Industry leading companies work with IntegrityNext
The CSRD marks a fundamental step change in the disclosure and assurance of non-financial information as it aims to improve the comparability, consistency and transparency of companies’ ESG data. Supply chains are a key lever for sustainable development and feature strongly in the directive's reporting standards.
IntegrityNext helps you to gain insights on critical supply chain risks, impacts and opportunities so that you can meet CSRD data collection and disclosure requirements with minimal effort and boost your sustainability performance.
How IntegrityNext can help
Supply chain, procurement and ESG teams are under pressure to meet increasingly demanding sustainability disclosure requirements. The CSRD has a distinctive value chain focus and thus reflects the importance of risks, impacts and opportunities beyond companies’ own operations.
IntegrityNext’s highly automated and easy-to-use platform provides vital assistance in identifying material topics, compiling ESG data and enhancing supply chain sustainability. We can support you with respect to the following CSRD requirements:
Data collection and analysis
Data quality assurance
Supply chain ESG risk management
Development of due diligence processes
ESG Topic Coverage
We already allow you to collect supply chain data on the following topics, all of which are relevant under the CSRD:
Going forward, we will continuously expand the range of risk areas against which you can assess your suppliers to ensure maximum alignment with the ESRS. The results are compiled in a report that can be readily used for your CSRD disclosures.
The regulatory context
The CSRD is a mandatory disclosure framework and cornerstone of the European Green Deal. It ties in with other policy initiatives such as the Corporate Sustainability Due Diligence Directive (CSDDD), the EU Taxonomy and the Sustainable Finance Disclosure Regulation (SFDR). As such, it plays a key role in helping the EU achieve its varied policy goals on social and environmental matters en route to climate neutrality by 2050.
The European Sustainability Reporting Standards (ESRS) are the centerpiece of the CSRD. The European Commission underscores a high degree of alignment between the initial ESRS and other widely used standards such as those of the Global Reporting Initiative (GRI) and the first two standards of the International Sustainability Standards Board (ISSB) published in June 2023 (IFRS S1 and S2).
The European Sustainability Reporting Standards (ESRS)
Companies falling under the CSRD are required to provide comprehensive sustainability disclosures in line with the ESRS. It is estimated that approximately 50,000 European companies and possibly around 10,000 non-European companies, mainly from the US, Canada, the UK, Japan and Australia, will fall under the provisions of the CSRD.
On July 31, 2023 the European Commission published a final delegated act to adopt the first set of the ESRS. They include twelve cross-sector standards and cover the following topics:
Water and marine resources
Biodiversity and ecosystems
Resource use and circular economy
Workers in the value chain
Consumers and end users
While some of the disclosure requirements are mandatory, others apply depending on the outcome of robust materiality assessments. More challenging datapoints across several topic areas can be disclosed on a voluntary basis.
Work is currently underway on the development of simplified reporting standards for listed SMEs, voluntary standards for non-listed SMEs and sector-specific disclosure metrics. EFRAG, the organization tasked with developing the ESRS, will also elaborate separate standards for non-EU companies.
Key features of the CSRD
The ESRS take a double materiality perspective and oblige companies to report on how they affect society and the environment (impact materiality) and how sustainability aspects create financial risks and opportunities for them (financial materiality).
Value Chain Approach
The ESRS cover companies’ entire value chains and thus take account of material impacts on sustainability reporting that may arise from upstream and/or downstream value chain actors, including in the supply chain.
Mandatory limited assurance checks by independent third parties serve to strengthen the quality and credibility of companies’ sustainability disclosures and materiality assessments. Reasonable assurance checks will become compulsory at a later stage.
Only ESRS 2 is mandatory for all companies. The other standards are subject to a robust materiality assessment. Companies can therefore omit information that is not relevant for their business context, but they have to justify their decisions.
Driving supply chain sustainability in shipbuilding
“We are aware that the biggest impact towards sustainability can be made in our supply chain. IntegrityNext helps us measure supplier performance, empowering us to strategically direct our actions where they matter most.”
Damen’s procurement team plays a considerable role in ensuring the evolution of the group’s sustainability performance. Having introduced a Code of Conduct years ago to ensure sustainable practices in the supply chain, the company was ready to take things to the next level by introducing an extensive Supply Chain Responsibility Program.
During the implementation the company faced the challenge to ensure compliance with sustainability related regulations such as the Corporate Sustainability Reporting Directive (CSRD). They searched for a management system to fulfill existing regulations. Furthermore their needs were to track supplier performance, monitor key sustainability metrics and generate custom reports.
How IntegrityNext helps
Using IntegrityNext, Damen has been able to extend its program to over 400 suppliers – prioritized by spend volume.
The company is able to continuously monitor its suppliers on a number of relevant topics, including environmental protection, energy management, human rights & labor, and carbon footprint. For suppliers with a weak performance (flagged red and yellow), Damen is able to take immediate action to the supplier and initiate potential improvements.
Going forward, Damen also plans to use IntegrityNext to select new sustainable suppliers.
Is your company
The scope of the CSRD goes far beyond that of the previously applicable Non-Financial Reporting Directive (NFRD). It places reporting requirements on
large EU companies, regardless of whether they are listed, which exceed at least two of the following thresholds: average annual workforce of 250 employees, balance sheet of €20 million and net turnover of €40 million
listed SMEs in the EU exceeding at least two of the following thresholds: 10 employees, balance sheet of €350,000 and net turnover of €700,000
non-EU companies meeting the following criteria: non-EU parent has a minimum of €150 million net turnover in the EU and at least one large EU subsidiary (see above) or EU branch (more than €40 million in net turnover in the EU)
Some exemptions apply, for example for non-listed SMEs and micro-enterprises.
The EU pursues a staggered approach to the implementation of the ESRS. Depending on the company's size, different timelines apply for compliance:
Fiscal year 2024
Companies previously subject to the NFRD: first reporting in 2025 on 2024 data
Fiscal year 2025
Other large companies: first reporting in 2026 on 2025 data
Fiscal year 2026
Listed SMEs: first reporting in 2027 on 2026 data; opt-out is possible for two years, i.e. first mandatory reporting in 2029 on 2028 data
Fiscal year 2028
Non-EU companies: first reporting in 2029 on 2028 data
Note that certain disclosure requirements benefit from phase-in periods. They relate to topics such as Scope 3 emissions, biodiversity and various social issues and mainly affect companies with fewer than 750 employees.