Understanding transitional provisions for CSRD reporting

Understanding transitional provisions for CSRD reporting

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How can companies leverage CSRD transitional provisions to improve sustainability reporting compliance?

The Corporate Sustainability Reporting Directive (CSRD) introduces detailed reporting obligations for companies to enhance transparency and accountability in sustainability reporting. Recognising the complexities of complying with these requirements, CSRD includes transitional provisions that give companies time to adapt. 

This article will explain these transitional provisions and how they can be leveraged effectively.

What are CSRD transitional provisions?

Transitional provisions under CSRD are designed to provide companies with a phased approach to meeting the new reporting requirements. These provisions allow more time for companies to collect and structure the necessary data, ensuring they are manageable as they transition to full compliance.

Critical elements of CSRD transitional provisions

Entity-specific disclosures

Companies can adopt transitional measures for the first three years of CSRD reporting when preparing entity-specific disclosures. During this period, they can prioritise previously reported information if it meets CSRD's qualitative requirements. Reporting entities are encouraged to use best practices and frameworks such as the International Financial Reporting Standards (IFRS) and the Global Reporting Initiative (GRI) for additional disclosures.

Value chain reporting

Recognising the potential difficulties in gathering comprehensive data from the entire value chain, CSRD allows companies to limit this information to what is available in-house and publicly for the first three years. 

This includes data the company possesses or information readily accessible from public sources. After the transition period, companies must provide more detailed information, including the metrics for their upstream and downstream value chains. This ensures a complete understanding of the sustainability impacts across the value chain.

Deferred disclosure requirements

Companies with less than 750 employees can delay the inclusion of certain disclosures. This provision applies particularly to topical standards such as ESRS E4 and ESRS S1 to S4, where omitted data must still be considered in the materiality assessment, and minimal disclosures must be reported if the topics are material.

Practical steps

During the transitional phase, companies are encouraged to take several preparatory steps. These include updating contracts with value chain actors, engaging stakeholders, enhancing materiality assessments, and preparing the necessary technological infrastructure.

Download our document about the CSRD & ESRS or access broader resources about all ESG reporting regulations.

Benefits of transitional provisions

Transitional provisions are a grace period and an opportunity for companies to build robust systems for sustainability reporting. By taking a phased approach, companies can:

  • Improve data accuracy: Gradually improving data collection processes ensures more accurate and reliable reporting in the long term.
  • Stakeholder engagement: Using the transition period to engage with stakeholders can help better understand and address their concerns, thus enhancing the credibility and relevance of the sustainability reports.
  • Resource management: Phased implementation allows companies to better manage resources, spreading out the costs and efforts associated with full compliance.

Challenges and solutions in CSRD implementation 

Data collection and completeness

  • Challenge: Gathering comprehensive data from the value chain can be challenging.
  • Solution: Using the provisions that allow for estimates and proxies while striving to improve data collection mechanisms over time.

Consistent reporting standards

  • Challenge: Ensuring consistency across different types of sustainability data.
  • Solution: Align entity-specific disclosures with existing best practices and international frameworks, such as IFRS and GRI, to maintain consistency and enhance comparability.

The transitional provisions in CSRD reporting offer a structured and phased approach for companies to meet strict sustainability reporting standards. By effectively leveraging these provisions, companies can ensure smooth transitions, enhance data accuracy, and comprehensively comply with CSRD.

Contact Plan A's team to get expert support and tools on CSRD reporting. Schedule a call today to achieve CSRD readiness.

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