The CSRD Opens a New Chapter on Biodiversity Reporting: What This Means for Companies

Starting from 2024, around 49,000 European companies are expected to report in accordance with the Corporate Sustainability Reporting Directive (CSRD), an instrument by the European Commission that will make sustainability reporting as binding as financial reporting. The EU hopes that this will lead to greater transparency and scale sustainability efforts. But what does this mean for companies, their business models and supply chain practices? How can they use the new directive as an impetus to align their business operations with sustainability – and biodiversity – goals? Lastly, how can companies use the new directive as an opportunity to better profile and build trust with their customers and clients?

The scope of CSRD

The Corporate Sustainable Reporting Directive (CSRD), which officially entered into force in 2023, establishes new binding standards across different sustainability fields. As part of the directive, separate standards, known as European Sustainability Reporting Standards (ESRS), have been developed. The directive entails three main topical standards, ESRS E – Environment, ESRS S – Social, ESRS G – Governance as well as a few cross-cutting standards. One of the standards falling within the topic of environment, ESRS E4, focuses specifically on biodiversity and ecosystems. The aim of this standard is to strengthen an understanding in companies about their role and impact on biodiversity and thus help them align their business models and operations with biodiversity protection and restoration. As part of their reporting, companies will have to disclose concrete biodiversity targets and action plans and communicate their contribution to the Commission’s goal of ensuring that all of the world’s ecosystems are restored and resilient by 2050 and that biodiversity is put into a path to recovery by 2030.

ESRS E4: A new chapter on biodiversity and ecosystem reporting

The ESRS E4 standard includes specific disclosure requirements on impacts and interdependencies in relation to terrestrial and aquatic ecosystems (freshwater & marine), species (fauna & flora), and diversity between and within ecosystems and species. Companies are required to report on the risks and opportunities (IROs – Impacts, Risks, and Opportunities) as well as associated strategies, measures and financial implications. The standard is divided into corporate strategy and business models, effects with risks and opportunities as well as parameters and key figures.

What does this mean for companies?

The introduction of the Corporate Sustainable Reporting Directive means a significant change in sustainability reporting for German and European companies. The link between biodiversity and the CSRD is emphasized in particular: according to ESRS E4, all types of companies will have to measure and report their impact on biodiversity by 2030 (larger companies with 500 or more employees already starting from the financial year 2024; SMEs starting from the financial year 2028). This requires a significant expansion of the scope of reporting and an adaptation of the content in sustainability reports. Various standards, such as the internationally recognised Global Reporting Initiative (GRI) or European standards such as the Eco-Management and Audit Scheme (EMAS), are currently adapting their requirements to these new developments, partly as a result of the COP15 agreements.

The extended scope and importance of biodiversity within the CSRD sends a clear signal to companies on their role to ensure that business activity is aligned to and in support of biodiversity protection and restoration. To achieve this, companies will have to adapt their strategies and business models in order to operate within planetary boundaries and have a positive impact on biodiversity. A new factsheet developed within our UBi: Business & Biodiversity project reviews the ESRS E4 standard on biodiversity and highlights key points for companies. You can download the factsheet here in English or German.

To learn more how the UBi project is supporting companies and business associations in Germany to integrate biodiversity into their strategic planning, please visit the UBi website.

For further questions, please contact Alexander Mannweiler.