The CSRD is a piece of EU legislation that extends and strengthens the rules regarding the information companies should disclose on environmental and social impacts and risks. It builds on the Non-Financial Reporting Directive (NFRD) and works alongside the EU Taxonomy by introducing new requirements relating to sustainability, climate change, human rights, diversity, and other issues.
The directive expands the scope of the entities that must comply, including all large European companies, listed SMEs, and companies with a significant business volume in the EU.
As part of energy-related reporting, the directive requires companies to disclose both location-based and market-based emissions from purchased electricity, heating, and cooling, known as Scope 2. Simultaneously, it mandates the use of “contractual arrangements” such as Guarantees of Origin, green tariffs, and Power Purchase Agreements to report renewable energy consumption.