Get ready for the

next wave of ESG

reporting
KPMG International
—
kpmg.com/CSRD
Administration

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Speakers

Jan-Hendrik Gnaendiger Marco Frikkee Andrea Sternisko

Head of ESG Reporting Advisory Sustainability Reporting Partner ESG Service Group
Partner KPMG in the Netherlands EFRAG Board member
KPMG EMA [email protected] Partner, KPMG in Germany
[email protected] [email protected]

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01
Intro to CSRD —what
it means for European
companies

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What does CSRD mean — EU companies

The CSRD revolutionizes ESG Reporting in the EU

Today Captured companies in EU 2024/2025

~ 50k
11,600
1 2
NFRD CSRD
until FY 2023 from FY 2024

NFRD 1) CSRD 2)
Non-Financial Reporting Directive Corporate Sustainability Reporting
13 months preparatory phase Directive
• Free choice of sustainability reporting frameworks, 2022-2023 • 12 new binding European Sustainability Reporting
standards (e.g., GRI, SASB), and non-financial KPIs Standards (ESRSs) with up to 120 mandatory non-
financial KPIs and additional qualitative disclosures
• Management report OR as separate report Companies meeting at least two of the following:
0• Reporting as part of the management report

!
• No assurance requirements, only whether non- • > 250 employees (annual average)
financial information has been provided • > €40M in net turnover • Mandatory limited assurance required
• Financial materiality defines reporting content • > €20M in total assets • Mandatory double materiality assessment
Listed SMEs from 2026 onwards, with deferral option (financial materiality + impact materiality)
1) Non-Financial Reporting Directive 2014/95/EU
2) Corporate Sustainability Reporting Directive 2022/2464/EU entered into force at
5 January 2023

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 What does CSRD mean — Scope

Who is in scope of CSRD?

The scope of reporting entities over the years
FY24 FY25 FY26 FY27 FY28 FY29
Reporting Reporting Reporting Reporting Reporting Reporting
in 2025 in 2026 in 2027 in 2028 in 2029 in 2030
1 Large EU PIEs (public interest entities) 
2 Other large EU companies  Option to opt out for two years
3 Certain listed EU SMEs* 
4 Ultimate non-EU parent


EU-based companies (general scoping) Non-EU parent scoping

1 Companies 2 All large companies 3 Certain listed SMEs* 4 Large subsidiaries of non-EU parents with substantial activity in the EU report for the
subject to the not currently subject and small and non- complete Group
existing Non- to the NFRD complex institutions
Financial and captive insurers Reporting regulations in accordance with slightly reduced ESRS (anticipated
Reporting separate disclosure standard)
Directive (NFRD) *Option to opt out until FY29
(effective date of FY28)
An ultimate non-EU parent company would be subject to the CSRD if it has:
i.e. large public- • Substantial activity in the EU — i.e. it generated net turnover > €150M in the EU
interest for each of the last two consecutive years; and
companies with Meeting at least two of Meeting at least two of
• at least:
more than 500 the following: the following:
• one subsidiary that meets the general scoping of the CSRD; or
employees • > 250 employees • > 10 employees • one branch (in general, a physical presence) that generated net turnover >
(annual average) (annual average) €40M in the preceding year
• > €40M in net turnover • > €700K in net turnover
• > €20M in total assets • > €350K in total assets

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What does CSRD mean — EU companies

The CSRD transforms ESG reporting on two levels

Scope ofapplication(slidebefore) Reporting Assurance Obligation
— Large EU-PIEs Reporting in the Management Report Limited Assurance according to ISAE 3000 or a
comparable standard will be mandatory
— Other large EU companies Digital reporting of sustainability information in line with
the European Single Electronic Format (ESEF) Reasonable Assurance possibly the next step
— Certain listed EU SMEs*
EU-Taxonomy
— Ultimate NON EU-Parents

Topics of CSRD Reporting Levels of the Corporate Sustainability Reporting Directive (CSRD) Reporting Areas
Sector-agnostic Standards

Cross-cutting ESRS 1 — General ESRS E1 — Climate ESRS S1 — Own ESRS G1 — Business

Requirements change workforce Conduct
Governance
ESRS 2 — General ESRS E2 — Pollution ESRS S2 — Workers in
Disclosures ESRS E3 — Water & the value chain
Environmental Strategy
marine resources ESRS S3 — Affected
ESRS E4 — Biodiversity communities
& ecosystems ESRS S4 — Consumers Implementation
Social & end-users
ESRS E5 — Resource use
& circular economy
Governance Metrics & Targets
Sector-specific Standards (Set 2,3,4) to come

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What does CSRD mean — EU companies

