CFOs: Are You Ready for CSRD?

Have you heard of the Corporate Sustainability Reporting Directive (CSRD)? If you haven’t you are not alone - many business leaders are unaware of the EU regulation. However, it’s time to understand this new directive and the risks non-compliance poses for your business. 

CSRD will require organisations to report on a variety of ESG metrics and is expected to impact more companies than any previous sustainability regulation. If non-compliant, businesses can face hefty fines, and with 2025 around the corner - it’s crucial to get your house in order as soon as possible.

With expert guidance from our partner Thrust Carbon, we outline the basics of CSRD, the consequences of non-compliance and how to get ahead of its imminent arrival.

What is CSRD?

CSRD is an upcoming EU legislation which requires businesses that operate within the EU to report on their emissions, in order to improve transparency and accountability, ensuring that business decisions factor in ESG. 

Companies will need to report on their Greenhouse Gas (GHG) emissions, which are categorised into scopes (see visual below). This includes direct emissions, such as owned facilities and vehicles, as well as indirect emissions from the likes of business travel.   

Under CSRD, companies will also have to disclose their long-term emission targets. They will also have to explain how their plans and targets align with a 1.5 net zero scenario and propose climate-based metrics for tracking. 

The directive will require a lot of investment - both in terms of time and money. On top of the emissions reporting, companies will also need to outline a plan of how they intend to reduce their carbon footprint and set targets against this, as well as have their data reviewed and assured by a certified third-party auditor. 

Although the directive came into effect in 2023, next year will be the first time businesses will need to adhere to disclosing the required information. It also operates on a phase-in timeline, with the largest companies (roughly 50,000 businesses) required to submit next year.  But this doesn’t mean smaller enterprises shouldn’t start preparing for robust reporting, as they will also be impacted if they work in the supply chain of larger companies. All business will be expected to deliver in the next couple of years. 
 

Risks for non-compliance

For those who don’t comply or fall short of the requirements, there can be severe ramifications. The EU is known for placing hefty fines on companies that have been non-compliant, and it will be no different with this directive. In the last few months, EU member states have transposed CSRD into regulations aligning with their existing legislation, providing different requirements and penalties country-by-country. Depending on the operational country, organisations may need to meet different requirements and could be penalised by the local government if they fail to meet the reporting standard. 

Companies and Directors who report incorrectly, or not at all, can be fined a substantial amount of their turnover or personal salary.  For example, the French government, which was the first member state to implement the law in December 2023, not only introduced fines for non-compliance but also imprisonment. 

But these are extreme cases; prison is unlikely if you show that you have done your due diligence and that your company has reported to the very best of its ability. To ensure compliance, there are several ways to get ahead of CSRD and be in the best position when your reporting obligations begin. 

The three C’s to streamline CSRD reporting

Commitment

There’s a lot to commit to, but the gathering of this data doesn’t need to be stressful. It can be quite straightforward if you’re using a platform that helps compile the data for you. For example, by investing in a joint travel and expense program, you can automatically gather data on the carbon impact your employees have when they are travelling for business.

At SAP Concur we work with Thrust Carbon - who's methodologies set the standard for carbon accounting within the travel industry - to provide sustainability data for customers to access through Concur Travel. This ensures employees can make better sustainability-driven decisions.

By opting for automated, joint travel and expense programs such as this, organisations can ensure an efficient CSRD reporting process.

Communicate

While the responsibility for accurate CSRD reporting will fall primarily on CFOs and their finance departments, they will need input from travel managers, HR, logistics teams, procurement and everyone in between. Therefore it is important to communicate CSRD expectations, requirements and delivery timelines earlier on for a smoother process.

It is also vital to speak to your suppliers. You’ll need their support in collating the data they hold on their emissions, as indirectly it is connected to your business too. Again, connecting with them earlier will reduce any confusion or delays in the future.

Finally, speak to your peers. Many CFOs will be going through the same process of understanding the new directive, its intricacies and logistics. They could have overcome similar challenges you might be facing and be able to provide guidance, or you can do the same. The purpose of CSRD isn’t to compete with each other, but to consolidate everyone’s efforts in reducing our imprint on the globe.

Clarify

Like any regulation or directive, CSRD is complex and differs between countries - there is a lot to get your head around.

Give yourself the time to do your research, there are useful resources out there, including SAP’s CSRD Guide and Thrust Carbon’s own tools to help navigate your journey to climate compliance. Or you can get in touch with us at SAP Concur to help prepare you for the incoming reporting requirement.

2025 is just round the corner, and although your company may not be required to report then, the subsequent years will come just as quick. To be prepared and get ahead of climate compliance, businesses need to be prepared to invest now in the right tools and scope to deliver on what’s needed. Without this investment early, businesses will ultimately find themselves lagging and unable to catch-up.