Introduction

• The European Union’s Corporate Sustainability Reporting Directive (CSRD), enacted on 5 January 2023, signifies a paradigm shift in sustainability reporting standards across the EU and beyond.
• This directive builds upon the foundation laid by its predecessor, the Non-Financial Reporting Directive (NFRD), and introduces mandatory provisions aimed at enhancing transparency and accountability in corporate sustainability efforts.
• Central to CSRD’s framework is the requirement for limited assurance on sustainability information, challenging organisations to adopt rigorous reporting practices. This is a key aspect of the framework and will have significant impact on how Irish firms implement their reporting.

Understanding the European Sustainability Reporting Standards (ESRS)

• The ESRS, integral to CSRD compliance, establish comprehensive guidelines for sustainability disclosures. These standards encompass a broad scope, extending beyond traditional financial metrics to include environmental, social, and governance (ESG) factors. ESRS consists of two cross-cutting standards and ten topical standards, each specifying detailed disclosure requirements tailored to different ESG topics.

Key elements of ESRS implementation include:

• Double Materiality: Companies must evaluate both the external societal and environmental impacts risk and opportunities on their value chain.
• Gap Assessment, Roadmap and Year 1 Sustainability Statement.
• Control Framework Sustainability reporting and associated

The Role of Limited Assurance

Under CSRD, Irish organizations are mandated to progress from initial limited assurance to future expectations of reasonable assurance.

This evolution reflects a gradual progression towards more robust verification and validation of sustainability data. The directive mandates that assurance on sustainability information must be conducted by accredited independent auditors or certifiers, ensuring adherence to established EU standards.

Governance and Audit Committee Responsibilities

CSRD places significant responsibility on audit committees within public-interest entities. These committees are tasked with overseeing the assurance process, ensuring the integrity and accuracy of sustainability disclosures. Key responsibilities include:

• Informing stakeholders: Audit committees must communicate the outcomes of the assurance process to the organisation’s administrative or supervisory body.
• Enhancing transparency: They play a crucial role in explaining their contribution to maintaining the credibility of sustainability reporting.
• Adapting to new standards: Committees must align their practices with evolving regulatory requirements to effectively manage sustainability risks and opportunities.

Practical Steps Towards Compliance

As CSRD continues to unfold, organisations must adopt proactive measures to achieve compliance and operational readiness:

• Early engagement with auditors: Collaborate with external auditors to establish best practices and prepare for limited assurance of the sustainability statement.
• Carry out scoping exercises: Determine the scope of reporting obligations and identify any exemptions applicable at subsidiary levels.
• Build ESG reporting capabilities: Enhance internal capabilities to manage and report on ESG data effectively.
• Document controls: Formalise and document processes for managing climate and sustainability information, ensuring compliance with reporting standards.
• Prepare for data requirements: Implement robust data collection and management systems capable of meeting assurance needs.
• Ensure governance buy-in: Involve governance bodies early in the reporting journey to ensure alignment with organisational objectives and regulatory expectations.

As organisations within Ireland and across the EU navigate the complexities of CSRD, early preparation and strategic alignment with governance and assurance frameworks will be essential. Embracing sustainability reporting not only enhances transparency and accountability but also positions companies to navigate evolving regulatory landscapes effectively. By embedding sustainability into core business strategies and operations, organizations can drive long-term value creation and resilience in a rapidly changing global economy.

This article was authored by Doreen Brennan, Director, Climate Change Advisory and Sustainability Services.