The CSRD, the Corporate Sustainability Reporting Directive, is about to come into force in 2025. Its role is to strengthen, clarify and harmonize non-financial reporting requirements. Faced with the climate emergency and its already perceptible consequences, stakeholders need a reliable reporting framework that allows them to anticipate, decide and act. CSRD is therefore a real transformation lever for companies ready to take up the challenge. A point of view presented by Junior Boulleys, Associate Partner in the Finance, Risk and Regulatory Transformation team at TNP.
CSRD sets a common regulatory framework for companies
The CSRD is part of the ambition of the ‘Green Pact for Europe’. This new growth strategy of the European Union aims at carbon neutrality in Europe by 2050. The CSRD aims to guarantee the clarity and security of information presented to the public, both on the risks that the deterioration of societal and environmental conditions represents for the company's activity, but also on the impact that the company has on these same factors. This is the concept of dual materiality.
Thus, the CSRD offers companies a regulatory framework and a common language. It imposes greater transparency and raises non-financial information to the same standards as financial information. Under this new directive, a certain level of internal control will now be required to guarantee the quality, reliability and accessibility of the information. It also recommends audited information, with requirements that are higher than current verification standards.
Data management, means to be deployed and issues to be considered
For banks, the CSRD entails many changes, as they will not only have to publish their own financial information, but also integrate that of the companies they finance. This raises the question of data processing and retrieval, as the implementation of this standard must result in the collection of audited, standardized and traceable data. How to recover data inherent to other companies? Which data sources should be used? How to manage the sovereignty issues on the acquisition of this data? What happens to companies that are not subject to CSRD? The regulations raise many questions. Financial institutions must also consider the resources to be deployed: CSR, finance, legal, compliance, technologies, projects ... the resources to be mobilized are colossal! In addition, there are issues of sourcing, quality, standardization and distribution of ESG data, as well as the cost of accessing it. Then, for the sake of consistency, we will also have to harmonize the different requirements between financial and non-financial reporting.
This new directive will definitely upset the established order. Non-financial standards and reporting represent considerable business challenges. In terms of refinancing, the consequences of the CSRD are already perceptible. In a process of decarbonizing portfolios, for example, the extra-financial rating of a company will become decisive for investors, and banks will be forced to withdraw from the least virtuous counterparties. But this new framework also presents opportunities. It is an opportunity to support clients in their own decarbonization challenges, to establish partnerships to help companies carry out their energy performance diagnostics, and to develop new products in the context of financing the transition.
It will be necessary to be transparent by analyzing and publishing the results. This will allow stakeholders to challenge and question the various players on a comparable basis and to refine their approach.
Managing extra-financial performance, a strategic objective for companies
Today, the intensification and multiplication of regulatory requirements and climate initiatives are a reality. Climate data is becoming a key element in the strategy of financial institutions and they must prepare and position themselves as of now. To do so, banking and financial players must make commitments. This starts with assessing the current situation, defining objectives and identifying the actions to be taken. Then, it will be necessary to monitor and control these commitments by putting in place the appropriate systems. Finally, it will be necessary to be transparent by analyzing and publishing the results. This will allow stakeholders to challenge and question the various players on a comparable basis and to refine their approach.
To meet current and future regulations, companies must anticipate the challenges that await them by using robust, scientific and transparent methodologies. In particular, they will have to integrate climate risks and the preservation of biodiversity into their internal management systems and train their employees. For a company, managing its extra-financial situation is now a strategic objective. To achieve this in the best possible conditions, it is strongly recommended to surround yourself with experts to ensure a smooth and successful transition.
TNP supports you in the implementation of the CSRD
Companies must already understand that it is time to act. However, making this transition cannot be improvised and cannot be invented: to go fast and be relevant, it is essential to surround yourself with specialists.
To meet the challenge of implementing the CSRD as well as that of climate change, TNP is committed to supporting its clients in their transition issues and providing its expertise. Our consultants are able to assist you in understanding these new standards but also in the transformations to be implemented to meet them. We can also help you set up technological partnerships, develop new offers (green loans, impact loans, sustainable savings and investments, etc.) and propose solutions for financing the transition.
The CSRD topic will be partially covered during the online event on 30th March "ESG disclosures (TCFD, EU taxonomy, CSRD, EFRAG, IFRS)". To register for free, please click here
