R&V (Germany) is in the process of developing a preliminary report that combines existing data with new CSRD-specific requirements. The CSRD represents a significant evolution from the Non-Financial Reporting Directive (NFRC), introducing mandatory external audits and shifting the focus from financial materiality to a dual materiality perspective that includes both financial and environmental/social impacts.
The implementation of the CSRD will significantly expand the number of entities required to report. The scope is expected to increase from approximately 11,500 to around 50,000 entities across the EU. This expansion is mainly due to lowered eligibility thresholds, posing significant challenges, particularly for smaller firms unaccustomed to such detailed reporting standards.
R&V began its compliance strategy with a gap analysis conducted in mid-2022. This analysis compared the company’s existing sustainability reporting (in place since 2013) against the new CSRD requirements. The analysis revealed that while R&V had reported on all relevant topics, the level of detail now required by the CSRD was not present.
In response, the company undertook a materiality analysis to determine which CSRD standards were relevant to its operations. A critical element of this analysis was the incorporation of the double materiality concept, which considers both the impact of external factors on the company and its impact on the environment and society.
R&V adopted a novel approach to stakeholder engagement, using internal representatives to simulate external stakeholder perspectives. This method, initially perceived as unconventional, aligns with the industry practices and is deemed necessary given the substantial increase in the number of reporting entities.
The company is focusing on identifying the impacts, risks, and opportunities (referred to as “IROs” in Germany) relevant to its business. This ongoing analysis is crucial as it continually shapes R&V’s reporting content.
R&V has set up a structured multi-year programme, involving approximately 120 personnel, to tackle CSRD compliance. The anticipated costs are substantial, potentially exceeding those estimated by major industry counterparts. The programme is comprehensive, addressing various facets from overarching principles to specific standards in environmental, social, and governance areas.
The materiality analysis yielded unexpected results; a majority of the standards were deemed relevant to R&V. This requires the company to undertake comprehensive reporting across multiple domains, especially those with significant financial impact and environmental influence.
R&V’s journey towards CSRD compliance is an extensive and evolving process that demands meticulous attention and significant resource investment. The company’s commitment to this initiative underscores its dedication to sustainable and responsible business practices.
