Are you ready to respond to the new European reporting requirements for real estate? Have you determined where and when you are subject to them? These are two critical questions we are currently working on with our global customers. As deadlines are rapidly approaching, we want to share the following key learnings with you.
What is CSRD?
The Corporate Sustainability Reporting Directive (CSRD) is the latest regulatory reporting requirement for companies operating in Europe. Its goal is to ensure that investors and stakeholders have access to the information they need to assess investment risks arising from climate change and other sustainability issues. CSRD makes sustainability reporting mandatory for companies across all sectors, including the real estate sector.
What needs to be reported?
Whilst the detailed reporting standards are still being finalised through mid-2023, for real estate companies, including real estate investment trusts (REITs) and developers, CSRD will require reporting on a range of environmental, social and governance (ESG) issues, including:
- Energy efficiency
- Scope 1, 2, and 3 carbon emissions
- Social value metrics
- Forward-looking ESG targets and progress toward them
- Climate due diligence processes
- Third-party verification on a company’s data-gathering processes
The most important stipulation will undoubtedly be double materiality. Double materiality is a concept that recognizes the importance of considering both the financial materiality and impact materiality related to environmental, social, and governance issues (ESG). Traditional financial materiality refers to the financial risk that sustainability issues may have on a company’s performance. Double materiality extends this concept to include a company’s own impact on people and the environment.
Who does this affect?
Approximately 50,000 companies in the EU, including large, medium, and small-sized firms, will need to follow the new regulations. Large companies or groups with consolidated subsidiaries–including international companies with significant operations in the EU–that meet two out of the three specified criteria (€40 million in net turnover, €20 million in assets, or 250 employees) must comply with CSRD rules.
How to get ready
With a phased implementation–and the earliest reporting deadline coming in early 2025–the prudent time to prepare is now. Measurabl is working with customers on the following key steps for CSRD reporting:
- Conduct a materiality assessment: Identify the ESG issues that are most relevant to the company and its stakeholders. This will help real estate companies determine the sustainability issues they need to disclose that are material to the company, and the impact they have on people and the environment.
- Set ambitious ESG targets: Set measurable ESG targets that are aligned with the company’s overall sustainability strategy. This will help companies measure their progress towards sustainability goals and demonstrate their commitment to sustainability.
- Implement ESG strategies: Develop and implement strategies to mitigate existing material ESG issues. This will help real estate companies improve their ESG performance and manage sustainability risks.
- Maximise transparency and auditability. Gather your ESG data in a central system-of-truth. This will enhance the credibility and reliability of sustainability reporting, and future-proofs against stepped up assurance requirements both in the EU and in the US. Note that under CSRD, data assurance will eventually be moving from limited to reasonable assurance by independent, third-party assurance providers.
Regulation plays a critical, enabling role in the climate transition as it sets a level playing field for businesses to operate in. Real estate companies have a unique opportunity to demonstrate their commitment to sustainability and to provide transparency on their ESG performance, ultimately enhancing their long-term resilience.
Take action now —January 2025 isn’t that far away. We are already working with customers to prepare for CSRD reporting, and continue to work on ways to streamline all ESG reporting for our customers.