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CSRD Hub Newsletter #2

March 2024


Welcome to the February edition of the CSRD HUB Newsletter.


In this issue, we will look at some of the most noteworthy news, developments and EFRAG updates of the past month in sustainability reporting. We also share lessons learned from teams implementing CSRD as we speak.



Although it is not mandatory yet, we have observed several initial attempts at CSRD reporting for the 2023 period. Many companies have opted to disclose their CSRD-related information, despite it not being perfectly aligned with the ESRS standards.


These organizations are leveraging this transitional phase as they shift from their previous ESG reporting frameworks to CSRD reporting, hoping to eventually merge the two seamlessly. The level of compliance achieved this year will facilitate their gradual progression toward full compliance in the subsequent years.


A few we have seen include


- Signify 2023 Annual Report

Orsted 2023 Annual Report

NetCompany 2023 Annual Report


Are you aware of others? Post them to the HUB!


Our take:


Proactively preparing for forthcoming mandatory regulations is prudent, even if full readiness has not been achieved. Identifying existing gaps enables targeted efforts to bridge them. Historically, most companies focused on single materiality, thus the transition to double materiality often presents the greatest challenge. Reporters are currently exploring ways to integrate this concept into their reporting practices effectively.


Observing how other companies conduct their preliminary Double Materiality Assessments in anticipation of new requirements, and how these efforts build upon their previous work, can be incredibly instructive. It offers valuable insights into how existing resources can be utilized more effectively.


Many companies have released a content index, statements on due diligence, and EU data points. We have also seen Taxonomy-aligned KPIs and a variety of materiality matrices. A notable observation is the imbalance between reported negative and positive impacts, with the latter often being overstated. This will not be acceptable in the fully aligned ESRS reports. 


We recommend reading some of these reports, as they could serve as a guide to your own reporting efforts. Analyzing how other organizations navigate the complexities of CSRD reporting and integrate double materiality into their disclosures can provide practical insights and inspiration for enhancing your own reporting processes.




The importance of being "in controls“


Many of us are gearing up and making sure our processes and controls are fit for purpose for reports we’ll publish in 2025 covering 2024.


Remember: This means having controls in place for data gathered in 2024!


Lesson learned: Work with audit and finance early. One example: One company’s external auditor, as part of a trial run on assurance of GHG data, required new controls for all data owners across 10 countries to implement immediately. This included four-eyes and plausibility checks that were not previously in place consistently.


New to controls or assurance? Learning more about controls will be helpful for all sustainability professionals. This video from Deloitte Netherlands includes an introduction. If you are short on time, focus on 1:00-2:15).




China proposes double-materiality ESG reporting framework


China has issued draft guidelines for a mandatory climate disclosure regime, requiring its biggest listed companies to report on a broad range of sustainability-related risks and impacts from 2025.


The Shanghai, Shenzhen and Beijing exchanges are taking a double materiality approach, requiring companies to report on the impact their activities have on the environment as well as the risks and impact of environmental factors on their business, according to


Around half of China’s listed companies will be obliged to carry out the reporting, including the biggest 180 listed in Shanghai (the SSE 180) along with the top 50 firms on the exchange’s Star 50 science and technology board.


The regulations are set to apply to company activities from 2025 onwards, with the first reports due at the end of April 2026.


The new rules will require companies to reveal a wide array of information, including scope 1 and 2 greenhouse gas emissions. A smaller subset of firms will report scope 3 emissions – those indirectly linked to the company via other actors in its value chain.


Companies’ transition plans and decarbonisation targets are also set to be revealed along with their use of carbon offsets and the processes they have in place to manage climate risks.


The guidelines encourage companies to carry out climate scenario analysis. Other ESG-related information to be disclosed under the new rules includes details of the companies’ anti-corruption and anti-bribery measures.


China’s environment ministry announced limited disclosure rules in 2021 for companies with a track record of pollution or environmental violations. The new regulations from the three stock exchanges also build on voluntary ESG disclosure frameworks unveiled in 2022.


