CSRD and CS3D are coming. Are you prepared?

The drumbeat signaling a new era of corporate responsibility continues to sound. Increased regulation of corporations’ ESG activities is coming, and the EU is still leading the charge, with ramifications for corporations within and beyond Europe.

 

Two new directives—the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD or CS3D)—are coming into force in the next two years, with the first reporting scheduled to take place in early 2025. These directives are far-reaching, affecting both European corporates and global organizations that operate in Europe.

The CSRD is a reporting directive that prompts larger corporates to report on their sustainability activities: that is, the actions they’re taking to make the transition to a net-zero carbon future. The goal of the directive is enhancing transparency into corporations’ sustainability-related activities with more rigorous reporting standards and requirements.

 

The CSRD will be implemented in three phases, beginning with large companies of 500+ employees. These companies are monitoring performance right now and will need to begin submitting reports in accordance with the directive in 2025.

 

While smaller corporations won’t need to report that soon, their time will come: mid-sized companies will need to begin reporting in 2026 and SMBs will begin reporting in 2027.

Like the CSRD, the CS3D requires corporations to report on how ESG-related initiatives impact their business. Unlike other regulations, however, the CS3D opens the aperture when it comes to corporate activity. Under this directive, corporations need not just report on their own activities, but also on those of their end-to-end supply chain partners.

 

For example, the CS3D requires that a corporation would need to report on any undesirable activities—from pollution to carbon emissions to human rights violations—of their supply chain partners. The goal of the directive is to widen the proverbial net, thus making it easier to identify and stop bad behaviours across the supply chain.

 

When the CS3D comes into effect, it will require large corporations with 1,000+ employees and/or revenues of €450 million+ to submit reports on these initiatives.

These directives are new, and precise reporting requirements are still emerging. But businesses that will be affected by these regulations should not wait for the reporting standards to come into effect. Indeed, the companies best positioned for proper and efficient compliance with these regulations will be those that begin the reporting planning process now.

 

Each directive contains multiple strict multilingual reporting requirements, which means translation needs to be an integral part of each company’s reporting strategy. RWS has assisted financial clients with their ESG reporting challenges for years, and we’re prepared and practiced partners for the corporates who now need these services. We conduct extensive translation work for various related document types, including shareholder communications, annual reports, press releases and more. No matter what inevitable changes and requirements await, we’re ready to help clients effectively communicate within the limitations of these reporting frameworks.

 

Our firm has worked across highly regulated industries for decades, and that has imparted a core truth upon our team: the secret to success with all regulations is to be proactive. The companies that plan ahead for these upcoming directives will be those that succeed within their parameters. We’re ready to help you on the road to success.

 

Ready to learn how we can help your company stay on top of your ESG communications? Reach out to our team today.