Formatted Title

A Paradigm Shift: How the EU Corporate Sustainability Reporting Directive Impacts Management of Environmental Liabilities

Background/Objectives

Over the past year, consequential sustainability related regulations and guidance frameworks have been promulgated, most notably, the European Union (EU) Corporate Sustainability Reporting Directive (CSRD) and the associated European Sustainability Reporting Standards (ESRS). These regulations require organizations to adopt the principle of double materiality when identifying material topics that should be assessed and reported by an organization. The directive impacts organizations that are either headquartered, have significant undertakings, or meet other specific criteria related to operations in the EU. The CSRD and associated ESRS have far-reaching impacts on an array of environmental, social, and governance topics including significantly more prescriptive requirements pertaining to the way companies identify, assess, manage, and disclose information related to environmental liabilities, globally.   

Approach/Activities

An extensive review of the CSRD, ESRS, and other sustainability related regulations and frameworks was completed with a particular focus on the topic of managing environmental liabilities and pollution to soil, groundwater, and the environment. The analysis was completed to document what is being required by organizations, elucidate the intricate interplay between directives and frameworks, and the impact, risks, and opportunities (IRO) they present for organizations.

Results/Lessons Learned

The requirements of the CSRD and related ESRS present a paradigm shift for the way organizations will need to manage and report on potential and actual environmental liabilities and associated management approaches. ESRS Environmental Topic 2 – Pollution, details specific disclosure requirements and recommendations that, under the principal of double materiality, organizations will need to disclose policies that address the identification, assessment, management, and/or remediation of material pollution related IROs. Organizations must document and disclose not only their policies but demonstrate that these policies are being implemented and report on material IROs at site locations. The disclosure requirement calls for specific action for identifying and assessing pollution impacts related to substances of concern and substances of very high concern. Further, the directive requires organizations to disclose associated information not only pertaining to its own operations but of its upstream and downstream value chain. While various sustainability topics garner attention, the impact the CSRD has on the way organizations need to manage and report on environmental liabilities constitutes a significant paradigm shift and should not be overlooked. The goal of our presentation will be to bring awareness of CSRD and related ESRS, and step through the components of the directive that have real-world implications on the way organizations manage and report on environmental liabilities.