Corporate Sustainability Reporting Directive - is reporting the answer?
In organic, we like to be prepared, asking ‘when do I have to submit my next sustainability report?’.
You may have heard a lot of acronyms recently.
All those sustainability-minded amongst us would welcome anything that assists the transition to nature-friendly solutions, halting the global decline in biodiversity and extreme pressures of climate change.
Is reporting the answer?
We’ve been diving into Directive (EU) 2022/2464 - Corporate Sustainability Reporting Directive (CSRD) to find out what it means for organic businesses. Not to be confused with the equally catchy CSDDD, the CSRD is about aligning various reporting goals, so let’s call it the Reporting Directive.
Although this currently only applies in Europe, the UK are likely to implement something similar - UK Sustainability Reporting Standards (UK SRS), so please read on!
Origin story
Historically, large companies needed to report on their finances and governance procedures. In other words, how much money they are making and what rules they are following to achieve this.
CSRD’s older cousin, the Non-Financial Reporting Directive (NFRD) came into force in 2014. This mandated companies larger than 500 employees to disclose information relating to environmental, social, and governance (ESG) performance. It mainly applied to public interest companies and banks.
Having to report on anti-corruption policies, human rights and the environment was a new concept. A report by Greenly suggests there was a lack of standardisation and the NFRD didn’t go far enough.
Next step was for the European Commission to pull together a group of experts and draft European Sustainability Reporting Standards (ESRS). This Reporting Directive has introduced 12 standards based on ESRS.
There are two general, five environmental, four social and one governance standard. Have a read of Article 29b if you’re interested in the level of instruction provided, but upon assessment of the first set of reports published, European companies will act as barometers for each other.
One positive of the two general standards is that they provide rules on how to report and make the data easily accessible to investors. The Directive states data needs to be comparable internationally and therefore the hope is that this will drive investment into organisations performing well across various ESG factors.
Double materiality
The Reporting Directive involves a concept called ‘double materiality’. This is the impact ESG factors have on your business, and the impact your business has on them.
The inclusion of double materiality in CSRD gives financially minded companies and investors a better idea of how well a company will stand the test of time, rather than just profit and loss. If you are doing good for people and the planet, this could be an opportunity to shout about it.
Nevertheless, with the lack of guidance in the Reporting Directive, it is left to companies’ judgement how these categories of data impact their business and vice-versa. This lack of consistency does not align with the goal of balancing the playing field.
There is mention of third-party verification in the Reporting Directive. Third-party verification plays a role in ensuring fairness and integrity. Therefore, though there is no specific mention of organic in the regulatory text, the 380 or so mentions of “assurance” are promising. Organic standards are already internationally recognised.
Does this affect me?
If you had to report under NFRD, then CSRD applies to you.
The first wave of reporting by large and significant companies has already been completed by public-interest entities with an average of more than 500 employees during the previous financial year.
Large EU undertakings that were not subject to the NFRD with 500 employees or fewer, are in the second wave. Certain EU small and medium enterprises (SME) are in wave three of reporting, and non-EU companies with significant EU operations are in scope too.
The main message for those in scope, is to evaluate your supply chains, assess your governance processes and start compiling verifiable ESG data.
UK SRS are the version of CSRD that could affect all UK businesses in the future. UK government consulted on the introduction of Sustainability Reporting Standards and Soil Association inputted our response. More on this to come in a future article.
Interestingly, CSRD and UK SRS are using the same approach of having reporting standards to follow to ensure consistency in sustainability reporting. This means standards and reporting are becoming strongly interlinked. One of the key things currently lacking in UK SRS is double materiality assessments. One benefit of double materiality is resilience for investors, nature and capital portfolios.
International Financial Reporting Standards (IFRS) standards 1 and 2 are being used as baseline for UK SRS standards 1 and 2. Since UK companies will have to report to these, our Regulatory Affairs team has been in contact with the IFRS Foundation to advocate for interoperability and recognition of organic to avoid digression from a system we know works.
As it stands, the main message for those in scope of CSRD, is to evaluate your supply chains, assess your governance processes and start compiling verifiable ESG data.
Where are we now?
European and (some) global markets shift towards considering people and our planet as essential markers of success, governments are trying to find ways to ensure everyone is on the same page, opportunities are fair, and large companies take accountability for their part, good or bad. Soil Association Certification welcomes this, surely everyone does? Not necessarily.
Recent pushback shows that in some nations Directives (EU) 2022/2464 and 2024/1760 are controversial, and the EC is facing pressure to water-down or even scrap these regulations. As efforts are made to reduce red tape, and reporting burden, while increasing sustainability efforts, the European Commission’s Omnibus Simplification Package is set to make changes to reems of legislation.
With the dramatically named “Stop the Clock Directive” both the definition of a ‘significant entity’ in CSRD, CSDDD and others, and their reporting deadlines have changed. Directive (EU) 2025/794 published in April 2025 outlines that to avoid incurring “unnecessary and avoidable costs”, the deadline for companies that “have not already started reporting under CSRD should be postponed by two years”. This would mean new deadlines of 2028 and 2029.
