Corporate Sustainability Reporting Directive and Sustainability Due Diligence Directive

This report, developed by the Risk Advisory team of Grant Thornton, summarizes the main issues established in these European legislations for the preparation of sustainability reports and provides a detailed guide for companies on how to implement and comply with these directives. The report identifies the implementation schedule and the main disclosure requirements. It also highlights key concepts such as double materiality and the need to assess impacts, risks, and opportunities in the value chain.

Corporate Sustainability Reporting Directive (CSRD) and Due Diligence Directive (CSDDD)

Report

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"The implementation of the CSRD and CSDDD directives not only ensures regulatory compliance but also strengthens data and risk management in sustainability, becoming a differential vector for companies."

Daniel Fernández, Partner of Risk Advisory at Grant Thornton in Spain.

The CSRD, updating the NFRD almost a decade later, requires EU companies to disclose detailed information and impacts related to sustainability. This necessitates the collection and processing of data to prepare a volume that can exceed 1,000 data points related to environmental, social, and governance issues. The double materiality element is particularly relevant to ensure the prioritization of relevant aspects for companies and their subsequent disclosure.

The CSRD also requires these sustainability reports to be verified by an independent third party to ensure that the reported information is reliable, consistent, and complies with the established requirements.

Is your company within the scope of the CSRD?

The CSRD affects companies of different natures, from public interest entities, large companies, SMEs, and companies outside the EU with significant operations in the European market, each with specific implementation deadlines. Knowing when companies are impacted by the regulation allows for the anticipation of procedures for the collection and analysis of sustainability-related data and raises awareness across all areas of the company, from top management to business and operational layers.

Sustainability Due Diligence Directive (CSDDD)

The CSDDD complements the CSRD by imposing due diligence analysis on negative impacts on human rights and the environment. Companies must implement policies and processes to identify, prevent, and mitigate these impacts. It is crucial to design a transition plan with concrete activities to cover regulatory requirements and monitor these actions using qualitative and quantitative indicators to ensure compliance and anticipate possible deviations.

Steps to adapt to the CSDDD

The directive establishes a set of phases that must be completed to ensure due diligence compliance not only within the company but throughout its value chain.

1. Integration of due diligence into company policies.
2. Identification of actual and potential adverse impacts.
3. Periodic evaluations and monitoring
4. Public communication of due diligence.
5. Prevention and mitigation of adverse impacts.
6. Complaint procedures.
7. Continuous monitoring and updating of policies and processes.