The Swedish government proposes to delay the CSRD by one year


This means that companies with more than 500 employees, and which do not have a broken financial year, will not have to start reporting under CSRD until 2025.


Due to the previous extensive discussions on CSRD, several companies are likely to begin reporting under the new legal requirements next spring, even if it has not yet entered into force. These companies are seen to have a significant head start in their reporting process and in adapting to the ESRS, and will act as guides on content and quality. 


Educational videos about the SME Standards - February 20


​EFRAG has published educational videos about its Exposure Draft ESRS for listed SMEs (ESRS LSME ED) and Exposure Draft for the voluntary reporting standard for non-listed SMEs (VSME ED).


The three videos cover:


1.      Highlights of the two SME Exposure Drafts


2.     LSME Exposure Draft, covering the draft standard in detail, including the main simplifications from the first set of ESRS.


•  the draft shows approximately 50% reduction in data points compared to ESRS set one 

•  it sets the so-called “value chain cap” so it determines legally the maximum detail of information that large undertakings can collect from SMEs in their value chain to prepare their ESRS sustainability statement


3. VSME Exposure Draft, covering the draft standard in detail.


VSME is a tool to support SMEs in accessing sustainable finance. 


While there are costs associated with reporting, this standard may allow SMEs:


•  to start their ESG journey by monitoring their sustainability performance in a very simplified way

•  to use a single standardized data set to respond to different questionnaires from business counterparties, such as lenders, investors, corporate clients, that require data. 


They are expected to replace the multitude of questionnaires with only one standardised VME questionnaire.


VSME has a modular approach with three different modules:


•          basic module

•          narrative module

•          business partners module 


It will cover about 23 million non-listed SMEs in Europe


The EFRAG SRB approved the ESRS LSME ED on 15 December and VSME ED on 29 November 2023. The Exposure Drafts were released for public consultation on 22 January and the consultation period expires on 21 May 2024.


Click here to watch the videos on EFRAG’s Youtube channel!


Public consultation on digital taxonomies - February 8


EFRAG launched a public consultation on Draft XBRL Taxonomy for ESRS Set 1. In addition, EFRAG consults on the Draft XBRL Taxonomy for Article 8 disclosures. The consultations will be open until 8 April 2024. 


The digital taxonomies enable the marking up ('tagging') of sustainability reporting in machine-readable XBRL format. 


 The ESRS Set 1 Draft XBRL Taxonomy enables digital tagging of ESRS statements by providing XBRL elements (or 'tags') for every datapoint and dimensional disaggregation defined in the ESRS disclosure requirements. An XBRL software should be used for processing the XBRL taxonomy.


The first set of technical Explanations - February 5


EFRAG released the first set of technical Explanations provided to assist stakeholders in the implementation of the ESRS via the EFRAG ESRS Q&A Platform. 


The Explanations are grouped in chapters according to their nature (cross-cutting, environment, social, governance):



•  SBM-1 sector breakdown and phase-in 

•  Transitional provisions 750 employees 

•  Entity-specific guidance and examples 

•  ESRS 2 GOV disclosures and specifications in the topical ESRS 

•  Minimum number of material matters 

•  Time horizon: impact versus financial materiality



•  Energy mix 

•  Scope 3 GHG emissions for insurance companies

•  Subsidiaries, holding company – alignment for GHG protocol 

•  Disclosure Requirement E1-6 

•  GHG Protocol Scope 3; Sector 



•  Definitions of non-employees  




The CSDDD saga continues


The vote failed on the final compromise text for the Corporate Sustainability Due Diligence Directive (CSDDD) at the COREPER meeting on 28 February.


The European Parliament must approve the CSDDD by March 15 for it to be adopted prior to the elections. However, it faces an earlier deadline of March 7 to get approval of the legal affairs committee, commonly referred to as JURI, although there are some procedural steps that can be taken to allow for a later JURI vote.