Opportunities
Here’s where I advocate for organic first. Organic guiding principles mean products come from a system that has always attempted to mitigate impact on the natural world, be circular, fair and future facing.
Organic businesses will often already align with the goals of CSRD; prioritising environmental and social responsibility. The Reporting Directive allows you to showcase these efforts, reinforcing values you already hold and giving you a competitive edge compared to non-organic businesses. Anyone not performing to modern expectations of ESG, hence reporting lower standards in their data, may be left behind. We welcome the effort towards sustainability becoming a key factor of investment decisions.
Double materiality is an important development. We appreciate the evolution from standalone financial reporting to more holistic reporting on the impact businesses have. Remember this means companies can report on both risks and opportunities, so if you are doing good for people, nature and the planet here is a chance to state those opportunities for investors. The aim is to move capital markets from solely looking at financial information to providing substantiated data relating to a multitude of factors that could impact investment decisions.
As far as reporting goes, CSRD should be more holistic and far-reaching than NFRD. When UK recently met EU to discuss their finances, CSRD and the UK SRS came up:
“Both sides agreed on the importance of international coordination to ensure interoperability and consistency in sustainable finance standards.”
This is a strong indication the direction UK SRS will take. Governments are aiming to create and use internationally interoperable standards to align with a range of global sustainability targets and ambitions e.g. Net Zero and EU Green Deal.
Considering this international aspect, sustainability reporting could improve access to capital markets for conscious companies. Similarly, there could be new partnership opportunities with retailers or institutes that, thanks to reporting obligations, will now prioritise responsible sourcing. Meaning another benefit of the Reporting Directive is the potential of transparent ESG reporting to attract investors or even find sustainability-linked financing options.
As businesses adopt CSRD and improve performance in all areas of ESG, this is a positive and in contrast to a paper exercise, the Reporting Directive can be seen as an opportunity to drive further innovation.
The downside
CSRD and UK SRS aim to standardise sustainability reporting, but organic outcomes are nuanced, holistic and far reaching. From our experience, working in this sector farmers and businesses often use well-practiced methodologies or seek advice from trusted experts. Organic farming utilises regenerative practices and has local ecosystem impacts. We don’t use a one-size fits all approach and therefore regional sustainability cannot be internationally interoperable when it comes to some of the metrics used in these sustainability reports. The Reporting Directive uses generic/simplified metrics for data, such as measuring biodiversity by looking at the percentage of natural area with different land use. This doesn’t account for multi-land use management systems such as agroforestry, which have benefits across multiple ESG factors, rather than just one. Innovators in organic work to improve water quality, increase biodiversity, protect specific habitats. Organic standards already exist and are internationally recognised as standards for sustainable production in farming, food, drink, fashion, textiles, beauty and well-being.
There is a lack of guidance accompanying the new directives. This could leave companies not versed in ESG wondering how to measure and/or improve. Arguably these are the companies that most need support to achieve the goals of the European Commission. The unique benefits of organic practices may become less distinctive under these Reporting Directives, if there is no recognition within their respective Sustainability Reporting Standards.
In addition, Soil Association is asking for support for smaller businesses transitioning to sustainable solutions for people, nature and the planet. Support from the UK Government and regulators will be crucial to enabling SMEs to implement the UK SRS effectively, while minimising disproportionate costs. The Reporting Directive comes with financial costs of complying. Requirements are in depth and CSRD Learning Compass suggests investing in team members for whom this is their expertise. Whilst mandating CSRD and UK SRS for all large companies means they will have to invest in our futures. SMEs should be provided with proportionate pathways, guidance, and practical toolkits to navigate reporting requirements.
Final thoughts
If your business is low impact, helping to mitigate loss of biodiversity and/or resilient to climate change, there should be more ways to promote this. Maybe sustainability reporting is one such way. If CSRD is used as a tool to highlight the broader value of nature-friendly practices that is positive.
Here at Soil Association Certification, we want to promote a holistic approach looking at a multitude of outcomes, including water, biodiversity, carbon and animal welfare. Though accurate reporting is essential to understanding a business’ real-world impact, CSRD does not provide clear guidance on how to measure these complex interdependencies.
As Sustainability Reporting Standards are developed, we advocate for double materiality, third-party verification, the good work of organic systems and the integrity that Certification displays.
Looking ahead to the introduction of UK SRS – the greater interoperability with Soil Association standards we can get, the better. Soil Association Exchange is leading the way in gathering primary data from farms, using more diverse metrics and giving a well-rounded view of whole farm systems.
How will UK SRS impact your business? If UK SRS is voluntary, would you opt-in?
If you would like to be a part of our discussions on UK Sustainability Reporting Standards, please get in contact with regulatoryaffairs@soilassociation.org.