understanding how these sustainability issues affect the company's financial performance. This holistic approach is not only essential for compliance but also enhances strategic decision-making and builds stakeholder trust.

Gap Analysis: Identifying and Bridging Compliance Gaps

A comprehensive gap analysis is critical. This process identifies discrepancies between current practices and CSRD requirements. By pinpointing areas needing improvement, companies can make necessary adjustments to meet all directive aspects once it is transposed into national law. This proactive measure safeguards against future regulatory surprises.

ESG Strategy: Integrating Sustainability into Core Business Practices

Aligning ESG strategies with the CSRD is essential for companies looking to thrive in the new regulatory environment. Integrating sustainability goals into the core business strategy ensures that these objectives are not merely peripheral but central to the company's mission and operations. This alignment drives long-term value creation, enhances reputation, and meets the growing expectations of stakeholders who are increasingly focused on sustainability.

CSRD Data Management: Building a Foundation for Reliable Reporting

Robust data management systems are vital for CSRD compliance. Companies must establish processes for accurate, comprehensive, and consistent data collection, management, and reporting. This infrastructure supports reliable sustainability reporting and builds a foundation for continuous improvement and regulatory adherence. Investing in data management systems now will pay dividends as reporting requirements become more stringent.

Forward Thinking

As 2024 approaches, companies must act decisively to prepare for the CSRD. Emphasizing double materiality, conducting gap analyses, aligning ESG strategies, and implementing robust data management systems are not just compliance steps but strategic initiatives that position businesses as sustainability leaders. By taking these proactive measures, companies will mitigate risks, enhance their competitive edge, and contribute to a more sustainable future.

RSM is a thought leader in the field of Sustainability and Strategy Consulting. We offer frequent insights through training and sharing of thought leadership that is based on a detailed knowledge of regulatory obligations and practical applications in working with our customers. If you want to know more, please reach out to one of our consultants.