CSRD is a directive on reporting. It specifies which companies are required to report and what they must report. However, it does not dictate how business should be conducted. This should not be confused with regulations such as the CSDDD—the due diligence directive requires companies to act in a certain way (or refrain from acting). The CSDDD also includes a reporting component, but this is only one element of the directive; the essence of the directive concerns action or inaction.
Following CSRD, the standards themselves do not require companies to conduct their business in a specific manner. In short, the requirements contained in ESRS can be summarized in two points: determine which sustainability issues are relevant to your case, and then disclose specific information about them in your report.
ESRS standards do not require any company to have and implement any policy. However, they do require disclosure of whether we have a policy on an issue that is relevant to us, and if we do, to describe that policy in a specific manner. If we do not have a policy, we must state this explicitly. The same applies to actions. We must disclose (in the manner specified in the standards) what actions we are taking in relation to an issue that is material to our company; if we are not taking any action, we must disclose this fact. Targets? The same applies! ESRSs do not require us to set any goals in relation to material sustainability issues, but if we have any goals, we must describe them in a specific way. The same rule applies to metrics. We must disclose (provided, of course, that these issues are material to our company) how much energy we consume, how much greenhouse gas we emit, what our employment structure is, and what accident rates we have recorded. However, the standards do not require us to improve energy efficiency, reduce greenhouse gas emissions, or reduce the number of accidents.
The only two actions required by ESRSs are the performance of a materiality assessment (which is necessary in order to prepare a report) and the preparation of the report itself. All other activities are not required by the standards, but are decided by the company. They may be based on strategy, required by other legal provisions, the result of agreements with financial institutions, or the result of customer and business partner expectations—but they are never required by the ESRS.
It is worth remembering this when preparing a report and conducting a gap analysis, which is popular among many companies. If the gaps detected relate to, for example, data deficiencies, we must address them, because the data will be necessary for us to disclose the metrics. But if the gaps concern policies or actions, we should remember that their absence does not mean non-compliance with standards. Before conducting a gap analysis, we should understand what these gaps will be determined against—whether against the ESRS standards themselves, or, for example, against the average condition of companies similar to ours, or perhaps against good practices prevailing in the market.
Clearly defining what reporting standards require of us and what is caused by other factors allows us to organize our preparation plan. And it usually relieves us of at least some of the pressure, which has been extremely strong lately, as we read everywhere that we need to comply with CSRD and ESRS as quickly and accurately as possible 😊
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