CSRD Omnibus Changes – What does this mean for your business?
Recently, the EU approved the ‘Stop-the-Clock’ proposal, delaying CSRD reporting requirements by two years for companies set to start next year. The CSRD mandates detailed ESG disclosures from companies.The delay to reporting resulting from the Stop-The-Clock proposal gives the EU time to pass the second Omnibus proposal which aims to simplify and streamline the regulation for these companies. This process will take time, and it is unlikely we will have full clarity on the updated regulation and standards until late 2025 at the earliest. Since the EU has not yet finalised negotiations and legal certainty about the CSRD’s applicability remains unclear, many forward-thinking companies continue to voluntarily report on sustainability.
Companies who were due to publish their first sustainability statement next year should now work on the basis that they will publish their first statement in 2028 on 2027 data. These companies should not take their foot off the pedal but rather look at this delay as an opportunity to be confident and ready to report by 2028.
This means that you have both more time to prepare to publish your first statement, and more time to improve your company’s sustainability performance in time for the publication of this first statement.
Time to prepare
The CSRD requires companies to report under the European Sustainability Reporting Standards (ESRS), which reflect the principle of double materiality. For companies who have yet to start your Double Materiality Assessment (DMA), it is strongly recommend that you do so as soon as possible. Various industry bodies are recommending continuing with your double materiality process regardless of regulatory changes. For example, Dublin Chamber of Commerce recommends continuing reporting and taking proactive steps such as the DMA to position your company for success amidst regulatory changes. Similarly, sectoral organisations (such as the Construction Industry Federation) and auditors (such as KPMG) recommend continuing to take actions to ensure compliance despite regulatory evolutions. There are also further benefits to conducting a DMA whether you are within or out of scope for CSRD.
Benefits of conducting a Double Materiality Assessment
- Resilience: A Double Materiality Assessment provides businesses with a holistic understanding of their potential and actual Environmental, Social and Governance (ESG) impacts, risks and opportunities, giving leadership a more complete picture of sustainability across the entire value chain (suppliers, own operations, and customers). Uncovering risks and opportunities in your value chain can help identify strategies to mitigate and remediate these risks, thereby building business resilience.
- Strategy: A DMA can help embed ESG priorities into business strategy, governance, and operations, and assist to focus resources on the most material issues, improving sustainability performance where it matters most.
- Reputational benefits: The assessment builds credibility, transparency and trust with investors, regulators, customers, financial institutions and society by showing that you are proactively managing ESG impacts and risks.
- Access to funding: Standardised and auditable sustainability reports enable investors to assess and understand your business’ commitment to sustainability, setting you apart from competitors and improving potential access to finance. Many investors are demanding robust ESG disclosures, and a double materiality assessment meets this need and helps to build alignment with investor reporting requirements e.g. EU Taxonomy and SFDR.
- Sustainability performance as a differentiator: Many ESG ratings platforms, used to benchmark companies, are aligning to the sustainability matters outlined in the CSRD. Undertaking a DMA improves competitiveness as it helps to better understand how you stack up against peers and identify areas for improvement across the business.
Regardless of whether or not publishing a CSRD Sustainability Statement is mandatory for your company, mature companies are already working towards this goal, ensuring that come 2028 they have no datapoint gaps and are confident they can produce a compliant report reflecting their ongoing sustainability work.
Time to take action
- Rather than delaying action, companies should use this time to strengthen internal systems, enhance data quality, and fully embed ESG into decision-making. Below, we outline key areas where companies can focus to implement sustainable actions ready for reporting Establish a Reporting Strategy: Establishing a solid reporting strategy can be done in several ways and will be an asset to your business whether or not you are in scope of CSRD reporting. This can be done through several steps, including: Appointing a sustainability lead or team to coordinate efforts, Involving cross-functional departments: legal, finance, risk, HR, procurement, operations, and communications, Identifying quantitative and qualitative metrics using the standards, Building or upgrading internal systems for data collection, management, and auditability, and Developing documentation and evidence trails for each reported KPI.
- Taking Climate Action: Starting on your company’s decarbonisation journey ensures you have policies, actions, and targets to report in your company’s first sustainability statement. Such actions include measuring Scope 1, 2 and 3 Carbon Emissions, developing a decarbonisation strategy, and setting 1.5-degree carbon reduction targets.
- Developing Broader Sustainability Strategy for your Company: Ensuring that your company has a sustainability strategy in place across different business units allows the management of material impacts, risks and opportunities across your business in a targeted way, ensuring that there are actions to report on for each standard. This could include the development of a Responsible Sourcing Strategy to engage your supply chain and prevent, mitigate or manage your material upstream impacts
How can we help?
Goodbody Clearstream offer a wide range of services to help companies with sustainability reporting and to improve their performance on sustainability. Get in touch to discuss how we can assist on your Reporting and ESG Implementation journey.
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