Non-financial Reporting: Introduction of the CSRD
From optional to mandatory: Sustainability reporting for companies has developed considerably in recent years. And the changes are continuing: The introduction of the Corporate Sustainability Reporting Directive in the EU also affects numerous Swiss companies. In addition, the Federal Council has also tightened the rules for sustainability reporting in this country. Zoebeli Communications provides an overview of the most important changes.
On June 26, 2024, the Federal Council launched the consultation on the planned further tightening of sustainability reporting requirements. The changes will affect 3,500 Swiss companies. In future, they would all be obliged to report on risks and measures in the areas of the environment, human rights and corruption.
Swiss companies with locations in the EU
The situation is different for Swiss companies with locations in the EU. Not only the Swiss regulations apply to them. If subsidiaries of Swiss companies meet the requirements of the EU, they are also subject to the provisions of the Corporate Sustainability Reporting Directive (CSRD) applicable there. The conditions depend, among other things, on the size of the company.
If it exceeds at least two of the following three size criteria for two consecutive financial years, it falls into the corresponding size category:
Size Category | Turnover | Total Assets | Employees |
---|---|---|---|
Small | >€ 900’000 | >€ 450’000
| >10
|
Medium Size | >€ 15 million | >€ 7,5 million
| >50
|
Big | >€ 50 million | >€ 25 million
| >250
|
What Will Change with the CSRD?
The CSRD regulations go further than the previous rules in many areas. The three most important changes sound quite technical at first: 1. reporting in accordance with the European Sustainability Reporting Standards (ESRS) 2. inclusion of sustainability-related taxonomy ratios in the sustainability statement 3. disclosure of the (Group) management report in the XBRL (eXtensible Business Reporting Language) and ESEF (European Single Electronic Format) formats with tagging of the sustainability information
When Does CSRD Reporting Have to Start?
For financial years beginning on January 1, 2024: Companies that were already affected by the EU's Non-Financial Reporting Directive (NFRD) For financial years beginning on January 1, 2025: large companies For financial years beginning on January 1, 2026: small and medium-sized companies.
Three editions mean three challenges. But even this task can be mastered. The experts at Zoebeli Communications will be happy to support you.
The following six aspects need to be considered:
1. Reporting in Accordance with the ESRS
With the European Sustainability Reporting Standards (ESRS), the EU is implementing the Corporate Sustainability Reporting Directive (CSRD). There are currently a total of twelve standards with a total of 82 disclosure requirements (also known as DR for short). Unfortunately, reading these standards is no easy task. Unlike the standards of the Global Reporting Initiative (GRI), they are not yet available in a clearly structured form.
2. Reporting along the entire Value Chain
When reporting on sustainability, you must now take into account all influences, effects and measures along the entire value chain of your company. Specifically, this includes upstream processes such as the extraction of raw materials required for production and downstream processes such as the disposal of a product.
3. Materiality Analysis
Based on a predefined list of topics (“climate protection”, “adaptation to climate change”, “sustainable use of water or marine resources”, “transition to a circular economy”, “prevention or control of pollution” and “protection and restoration of biodiversity and ecosystems”), a company must transparently explain and justify which sustainability aspects it considers relevant and which it does not. The focus is not only on the impact of the company on the environment, but also on the impact of the environment on the company. This is referred to as a “double materiality analysis” or “impact materiality” (inside-out) and “financial materiality” (outside-in).
4. IRO
The abbreviation IRO stands for the terms “Impact”, “Risk” and “Opportunities”. It is therefore not enough to simply report on what has been achieved so far. For all disclosure requirements, the sub-topics (data points) must be broken down into all three aspects.
5. Environmental Taxonomy
Companies that are obliged to provide non-financial reporting must also take into account the Environmental Taxonomy Regulation. This is intended to provide regulated, comparable and standardized transparency on how sustainably a company operates. According to the EU Taxonomy Regulation, a company is only considered “sustainable” if it contributes to at least one environmental goal. At the same time, however, it must not violate any other environmental objective.
6. Machine-readable Form
In accordance with the CSRD, the management report including the sustainability statement must be prepared and published in machine-readable form. The implementation of the report in the European Single Electronic Format (ESEF) requires extensive prior knowledge. The information provided in the report is technically labeled (“mapping”) and designated with corresponding terms (“tagging”). The information in the sustainability report is therefore assigned to the appropriate XBRL tag. If no suitable iXBRL tag exists by default for a particular disclosure, corresponding extension elements must be created. These are then linked to the existing elements (“anchoring”). It is easiest to break down the mapping in detail first. Only after a technical check do we recommend conversion to XBRL.
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