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Knowledge

What is the relationship between CSRD and ESG?

 

The CSRD (Corporate Sustainability Reporting Directive) and ESG (Environmental, Social, and Governance) are closely linked, as the CSRD aims to improve reporting and transparency on ESG factors within companies.

Here's how the two concepts relate to each other:

 

1. Content focus

  • ESG refers to the three broad categories of topics (environmental, social and governance) that are relevant to a company’s sustainability and ethical impact. ESG factors include, for example, environmental management, climate change, labor rights, diversity, ethics and governance structures.

  • The CSRD requires companies to report extensively on their ESG performance and risks. It is a guideline that encourages companies to report systematically and in detail on these three areas.

 

2. Regulatory framework

  • ESG as a concept is broader and can be voluntarily applied by companies. It is a framework used by investors, regulators and other stakeholders to assess a company's sustainability performance.

  • The CSRD is a specific legal obligation within the European Union. It requires companies to report ESG information according to standardized guidelines, making the information consistent and comparable.

 

3. Transparency and accountability

  • ESG reporting can vary in quality and depth depending on a company's voluntary choices or investor expectations.

  • The CSRD aims to reduce this variability by introducing standardised reporting requirements for ESG information. This means that companies are required to provide detailed and reliable information that can be verified by third parties.

 

4. Target group and impact

  • ESG is of interest to a wide range of stakeholders, including investors, customers, employees and governments, who want to understand and assess sustainability performance.

  • The CSRD primarily focuses on informing these stakeholders by forcing companies to show more transparency and accountability in their ESG performance.

 

In essence, the CSRD is a specific regulatory instrument that requires companies to make comprehensive ESG disclosures. It ensures that ESG criteria are not just a voluntary practice, but an integrated part of corporate reporting and strategy, with the aim of promoting sustainability and managing risks

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