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The Corporate Sustainability Reporting Directive is a European directive that takes effect from 2024/2025 for companies of a certain size and requires them to report on their human and climate impact. The aim of this directive is for companies to report transparently on the sustainability topics relevant to it. Read in this whitepaper everything you need to know about the CRSD.
A double materiality analysis is a study that identifies which sustainability themes (based on Impacts, Risks and Opportunities (IROs)) are material to your company. A theme can be material (relevant) for two reasons:
Read in this article which steps you need to take for a DMA.
The European Commission's 'Do No Significant Harm' principle states that economic activities can only be considered sustainable if there are no significant negative impacts in other areas besides positive impacts. Both the EU Taxonomy and the SFDR use this principle.
ESG is the abbreviation for Environmental, Social and Governance factors. These three dimensions are all important aspects of sustainability. ESG policy is thus a synonym for sustainability policy. Not all ESG themes are relevant to every company, as this depends on the sector and context of the company. The CSRD has established several thematic standards for E, S and G themes.
The European Sustainability Reporting Standards are the CSRD standards setting out what companies must report on. These 12 standards are divided into four clusters:
The general standards apply to every company, while the ESG-related standards only apply if assessed as material in the materiality analysis. See a link to the standards here.
The EU Taxonomy is a classification system designed to provide businesses and investors with a common language to determine the extent to which certain economic activities can be considered environmentally sustainable. Thus, this taxonomy determines which economic activities can and cannot be considered 'green'. Both within the CSRD and the SFDR, reference is made to the EU Taxonomy, making it relevant for both companies and investors.
An integrated report (IR) contains relevant information on both financial and non-financial matters, including an organisation's strategy, governance, performance and outlook. An integrated report provides consistency between the financial and non-financial aspects. It thereby clarifies how the organisation creates and destroys value in the short, medium and long term.
This can be visualised by a value creation model (VCM). This type of report was introduced by the International Financial Reporting Standards foundation (IFRS).
Greenhouse Gas Protocol is the most widely used protocol worldwide to calculate and report greenhouse gas emissions. This protocol must be used if an organisation commits to the SBTi. The protocol distinguishes three different types of emissions, scope 1, scope 2 and scope 3 emissions.
The Global Reporting Initiative is an international non-profit organisation that produces sustainability reporting guidelines and standards that allow companies and organisations to report their economic, environmental, social and governance performance, similar to the SASB. The GRI standard is the standard used by most companies worldwide to report on sustainability. In drafting the CSRD standards, the GRI standards, among others, were considered.
Read in this article more about the different frameworks.
Impacts, risks and opportunities (IROs) are the central elements of a sustainability strategy. According to the CSRD, IROs determine which sustainability themes are material to an organisation.
Impacts concern the influence of an organisation on its surroundings (people and environment). Risks and opportunities, on the other hand, deal with the influence that sustainability topics have on the company and thus can have a financial impact.
Corporate Social Responsibility is the concept that a company has a responsibility to society to consider the effects of their business operations on people, the environment and society.
CSR strategies encourage the company to have a positive impact on the environment and relevant stakeholders. The term Corporate Social Responsibility (CSR) is often used internationally to refer to the same.
The Non-Financial Reporting Directive is the predecessor of the CSRD and requires large public-interest organisations to include non-financial statements as an integral part of their annual public reporting requirements. However, the CSRD applies to a larger group of companies and is more far-reaching than the NFRD, which will therefore lapse.
Principal Adverse Impacts are the main negative impacts on people and the environment caused by organisations in which financial institutions invest. According to the SFDR, financial institutions should publish how they deal with the PAI of their investment policies and decisions.
This term is applicable within CSRD. Once the double materiality analysis has determined which themes are material (based on impacts, risks and opportunities), a company should report on Policies, Actions, Metrics and Targets on those material IROs. In this, it is up to the organisation to decide what policies they prescribe, what actions they want to take and how far-reaching the targets are. The indicators are (partly) prescribed by the CSRD, though.
The Partnership for Biodiversity Accounting Financials provides financial institutions with practical guidelines for assessing biodiversity impacts and dependencies, and defines what is needed to ensure that these assessments provide the right information to financial institutions.
The Partnership for Carbon Accounting Financials provides a measurement methodology for financial institutions to measure the carbon footprint of their investments.
The Sustainability Accounting Standards Board is an international non-profit organisation that produces sustainability reporting guidelines and standards that allow companies and organisation to report on relevant sustainability risks and opportunities. In drafting the CSRD standards, the SASB standards, among others, were considered.
The Science Based Target Initiative is the organisation that conducts science-based target analysis with regard to emissions and reduction plans of companies and financial institutions.
For organisations that commit to the SBTi, the SBTi determines how much and how fast they need to reduce their greenhouse gas emissions in the short- and long-term to meet the 2050 targets of the Paris Climate Agreement.
In other words, how much CO2 reduction a company must pursue to contribute to no more than 1.5 degrees of warming. Companies are not required to commit to the SBTi, but an increasing number of companies are doing so because it enables a science-based reduction target.
To measure greenhouse gas emissions, the GHG protocol uses a categorisation of emissions.
The Sustainable Development Goals were adopted by the United Nations in 2015 as a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity by 2030. The 17 goals cover several E,S,G topics. From the government side, the Netherlands is also working on the SDGs, coordinated by the National Coordinator Sustainable Development Goals. Achieving the goals also requires commitment from the business community.
Designed under the European Green Deal, the Sustainable Finance Disclosure Regulation contains a set of EU rules and guidelines to better understand, compare and monitor the sustainability characteristics of investment funds by standardising sustainability disclosures. The SFDR is the counterpart of the CSRD; where the CSRD applies to business, the SFDR applies to financial market participants.
The Task Force on Climate-Related Financial Disclosures was developed to provide consistent disclosures on climate-related financial risks for use by companies, banks and investors. There are four core pillars:
The TCFD asks organisations to develop a scenario analysis to analyse climate-related risks.
The Task Force on Nature-Related Financial Disclosures was developed following the TCFD to provide consistent disclosures on nature-related financial risks for use by companies, banks and investors. There are four core pillars: governance, strategy, risk management and metrics and targets. The TNFD asks organisations to develop a scenario analysis to analyse nature-related risks.
A Value Creation Model shows at a glance what the nature of an organisation is, and how it achieves goals and impacts. The model originates from IFRS's Integrated Reporting Framework. It serves to create integrated annual reports, but is also often used separately as a strategy tool or in sustainability strategies. Read more about the VCM in this article.