CSRD: EU Sustainability Reporting Directive
The EU directive on sustainability reporting means that a number of Danish companies must comply with extensive reporting requirements.
Who is covered?
The phasing-in, deadlines, etc. are affected by the EU Commission's omnibus proposal.
Companies in Denmark will be covered after a gradual phasing-in:
- From financial year 2024
Listed companies and state-owned limited liability companies (accounting class D), which are large companies according to the size limits for accounting class C (large) and which have more than 500 employees (on average for the year). - From financial year 2025
Other large companies (both listed and unlisted) measured according to the size limits for accounting class C (large). - From financial year 2026
Small and medium-sized listed companies (except micro-enterprises) with the possibility of a postponement to 2028.
Reporting requirements
The requirements are comprehensive and include, among other things, the strategic work on sustainability and a detailed assessment of the company's impact on the outside world and the impact of the outside world on the company through a dual materiality analysis.
This is followed by the comprehensive reporting requirements as stipulated in the ESRS (European Sustainability Reporting Standards). Sustainability reporting must be included as part of the annual report and is also subject to the requirement for a limited assurance auditor's statement.
There is therefore a major task ahead in terms of determining data requirements and subsequently establishing internal systems and processors that ensure the provision of data and its quality - in the same way as with all other financial data.
How to approach it
It is often obvious that the CFO area takes ownership when the data part of the ESG work is to be anchored. They are experts in the use of data, including the need for structure, security and quality. However, it is important to establish that the entire organization must be involved.
The focus areas are absolutely central to ensuring the completeness, accuracy and timeliness of data and thus supporting ESG reporting:
- Preparation of ESG reporting manual
This includes a list of KPIs with definitions and calculation methods, an overview of data sources with systems and processes for data collection, etc. The ESG reporting manual also supports the work on automating data collection and informs the decision-making process regarding the choice of ESG software. - Determination of roles and responsibilities in connection with ESG reporting
Can possibly be done via the RACI model. This supports the way in which work is done and provides a clear and transparent understanding of ownership across all activities.
- Automating data collection and establishing reporting structure
Including considerations on the use of ESG software. - Establishing an internal control environment for ESG reporting
Here, internal controls are defined and established, including annual cycles for the execution of the same.
Not covered? Familiarize yourself with CSRD anyway
Your business may be indirectly affected by CSRD requirements if you are a supplier to larger companies that are covered. Companies that do business with larger companies may be required to measure and document their impact on the environment and climate, as well as social and governance (ESG) issues.
The ability to meet increasing demands for ESG data from customers and partners will therefore be crucial for competitiveness going forward.
Lovgrundlag
The legislative amendment is crucial to further boost companies' green transition, and the final adopted bill can be found in its entirety here:
