Did you know that the Corporate Sustainability Reporting Directive (CSRD) is going to apply in all Member States of the European Union starting from next year? This means that large companies must publish a sustainability report as part of the management report of the 2023 annual report, explaining how business management and commercial activities affect potential social and environmental challenges.
All entities of public interest with over 500 employees are considered large companies that are required to submit this report next year. However, you should keep in mind that the reporting obligation is going to be extended to other companies in the future. All large companies must submit a report about the 2023 financial year, and all small and medium-sized companies listed on the stock market must submit a report on the 2026 financial year. In Estonia, the number of such companies is about 240.
What should a sustainability report contain?
The new directive means that the European Sustainability Reporting Standards (ESRS) will be developed by the autumn of this year, based on the principles and framework of the widespread ESG (environmental, social, and corporate governance) reporting. Therefore, companies must start reporting on their sustainability and responsibility measures and plans adopted when running their business, based on environmental, social, and corporate governance aspects.
Information specific to the sector and company must be disclosed, significantly increasing the transparency of companies and making it easier to compare them with their competitors. Moreover, cross-sector information comparable to that of all companies operating in the European Union is required. Therefore, the dataset is going to be extremely large.
Based on the climate standard alone, it is necessary to disclose how the ESG strategy and business model of the company are in line with the Paris Climate Agreement.
- How does climate change impact the company? How is this impact taken into account in the strategy and business model of the company?
- How is the resilience of the strategy and business model of the company to the transition and physical risks associated with climate change ensured, including in different scenarios of climate change?
- What kinds of risks, opportunities, and impacts are associated with the climate change in the context of the value chain of the company?
- How are sustainability indicators utilised in the motivational and remuneration systems?
- How large is the greenhouse gas emission footprint of the company and how does it compare with the benchmark year?
- Do business decisions (such as investment decisions) take into account their impact on the mitigation of climate change and how?
- How much of the turnover, investments, and expenses of the company are in line with the EU taxonomy of sustainable finance, i.e. are green?
The report is going to become an annual obligation for companies, which must also demonstrate progress compared to the benchmark year. Therefore, the results of each year must exceed the results of the previous year when adopting sustainable and responsible measures and making changes in operations.
What does the new obligation mean for companies today?
Depending on the size of the company, the new reporting obligation might seem like a distant future at the moment, when actually, it is already worthwhile to transform the operation and values of your company to be more responsible and sustainable. Why not establish the first goals for this new financial year when preparing action plans and budgets?
When considering the aforementioned climate standard, approaching all future investments in production, transportation, and real estate through the lens of sustainability and energy efficiency is particularly important. For example, if a company wants to find a new office or new production premises in the next few years, then it should take the necessary steps now to make sure that this investment qualifies as a ‘green investment’ and reduces the footprint of the company. One of the possibilities for this is to construct an energy-efficient green building or to renovate an old building based on the respective requirements.
Forus can help all who are interested by providing consultations on energy-efficient green buildings, based on which technical terms of reference are prepared for the designer. This ensures that all important laws and requirements are taken into account during the construction or renovation and the end result meets the needs of the company and complies with sustainability standards. An energy-efficient design leads to better financing terms for real estate investments. The competent experts of Forus can advise your company during each stage of construction, making it possible to award a LEED (Leadership in Energy and Environmental Design) certificate to your commercial building based on internationally recognised methodology, verifying the sustainability of the building.
You can read more about the energy efficiency consultation here. You can also submit a query on the same page.
