Chapter 5:
What makes this framework different from others
There are several factors which make the EU CSRD stand out from other frameworks. From scope to double materiality, we’ve outlined the following three areas which truly make it unique:
Area 1:
Applicable to organisations outside of the EU
Most sustainability frameworks correspond to organisations within a specific location. The Financial Conduct Authority (FCA) in the UK has adopted The Task Force on Climate-related Financial Disclosures (TCFD), for example, for financial reporting, while the Securities and Exchange Commission (SEC) in the US will have it’s own requirements.
However, the EU CSRD can be applicable to organisations outside of the European Union. As previously stated, organisations who are headquartered in the EU with a branch or subsidiary outside of the EU, fall within the CSRD’s scope.
Area 2:
Large scope with a wide-range of subtopics
The sheer number of data points companies can disclose is unlike other frameworks, with 1,144 data points; but don’t panic! You don’t have to report information on every one of them.
Since the volume of subtopics is so large, organisations have a variety of data points which may be material to their business. Ranging from climate change and pollution to business conduct and affected communities, these topics and subtopics are all in alignment with the ESRS, as previously mentioned.
Area 3:
The concept of double materiality
An element that truly makes the EU CSRD stand out amongst all other frameworks is that it was the first to introduce the concept of double materiality. This allows organisations to go one step further to gain true transparency into their sustainability performance.
So, what does double materiality mean? It’s the idea that organisations should report not only how they impact the environment and society, but how the environment and society impacts them as well. This is vital for investors and other stakeholders to get a more holistic view of the organisation.
Double materiality can be split into two distinct categories: financial materiality and impact materiality. Financial materiality, also known as the “outside in” perspective is measuring how the environment and society influences your company’s financial performance. Impact materiality or the “inside out” view is how your organisation affects or impacts the environment and society.
These elements make the EU CSRD an innovative framework that helps organisations truly understand their organisation from various aspects, create a strong sustainability strategy, and make actionable change when it comes to environmental, social and governance issues.
