22/11/2023
CSDDD vs CSRD: Understanding Sustainable Business Dynamics
Explore CSDDD and CSRD: sustainability directives driving proactive responsibility and transparent reporting.
13 October 2023
In today’s business landscape, the principle of corporate social responsibility has become more and more important. Organizations worldwide use two key reporting frameworks to report their sustainability efforts accurately.
First we have the Corporate Sustainability Reporting Directive (in Europe). Second, we have the International Sustainability Standards Board (ISSB), which is closely related to the Global Reporting Directive (GRI).
In this blog post we take a closer look at the key differences and similarities between these groundbreaking reporting frameworks.
The Corporate Sustainability Reporting Directive (CSRD) is an initiative of the European Union. It is a European Parliament and Council directive. The CSRD obliges specific large corporations in the EU to report on sustainability issues. The CSRD replaces the Non-Financial Reporting Directive (NFRD). The NFRD implemented in 2014, with a primary focus on enhancing transparency and consistency of sustainability reporting across all of its member states.
Meanwhile, the Corporate Sustainability Reporting Directive (CSRD) requires companies to report on their environmental, social, and governance (ESG) performance in a clear and consistent way. This helps people and businesses make better decisions and builds trust in the market. The European Commission is creating EU sustainability reporting standards for companies to follow under the CSRD.
Since, 5 January 2023, the CSRD requires companies to publish regular reports following the European Sustainability Reporting Standards (ESRS). These reports must detail social and environmental risks associated with their operations or products. This information will help investors and stakeholders understand the impact of these companies on people and the environment.
There is no single international equivalent of the Corporate Sustainability Reporting Directive (CSRD). However, there are a number of international initiatives that are working to develop global sustainability reporting standards.
But, one of the most important initiatives is the International Sustainability Standards Board (ISSB):
The IFRS Foundation established the ISSB in 2021. This is the same agency in charge of the International Financial Reporting Standards (IFRS).
The ISSB has outlined four main objectives:
The main objective is to develop a baseline set of global sustainability disclosure standards that will be aligned with IFRS. The ISSB collaborates closely with the Global Reporting Initiative (GRI), a well-established body in the field of sustainability reporting.
The ISSB and GRI framework are designed to help organizations around the world, regardless of where they are located, report on sustainability in a consistent way. It does this by harmonizing sustainability reporting standards, which makes it easier for multinational corporations to align their reporting practices across borders.
The CSRD is a mandatory European directive, requiring specific companies to follow strict reporting rules. On the other hand, the ISSB provides a flexible global framework that isn’t legally enforced but serves as a baseline for sustainability reporting. This contrast shows how the CSRD focuses on regional compliance, while the ISSB offers global adaptability.
CSRD is a European sustainability reporting requirement, while ISSB is a global framework. This gives multinational corporations more flexibility to choose the best approach for their needs.
Companies around the world can use the ISSB/GRI framework as a standard for reporting on sustainability, but it is not legally required. While the CSRD is a law in the European Union that requires certain companies to report on sustainability in a specific way.
The CSRD is a stricter reporting framework than the ISSB/GRI framework. The CSRD tells companies exactly what information they must disclose, while the ISSB framework is more flexible.
Both the CSRD and the ISSB/GRI framework focus on non-financial disclosures, meaning that they require companies to report on their environmental and social impacts, as well as their governance practices. This common ground helps to ensure that sustainability reporting remains a top priority for businesses.
CSRD and ISSB frameworks both promote transparency and accountability, which helps to build trust between companies and their stakeholders, including the public. This encourages companies to take responsibility for their impacts on society and the environment, and to conduct business in an ethical way.
The CSRD is aligned with the ISSB standards. It’s expected that the ISSB standards will become the global standard for sustainability reporting in the coming years. However, an important note: the ISSB standards are still under development and not yet mandatory!
In the meantime, companies that are subjected to the CSRD can use the other sustainability reporting standards, such as the GRI standards, to showcase their compliance.
When companies go through CSRD assessment and have a solid ESG rating, they’re in for some exciting perks. Banks and investors tend to offer them better financing deals. It’s like having a strong foundation for financial support, setting the stage for future growth and success.
As a sustainable software solution, Pilario provides a valuable solution for companies seeking to navigate the evolving landscape of sustainability reporting. We understand the challenges companies face in capturing and managing sustainability-related data, conducting life cycle assessments (LCAs), and ensuring compliance with reporting standards.
We offer a practical solution for companies to adapt to the changing world of sustainability reporting, including potential future alignment with ISSB standard by simplifying data management, reporting, and transparency. While our software is scalable and innovative at the same time.
Learn how Pilario can simplify your sustainability reporting and prepare you for the future. Book a meeting with our sustainability expert here. We’re here to help you thrive in the world of sustainability reporting and stay ahead of industry standards.
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