The EU Corporate Sustainability Reporting Directive: Challenge or Opportunity?

Key Points

• From January 2024, the EU’s Corporate Sustainability Reporting Directive (CSRD) has laid down comprehensive reporting rules on many companies’ environmental, social and governance (ESG) practices. 

• Two of the CSRD’s European Sustainability Reporting Standards (ESRS) relate directly to a company’s diversity, equity and inclusivity (DEI) metrics – ESRS S1 and ESRS G1. 

• The gathering of CSRD-related data will be ongoing challenge for companies, but will provide accessible, invaluable insights for decision-making and target-setting, including those relating to DEI. 

Preparing for CSRD Reporting

Large companies and listed European SMEs will currently be working hard on gathering data in preparation for the 2025 publication of reports under the EU’s Corporate Sustainability Reporting Directive (CSRD), which came into force in January 2023 and first applied to the 2024 financial year.i The CSRD considerably strengthened and widened previous EU rules on company disclosure of environmental, social and governance (ESG) practices, and now encompasses 12 European Sustainability Reporting Standards (ESRS). These in turn break down into 80 reporting requirements amounting to over 1,100 data points. These numbers alone suggest the exhaustive, exhausting nature of the endeavour, but an endeavour that will potentially be deeply rewarding – offering assurances of, and insights into, companies’ impact on people and the environment for all stakeholders, not least of all the companies themselves. 

DEI and HR Implications

So what does this mean in relation to DEI, and human resources more generally? Two of the ESRSs are of relevance here: ESRS S1 (where the S refers to the Social in ESG) and ESRS G1 (referring to Governance). At the heart of the ESRS S1 standard is how a company is ensuring the wellbeing of its employees. Some of the key indicators in question here are: How does the workforce break down demographically and what are the indicators of gender distribution within management and of age diversity across the wider workforce? What policy goals does the company have on inclusivity and diversity? How does the company promote and protect its employees’ work–life balance, and how does it support them through important life stages? ESRS G1, meanwhile, looks at a company’s ethics and culture, and how it sets, assesses, sustains and communicates its core values. Reporting requirements here include a description of how a company creates and implements a positive work culture across the board (including DEI). 

The Challenge of CSRD Reporting

CSRD reporting will be massive, not to say daunting, annual undertaking, and to avoid overwhelm, companies will have put in place efficient digital systems that streamline data collection, ensure data integrity, and promote comprehensive reporting. It will an ongoing challenge – so it will be crucial that we bear in mind that it’s not just some arbitrary, Kafkaesque exercise imposed from the EU-on-high: the outcome will be, or should be, accessible, visualised data whose real-time insights will provide benefits for stakeholders of every hue – from investors to employees. 

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