Two critical things you should know about the CSRD if you are US company

If you are an American held company operating in Europe, you may think that the EU’s announcement of the new *Corporate Sustainability Reporting Directive (CSRD) mandate doesn’t impact your company. Think again. The CSRD is set to impact over 50,000 companies (both EU and non-EU) over the next few years. 

While the EU’s focus on corporate sustainability efforts isn't a new thing, this initiative is certainly more far- reaching and intensive than seen before. It is much broader than those proposed in the U.S. and includes both how sustainability risks and opportunities affect a company's financial performance along with how they affect people and the environment. 

Here are two things you need to know to understand the implications:

1. The Scope:

The current CSRD guidelines apply to EU-based public and private organizations as well as EU subsidiaries of non EU-parent companies that have:

a) 250+employees

b) €40m+ annual revenues,

c) €20m+ balance sheet.

However, the CSRD will eventually layer on separate requirements for non-EU companies, extending the scope of firms and reporting to cover the whole entity including the parent company, not just their EU activity.

The second wave of requirements will apply if a non-EU parent company has €150m+ in annual EU revenues, with at least one branch or subsidiary where:

a) the branch has €40m+ in annual EU revenues,

b) the subsidiary is either EU-listed or meets the large criteria above.

Source: Watershed.com

2. The Investment, Resources & Stakeholder Coordination:

The CSRD requirements are not trivial and require careful planning, coordination across all company stakeholders, and strategic prioritization and decision making. On average, it takes 12 to 18 months for companies to fulfill the disclosure requirements of the CSRD and EU Taxonomy with a dedicated team driving the effort and managing the required involvement of other internal and external stakeholders, such as suppliers and customers. Companies that don’t start to plan, budget, and take proactive steps to get ready, will find themselves disrupted mid-year by the demands of this directive while missing out on the opportunity to create a strategic business value out of this effort.

The Bottom Line

While affected companies don’t get a choice in whether or not to comply, they do get to choose whether or not they use the reporting process and gathering of information to their greater advantage. 

The CSRD and EU Taxonomy will provide enlightened companies the incredible potential for growth, increased value and positive environmental impact, and overall viability.  Those who approach this as more than just a disclosure requirement and go beyond the minimum to “just tick the box” will see great opportunities for value creation.

And we are here to help.

Download our CSRD Guide and contact us to understand:

• Whether your company falls within the scope of this directive

• The reporting requirements

• The scope of the effort and investment required

• The recommended approach to take to successfully implement the report and gain the most value out of the process

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