At element61, we help shape initiatives around relevant ESG data architecture, data collection (both manual and automatic), as well as the management and regulatory reporting around it.
What is ESG and CSRD
ESG stands for Environmental, Social, and Governance, which are the three central factors in measuring the sustainability and societal impact of an investment in a company or business. ESG criteria help determine the future financial performance of companies by assessing their return and risk. CSRD stands for Corporate Sustainability Reporting Directive, a European Union directive aimed at improving and standardizing the sustainability reporting of companies. It requires companies to report on how their business activities impact the environment and society, as well as how sustainability issues affect their business.
Importance in Business and Reporting Contexts
ESG is crucial in the business context as it enhances reputation, drives innovation, and attracts investment. Companies that prioritize ESG are viewed more favorably by stakeholders, reduce risks related to compliance and social responsibility, and develop innovative solutions for efficiency and sustainability. Investors increasingly seek companies with strong ESG practices, seeing them as more sustainable and less risky.
CSRD is important in the reporting context because it standardizes reporting, improves transparency, supports decision-making, and promotes sustainability. It provides a consistent framework for companies to report on sustainability, making it easier for stakeholders to compare and evaluate performance. Detailed ESG reporting enhances transparency and accountability, helping investors, regulators, and other stakeholders make informed decisions about a company's sustainability practices and performance. By mandating ESG reporting, CSRD encourages companies to adopt more sustainable practices and contribute to a greener economy.
End of February 2025, the European Commission published a comprehensive package of proposals (‘Omnibus’) to simplify the CSRD regulations for companies while promoting sustainability and competitiveness.
The key elements of the proposal are as follows -
- Redefinition of Scope
The definition of 'large' companies subject to CSRD is adjusted to companies with more than 1,000 employees AND either €50 million in revenue OR €25 million in total assets - Voluntary Reporting for SMEs
Since many SMEs are part of the supply and value chain of companies falling under CSRD, an option for voluntary reporting is provided (EFRAG – VSME standards) - Postponement of Reporting Requirements (CSRD)
Reporting requirements for companies originally set to report in 2026 and 2027 could be postponed until 2028 - Simplified Reporting (CSRD)
ESRS data points will be reduced and clarified for consistency. The proposal excludes sector-specific standards - Value Chain Limit
The proposal aims to protect smaller enterprises in the supply and value chain from excessive reporting requests through a so-called value chain limit. SMEs may still be asked to provide limited information (linked to VSME) - Audit.
Publishing and certifying sustainability information remains mandatory under this proposal - Removing the Reasonable Assurance Standard
It is proposed to maintain limited assurance instead of transitioning to reasonable assurance for the time being. The European Commission will publish specific assurance guidelines by 2026
Impact on Businesses
Simplifying the rules for EU companies will help businesses transition to a sustainable economy in a practical and effective way, making the regulations more relevant, balanced, and attractive.
Additional Information
- All other sustainability regulations remain in effect.
- On the same day, the Clean Industrial Deal was introduced, emphasizing decarbonization and the circular economy.
- Stakeholders such as employees and banks continue to prioritize ESG.
- Carbon calculations, vision and strategy development, and reporting remain essential, though they will not necessarily follow the CSRD reporting framework.
This package is still in the phase of "a proposal at the European level." This proposal must still go through the necessary steps for approval in the European Parliament before it can be incorporated into Belgian legislation. It is too early to comment on the timeline, and until further notice, Belgian legislation remains applicable.
Keen to read more & learn all about ESG & link with your data, check out our Whitepaper: A deep dive into ESG analytics or contact us!
