Today, companies face the challenge of balancing financial goals with social and environmental responsibilities. Corporate social responsibility (CSR) has long been an important aspect of the business strategies of many companies, but a new European Union initiative, CSRD (Corporate Sustainability and Reporting Directive), is changing the approach to this issue.
CSRD (Corporate Sustainability Reporting Directive) and CSR (Corporate Social Responsibility) are two different concepts that can often be confused due to the similarity of their abbreviations.
The CSRD, i.e., Corporate Sustainability Reporting Directive, is new European Union legislation that aims to increase the transparency and consistency of sustainability reporting by companies. Here are some key facts about CSRD:
1. Scope extension:
The CSRD aims to extend sustainability reporting obligations to more companies. Currently, this obligation applies only to large and listed companies, while the CSRD is also to cover other large enterprises, including non-public companies and some public sector organisations.
2. Increase in reporting requirements:
CSRD introduces more detailed sustainability reporting requirements. Businesses will need to provide information on their environmental, social and governance impacts. They will also be required to present more specific sustainable development goals.
3. Reporting standards:
The CSRD is based on existing reporting standards such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) standards. Companies will need to use these standards or equivalent ones to ensure consistency and comparability of reports.
4. Audit and independence:
The CSRD also envisages strengthening the role of audit and independence in the sustainability reporting process. Companies will need to use independent audit bodies to verify their reports.
5. Implementation dates:
The CSRD aims to introduce gradual changes over several years. Final implementation dates have yet to be determined but are expected to depend on company size and other factors.
Therefore, it is important to note that the CSRD aims to ensure greater transparency and responsibility of companies in the field of sustainable development. This is expected to improve environmental, social, and business governance in the European Union.
CSR – traditional corporate responsibility
CSR (Corporate Social Responsibility) is a concept that refers to the social and environmental activities undertaken by an enterprise. CSR is related to how a company conducts its activities in a socially responsible manner, taking care of the interests of its stakeholders, including employees, customers, local communities, and the natural environment. The CSR concept is an expression of a departure from the idea that the purpose of an enterprise is solely to maximize profits.
CSR includes a number of activities, such as caring for employee well-being, promoting diversity and equality, protecting the natural environment, ethical business practices, investing in the local community and many others. Companies can engage in various CSR initiatives, such as charitable programmes, reducing greenhouse gas emissions, ethical supply chain management, sponsoring education, and supporting local social projects. The goal of CSR is to strive for sustainable development, i.e., considering economic, socialand environmental aspects at the same time. Companies that practice CSR strive to create value not only for their stakeholders, but also for society as a whole. CSR is a more general concept that refers to a company’s philosophy and approach to social responsibility.
CSR does not have a formal definition, but the idea of this concept is well reflected in the standard of the International Organisation for Standardisation ISO 26000 (Guidelines on social responsibility), which specifies that social responsibility is the responsibility of an organisation for the impact of its decisions and actions on society and the environment, ensured by transparent and ethical conduct that:
– contributes to sustainable development, including the health and well-being of society.
– considers the expectations of stakeholders (people or groups who are interested in the decisions or activities of the organisation).
– is consistent with applicable law and consistent with international standards of conduct.
– is integrated with the organisation’s activities and practiced in its relationships that concern activities undertaken within its sphere of influence.
CSRD – new reporting rules for sustainable development
In turn, CSRD (Corporate Social Responsibility Directive) is a specific legal act – a European Union directive adopted in December 2022, which aims to standardise and strengthen reporting on sustainable development by enterprises. It refers to the way a company communicates its CSR activities and the specific legal provisions that aim to improve the transparency and comparability of information about sustainability activities. CSRD is about publishing information about the social, environmental and governance activities a company undertakes. This is a way to transparently inform stakeholders about the company’s CSR initiatives.
The CSRD is intended to replace the current non-financial reporting directive (NFRD – Non-financial Reporting Directive). The new directive covers more companies, including large non-public companies and listed companies, and introduces more detailed reporting requirements. The CSRD aims to contribute to better monitoring and assessment of the impact of business activities on the natural environment, society, and the economy. In addition, it is intended to serve as a tool to support decision-making by investors, consumers and other stakeholders who are increasingly paying attention to aspects of sustainable development in companies’ operations.
Currently, there are many different sustainability reporting standards and frameworks, making comparability and transparency of information difficult. The CSRD aims to introduce more consistent and precise reporting requirements to make it easier to analyze and compare information on sustainability activities between companies. CSRD refers to the idea of ESG, as mandatory annual reporting concerns the following areas: environmental (E), social (S) and corporate governance (G).
The CSRD also aims to strengthen reporting standards so that companies provide more detailed information on their sustainability activities. The CSRD directive will standardisereports in terms of standards. Reports are to be in the same digital form for all entities. The European Financial Reporting Advisory Group (EFRAG) is developing uniform European Sustainability Reporting Standards (ESRS), according to which sustainable development factors will be reported. The first set of these standards was adopted by the European Commission on July 31, 2023. What is also new is that, in accordance with the CSRD, reports will be subject to mandatory auditing.
CSRD requirements cover aspects such as greenhouse gas emissions, natural resource use, employment, human rights, diversity, supply chain management and other aspects related to social, environmental and governance responsibility. The introduction of more precise and consistent reporting standards aims to increase the transparency, accountability,and comparability of information on sustainable development activities of enterprises throughout the European Union, as well as to counteract the phenomenon of greenwashing.
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