Adoption of the European CSRD Directive. What is changing for Greek companies?

Climate change has emerged as the defining global challenge that profoundly affects modern societies and businesses. Climate-related risks and opportunities have become integral considerations in strategic decision-making, forcing companies to re-evaluate their business models, supply chains and commitments to sustainability.

The European Union is increasingly embracing pertinent legislation and initiatives, with a notable example being the Corporate Sustainability Reporting Directive, commonly referred to by its English acronym, CSRD. Adopted in April 2021, the CSRD amends the existing Non-Financial Reporting Directive (NFRD), aligning it with the areas of the EU Taxonomy and substantially increasing the reporting requirements for companies within its scope. This expansion aims to provide users with more comprehensive sustainability information.

Field of application

The proposed directive entails a fourfold increase in the number of companies subject to sustainability reporting requirements in the EU. The existing Non-Financial Reporting Directive (NFRD), which currently applies to around 11,700 companies across the EU for reporting sustainability information, is expected to see an increase to approximately 49,000 companies under the new Corporate Sustainability Reporting Directive (CRSD).

The new requirements will be applicable to large companies, whether listed or unlisted, meeting two of the following three conditions:

• Over 250 employees.
• Turnover exceeding €40 million.
• Total balance sheet (assets) exceeding €20 million.

Listed small and medium-sized enterprises (SMEs), which are particularly important for the Greek economy, are also obligated to disclose sustainability information if they meet two of the following three conditions:

• Over 10 employees
• Turnover exceeding 700,000 euros
• Total balance sheet of more than 350,000 euros

Standardized frames of reference

It is crucial to note that CSRD places a strong emphasis on standardizing reporting practices throughout the EU, aiming for uniformity and comparability of sustainability data. The EU Taxonomy contributes to this objective by offering a framework for categorizing environmentally sustainable economic activities. For this reason, European Sustainability Reporting Standards (ESRS) are being created for the first time.

According to the ESRS, the use of a standardized electronic reporting format (digital tagging) is required, compelling relevant reports to focus on specific numerical data. This requirement aims to enhance the comparability and transparency of sustainability data. Naturally, companies must furnish detailed and structured data to comply with this standard.

For example, in ​​environmental reporting (Pillar E of ESG), companies may have previously reported general information about their efforts to reduce their emissions. However, with the implementation of the CSRD and ESRS, they are now obligated to report exact emission figures in tons, along with the methodology used and progress towards predefined targets. This shift may make reporting more time-consuming and demanding in terms of data collection, confirmation, and verification methods. Similarly, regarding social aspects (Pillar S) and governance aspects (Pillar G), companies will be required to report more detailed data. This may include diversity statistics, employee training hours or supply due diligence, which requires more integrated data monitoring and reporting systems.

It is reasonable to conclude that with the implementation of CSRD, which mandates standardized and detailed sustainability reporting along with digital tagging, companies find it more difficult to make unsubstantiated claims, thereby reducing the occurrence of greenwashing phenomena. Another new requirement in this direction is the compulsory assurance of sustainability reports by third-party independent verifiers.

Ιn conclusion

In conclusion, the implementation of CSRD signals a profound shift in the way companies operate in today’s world, fostering a more authentic and responsible approach to sustainability. It serves to diminish greenwashing tactics and encourage genuine efforts for a more sustainable future. In navigating the complex ESG landscape, companies acknowledge that dedicating time and resources to sustainability reporting is no longer an option but a necessity. CSRD not only compels this transition but also provides a unique opportunity for businesses to align their strategies with global sustainability goals, build trust among stakeholders and ultimately flourish in an era where responsible business practices are not just anticipated but demanded.