If you’ve been engaging with social media in recent times, you’re probably aware that businesses are increasingly being asked to be more transparent about their environmental and social impact, right?
That’s why the European Union introduced the Corporate Sustainability Reporting Directive (CSRD), a set of new rules for companies to report on their sustainability performance.
But who does this apply to? Many people are asking if the CSRD applies to private companies too – and this article will answer that question directly. We’ll explain who needs to comply with the CSRD and dive into the details of the new rules and what they mean for companies, big or small, private or public, based in the EU or elsewhere.
Read also: Does the CSRD apply to the UK, as well?
So, does the CSRD apply to private companies?
As the CSRD is not just a rule for publicly traded companies, it indeed applies to private companies. The European Union wants to see more companies taking sustainability seriously, and that includes private businesses.
In fact, the CSRD will expand the number of companies that must report on their sustainability performance significantly – from around 11,000 under the NFRD (Non-Financial Reporting Directive) to 50,000 under the CSRD.
You might be thinking, “If it applies to private companies, does it also apply to companies based outside of the EU?” And the answer to that is also yes, but with a few caveats. Companies based outside the EU will also need to comply with the CSRD if they meet certain criteria.
Who does the CSRD apply to? Understand its scope
The CSRD applies to a wide range of companies, so here’s a breakdown of who needs to comply:
Large companies
If your company is considered “large,” you will need to follow the CSRD. Large companies are defined as those meeting at least two of the following conditions:
- €50+ million in net turnover: this means the total revenue your company earns each year after subtracting the cost of goods sold;
- €25+ million in assets: this refers to the value of your company’s assets, such as buildings, equipment, and investments;
- 250+ employees: this includes all employees who work for your company.
As we’ve mentioned before, the CSRD doesn’t just apply to companies based in the EU. Foreign companies with a significant presence will have to follow the CSRD if their turnover is €150 million or higher in the EU.
Small and Medium Enterprises (SMEs)
While many SMEs will be exempt, some will still need to comply with the new environmental regulations. If your SME is listed on European markets, you’ll need to meet the criteria to report under the CSRD. This applies to companies that meet at least two of these conditions:
- €8+ million in net turnover;
- €4+ million in assets;
- 50+ employees.
When do companies need to start reporting under the CSRD?
The CSRD establishes a phased approach to reporting, with different deadlines for different groups of companies.
The largest companies, who were already subject to the NFRD, will need to start collecting data beginning in 2024 to report in 2025. These companies are already familiar with sustainability-related reporting, so the transition to the CSRD will be smoother.
Large companies not previously covered by the NFRD will have until the beginning of 2025 to start collecting data, which must be reported in 2026. This gives them extra time to get up to speed with the new requirements.
SMEs, on the other hand, will start collecting in 2026, though they may opt out of reporting until 2028. This gives smaller companies a chance to prepare and adjust their processes without wreaking havoc on their logistics and financial reserves.
Starting in 2028, the CSRD will require reasonable assurance auditing of said reports. This means companies will need to have their reports reviewed by independent auditors to ensure their accuracy and reliability, which further emphasizes the importance of accurate CSRD reporting.
Additionally, companies will need to have a plan in place to reduce their greenhouse gas emissions starting in 2025. This plan must be aligned with the goals of the Paris Agreement, which aims to limit global warming through net zero emissions by 2025.
The CSRD’s impact on businesses: new challenges and opportunities
The CSRD, while a significant step towards a more sustainable future, presents both challenges and opportunities for businesses. Companies will need to adapt their practices and processes to comply with the new reporting requirements.
This can involve significant investments in data collection, reporting systems, and even changes to internal operations. The increased reporting burden can also add to operational costs and require additional resources for data analysis and reporting.
The CSRD is a big shift for businesses, and it’s not all about paperwork – it also opens up some real opportunities. If companies get serious about sustainability, they can find some surprising benefits.
For example, taking sustainability seriously can actually help companies save money. If they become more efficient with resources, reduce waste, and use less energy, companies will cut costs in the long run.
But that’s not all. Today, people are paying more attention to how companies treat the environment and their employees. Companies with a strong sustainability record often attract investors and customers looking for businesses making a positive impact.
This can give them a real competitive edge and be the tiebreaker for their customers.
So, what are the next steps?
The CSRD might seem daunting, but it’s important to remember that it’s a chance for your company to showcase its commitment to sustainability and positive impact. The first step is to understand what data you need to collect.
The CSRD covers three “scopes” of environmental impact:
- Scope 1: includes direct emissions from sources your company owns or controls, such as factory boilers or company vehicles;
- Scope 2: covers indirect emissions from the energy you buy to power your operations;
- Scope 3: this is the most challenging category and includes indirect emissions related to your supply chain and other value chain activities. This includes emissions from your suppliers, transportation, and the use of your products.
Once you’ve collected the necessary data, you’ll need to analyze it to identify trends, assess your company’s overall environmental impact, and develop strategies for improvement. This might involve using specialized software tools to analyze your data, or it could involve working with consultants who have expertise in sustainability reporting.
There are plenty of resources available to help companies with the CSRD’s requirements. The European Commission and other organizations offer guidance, tools, and support for companies preparing for the new regulations.
The sooner you start, the more prepared you’ll be. If you take a proactive approach and collect the right data now, you’ll ensure your company is ready to comply with the CSRD. You’ll also have more time to analyze the information, identify improvement areas, and develop a strong sustainability plan. It will also help showcase your company’s commitment to a better future!
So – does the CSRD apply to private companies as well?
The answer is yes, the CSRD applies to private companies, and it’s crucial to understand the requirements and deadlines. Taking a proactive approach to sustainability reporting will help you meet the regulations while highlighting your company’s commitment to environmental responsibility and responsible business practices.
We at Datanet IoT would be delighted to help you in this journey. We offer many reliable and secure asset and environmental monitoring solutions for your company’s equipment and painless CSRD reporting. Contact us to learn how we can help streamline your operations!
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