CSRD for Mexican companies

We recently read an ESG Practitioner survey from Workiva that had very a interesting data point. After interviewing 2000 people involved in ESG reporting across the world, the survey found that 81% of companies not subject to Europe’s Corporate Sustainability Reporting Directive (CSRD) still intend to comply with it.

For those of you not that familiar with the CSRD, let me break it down for you. The CSRD is a set of rules that came into force on January 5, 2023, with the aim of modernizing and strengthening social and environmental reporting requirements for organizations. Essentially, it mandates that companies, both within and outside the European Union (EU), must provide transparent and comparable information about their sustainability practices.

So, for companies with business ties to the EU or that operate globally, understanding the CSRD is crucial (and may eventually be mandatory). If you haven’t really looked into it yet, here are what we believe are the Top 5 things a company outside of the EU must know about it:

1. Applicability Beyond the EU: The CSRD isn’t limited to European Union (EU) companies. Non-EU companies with substantial activity in the EU and a turnover exceeding €150 million must also comply, albeit later (2028, you have a few years to digest this).
2. Double Materiality Principle: To be aligned with CSRD, you must base your reporting not only on how your company impacts the environment and society, but also on how environmental and social factors affect your business.
3. External Assurance: Companies must obtain external and independent assurance for sustainability reports. This ensures the reliability and accuracy of the disclosed information.
4. Standardized Reporting Templates: The CSRD aims to standardize sustainability reporting. Companies must use predefined templates for reporting on environmental, social, and governance (ESG) matters, making it easier for investors and stakeholders to compare data.
5. Timelines and Transition Period: The CSRD will apply to financial years starting on or after January 1^st, 2024. Companies have a transition period to adapt their reporting processes and systems.

As the global landscape of sustainability reporting evolves, familiarity with the CSRD can pave the way for smoother transitions and enhanced credibility in the eyes of your stakeholders. Given the answers in Workiva’s survey, we may even start to see some CSRD reporting in Mexico next year (could be just partial reporting, but still). Over time, if this increases, market expectations may switch to faster adoption than what the CSRD calls for today.

I hope you found this interesting. As usual, if there is anything we can help you with, or if there is an ESG topic you would like to know more about, please let us know.

Best,

Marimar

CEO, Miranda ESG