The CSRD in construction: what is it and what to do about it?

The construction industry is playing an important role in the transition to a more sustainable future. As a builder, you already have to comply with more and more regulations (read this article on ESG reporting), and now there is also the Corporate Sustainability Reporting Directive (CSRD). But what exactly does the CSRD entail, and what does it mean for construction companies? As a construction company, do you need to take specific steps to comply with these new guidelines? We answer all your questions and give you some practical tips on how to comply with the CSRD.

What is the CSRD?

The Corporate Sustainability Reporting Directive (CSRD) is a new European legislation that requires companies to report in detail on their environmental, social and governance (or, ESG: Environmental, Social, Governance) impacts. The CSRD directive stems from the European Union’s Green Deal and should help meet climate goals. It replaces the Non-Financial Reporting Directive (NFRD), which large, listed companies already had to comply with. With the new regulations, the group of companies obliged to report will gradually increase in size. The obligation will be phased in; initially, the regulations will only apply to listed- and large-cap companies (more on the latter later).

The CSRD sets stricter requirements on how companies report. This includes not only the financial, but also the non-financial impact of their activities. And, extra challenging, companies have to map not only their own sustainability performance, but also that of their supply chain. So this means including indirect emissions and the social impact of suppliers in your reporting.

What does the CSRD mean for construction?

Under the CSRD, construction companies will (eventually) be required to be more transparent about their sustainability performance. They must report on their energy consumption and CO₂ emissions, the use of sustainable building materials and on and working conditions of employees and subcontractors. For the construction industry, this means concretely that companies have to report not only their direct impact, but also their indirect impact. To do so, you will have to scrutinise the entire construction process, from design to demolition. Consistent recording of data is crucial here.

It is important to record things on a day-to-day basis in such a way that you can easily find them later to easily make reports.

As a builder, what should you do for the CSRD and why?

As a builder, you need to get going! Maybe not right away yet, but probably at a later stage. That sounds like quite a challenge, but it doesn’t necessarily have to be. If you have your records in order and keep track of everything, printing out a good report is not that complicated. What matters now is to start mapping out all the relevant sustainability criteria that apply to your business. It is also essential that you have a detailed document management system, preferably one designed specifically for construction. This involves recording things on a day-to-day basis in such a way that you can easily retrieve them later for easy reporting. You may not yet be legally obliged to do so, but having this information and being able to offer such reporting ensures that your company is ahead of the game. That can provide competitive advantage.

What steps to take:

1. Map your sustainability impact: describe how your company impacts the environment and society, from energy consumption on site to the use of sustainable materials.
2. Collect data: Accurately recording data on your energy consumption, emissions, waste management and social impact is crucial for good reporting. Work with a smart document management system (DMS) or Common Data Environment (CDE) to easily monitor your ESG performance.
3. Involve the whole chain: Construction companies will also need to collect data on the sustainability performance of their suppliers and partners. This may mean you have to start imposing stricter requirements on your suppliers.
4. Be prepared for audit: The CSRD requires sustainability reports to be audited by an external auditor, just as is already done with financial data.

As of when?

Obligations under the CSRD will be phased in:

• From 1 January 2024, listed companies previously covered by the NFRD will have to start reporting.
• From 2025, other large companies will also have to report. These are companies with more than 250 employees, a turnover of more than €50 million, and/or a balance sheet total of more than €25 million.
• Until 2026, SMEs are exempt from the CSRD. Nevertheless, as an SME, you may have to deal with this before then. Indeed, to report on the value chain as a large company, these large companies need input from their suppliers and customers.

Where to start? 5 tips on the CSRD

1. Start on time
   Setting up and establishing a solid sustainability reporting system takes time.
2. Invest in data analysis
   Reliable data on your environmental impact is the basis of good reporting. Invest in systems where you can accurately and securely store and manage all your data.
3. Create awareness within your organisation
   Involve all departments, from procurement to export, in your sustainable efforts.
4. Work together in the chain
   Build sustainable relationships with suppliers and partners so you can include their sustainable performance in your reports.
5. Ask for help
   Engage experts if you find the process too complex.

When you have to report for the CSRD, a lot comes your way. Yet it doesn’t have to be that complicated. Using a smart document management system or collaboration platform is already a big part of success. If you start on time, there will be no surprises and you will be completely future-proof!