The blockage was caused by some of the biggest member states. Germany announced its abstention early on, while France suggested a tenfold increase in the company threshold as a last-minute attempt to derail negotiations.


Council and Parliament agree to establish an EU carbon removals certification framework


Council and European Parliament reached a provisional political agreement on February 20 on a regulation to establish the first EU-level certification framework for permanent carbon removals, carbon farming and carbon storage in products. The voluntary framework is intended to facilitate and speed up the deployment of high-quality carbon removal and soil emission reduction activities in the EU.


Once entered into force, the regulation will be the first step towards introducing a comprehensive carbon removal and soil emission reduction framework in EU legislation and contribute to the EU’s ambitious goal of reaching climate neutrality by 2050, as set out in the European climate law.


The deal reached today is provisional, pending formal adoption by both institutions.


Air quality: Council and Parliament strike deal to strengthen standards in the EU


The Council presidency and the European Parliament’s representatives reached a provisional political agreement on February 20 on a proposal to set EU air quality standards to be attained to achieve a zero-pollution objective, thus contributing to a toxic-free environment in the EU by 2050. It also seeks to bring EU air quality standards in line with the World Health Organization (WHO) recommendations.


The new rules will hopefully improve the air quality we breathe and help us effectively tackle air pollution, thus reducing premature deaths and health-related risks.


Greenwashing: how EU firms can validate their green claims


The Internal Market and Environment Committees adopted their position on February 14 on the rules on how firms can validate their environmental marketing claims.


The so-called green claims directive complements the already-approved EU ban on greenwashing. It defines what kind of information companies must provide to justify future environmental marketing claims. It also creates a framework and deadlines for checking evidence and approving claims and specifies what happens to companies who break the law.


“Our agreement on this text ends the proliferation of deceitful green claims which have tricked consumers for far too long. It also ensures that businesses have the right tools to embrace genuine sustainability practices,” said Parliament’s rapporteur Cyrus Engerer for the Environment Committee. 


Commission presents recommendation for 2040 emissions reduction target of 90%


Based on an impact assessment, the Commission recommends a 90% net greenhouse gas emissions reduction by 2040 compared to 1990 levels.


The Commission will be launching a discussion with all stakeholders and a legislative proposal will be made by the next Commission, after the European elections. 


The European Climate Law, which entered into force in July 2021, enshrines in legislation the EU's commitment to reach climate neutrality by 2050 and the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels.


The EU has since adopted a legislative package known as ‘Fit for 55' which will enable the 2030 targets to be delivered. The Climate Law also required the European Commission to propose a climate target for 2040 within six months of the first Global Stocktake of the Paris Agreement, which took place in December 2023. Once the 2040 climate target is adopted, under the next Commission, that target will form the basis for the EU's new Nationally Determined Contribution under the Paris Agreement.


Environmental, social and governance (ESG) ratings: Council and Parliament reach agreement


The Council and European Parliament reached a provisional agreement on February 5 on a proposal for a regulation on environmental, social and governance (ESG) rating activities, which aims to boost investor confidence in sustainable products.


ESG ratings provide an opinion on a company’s or a financial instrument’s sustainability profile, by assessing its exposure to sustainability risks and its impact on society and the environment. ESG ratings have an increasingly important impact on the operation of capital markets and on investor trust in sustainable products.


The new rules aim to strengthen the reliability and comparability of ESG ratings by improving the transparency and integrity of the operations of ESG ratings providers and preventing potential conflicts of interest.


Under the new rules, ESG rating providers will need to be authorised and supervised by the European Securities and Markets Authority (ESMA) and comply with transparency requirements, in particular about their methodology and sources of information.

New tool for CSRD Hub subscribers


Earth Academy has worked with many leaders and advisors as they build capacity to lead companies on their CSRD reporting journeys. For more information on how we can help, see CSRD HUB.

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