Companies affected by the Corporate Sustainability Reporting Directive (CSRD) must comply with the European Sustainability Reporting Standards (ESRS). Yes, it sounds complicated, but look closer and you’ll see it’s really quite straightforward. The new directive simply means that companies of a certain size must fulfil 12 specific sustainability reporting standards.
Which companies does this concern? Initially the biggest, but most companies will be affected indirectly
From 2024-2026, this directive will be gradually rolled out to large European companies and all listed companies, with the exception of listed micro-companies. Read more about which companies will be affected here. Although the biggest companies will be the first to be affected by the new directive, most companies will be affected in some way indirectly.
What’s new is that companies must now report on both their own activities and the full value chain for the areas that are essential to their business. This means that a large number of companies that may not be directly affected by the directive will still need to comply with the new demands from the bigger companies.
Focus areas for HR
Two of the 12 standards are of particular relevance to HR professionals: ESRS S1, which covers own employees, and ESRS S2, which covers employees in the value chain.
ESRS S1 – Own employees: This standard requires companies to report on working conditions, equality and labour rights, including data on employees (full-time, part-time), diversity (gender, age), and more. Some of this data is already available in many companies, while others, such as pay gaps, discrimination and overtime, need to be systematically recorded and documented.
ESRS S2 – Employees in the value chain: Here, companies must report on the policies and practices they have in place to protect labour rights throughout the value chain, such as preventing child and forced labour and ensuring decent working conditions.
How can CSRD benefit HR?
On the surface, CSRD may seem like a heavy regulatory burden, but it actually opens up an exciting opportunity: It will transform the HR function from an administrative necessity to a central part of the organisation’s strategy.
By taking ownership of social sustainability initiatives, HR can position itself as a key player in the organisation. It’s no longer ‘just’ HR – it’s HR as a vital force in the corporate social responsibility strategy.
Boosting your company’s social profile
Through documentation and proactive measures, HR can make your organisation more attractive to employees:
- Existing and potential employees: By demonstrating a clear commitment to sustainability and social responsibility.
- Customers and partners: Who value accountability and ethical operations.
- Investors: Seeking sustainable investment opportunities.
This directive is not just a regulation, but a chance to rethink the way HR works, and a chance to make a difference in both business and society.