Organizing ESG reporting: Improving Governance Systems

Governing Body (Supervisory)
Management (Implementation)
Systems, processes and organization for the preparation of reporting data

Risk Management Compliance Internal Controls Internal Audit

Sustainability
Management Management of
operational and
Management of
Compliance risks
Management of
process risks
Controlling of process-
and control-effectivity on
strategic Risks all levels
Leads and directs actions
(including managing risk) and
application of resources to
• Integrate ESG risks into • Integrate due diligence • Non-financial ICS Expansion of the
achieve the objectives of the the risk inventory act requirements (nICS): Internal Audit activities
organization to ESG
• Embed climate-related • Integrate Minimum • Determine relevant
Implementation of measures risks and chances in Social Safeguards (EU non-financial KPIs
and operational controls, ERM to fulfill TCFD Taxonomy) • Identify relevant
reporting, monitoring processes involved to
requirements calculate KPI

Assurance

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02
What does CSRD mean
for non–European
companies/subsidiaries

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What does CSRD mean — non-EU companies

How Non—EU subsidiaries of EU parent company are involved

Scenario 1 —EU Parent Company with Non-EU Subsidiary (Not Operating in the EU)
[Ultimate] General Scoping (first at the stand alone level, then at the Consequence
EU Parent
group level)
• … is subject to CSRD if 2 out of 3 criteria are fulfilled: • Perform materiality analysis on group level
• Minimum of 250 employees • Disclose sustainability information according to CSRD/
• a turnover of >€40 million or EFRAG in management report on group level
• balance sheet total of >€20 million [2 of 3]. • Mandatory limited assurance

… is not subject to CSRD on a stand alone basis as long as it is not If included in the EU parent company’s sustainability
Non-EU incorporated or listed in the EU reporting, certain new data elements may be required to
Subsidiary … included in the parent company’s group report if parent has control provide to the parent company to meet their group reporting
needs

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What does CSRD mean — non-EU companies

How Non-EU parent companies with EU subsidiaries are

involved
Scenario 2 —Non-Parent Company with EU-Subsidiary
[Ultimate] Non-EU Parent Scoping Consequence
Non-EU Parent
An ultimate non-EU parent company would be subject to the CSRD on • Reporting regulations in accordance with slightly reduced
consolidated level from 2028 onwards if it has: ESRS (anticipated separate disclosure standard)
• Substantial activity in the EU — i.e., it generated net turnover > €150M in
the EU for each of the last two consecutive years; and
• at least:
• one subsidiary that meets the general scoping of the CSRD; or
• one branch (in general, a physical presence) that generated net
turnover > €40M in the preceding year

General Scoping
• The EU subsidiary would have to consider whether it meets
• … is subject to CSRD if 2 out of 3 criteria are fulfilled: the CSRD scoping requirements for EU companies on a
stand alone basis.
EU Subsidiary • a Ø-number of employees of >250, • EU subsdiaries may be exempted from its own reporting
• a turnover of >€40 million or requirements if they are included in a consolidated report
• balance sheet total of >€20 million [2 of 3]. prepared in accordance with full scope CSRD/ESRS or
equivalent reporting standards.
• It is still unclear whether the Non-EU Parent consolidated
report in accordance with reduced ESRS will exempt EU
subsidiaries from its own reporting requirements.

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What does CSRD mean — non-EU companies

Use case: Reporting Requirements based on Scoping

Example:

FY 2028
• 1st report in 2029
• In accordance with slightly
reduced ESRSs
Non-EU
Parent
Employees: 850
Net Turnover: €180M
Total Assets: €50M
Listed: Yes

FY 2024 FY 2025 FY 2026 required to be

included in the
• 1st report in 2025 • 1st report in 2026 • 1st report in 2027 'non-EU parent'
• In accordance with • In accordance with • In accordance with SME- reporting
ESRSs ESRSs ESRSs

EU Sub 1 Non-EU
EU Sub 2 EU Sub 3
(PIE) Sub 4

Employees: 550
Employees: 300 Employees: 9 Employees: 41
Net Turnover:
Net Turnover: €45M Net Turnover: €10M Net Turnover: €25M
€100M
Total Assets: €10M Total Assets: €5M Total Assets: €10M
Total Assets: €25M
Listed: No Listed: Yes Listed: Yes
Listed: Yes

FY Sub A FY Sub B
2024 2024

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03
Global reporting
requirements
outside of CSRD

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Global reporting requirements

Comparison of ESG Reporting Standards proposals

Two ISSB proposals
• Investor focus
• General principles, including proposed requirement to report across all

Scale of mandatory disclosures

sustainability-related risks and opportunities (not just climate)
• To date, detailed guidance on climate only1

Twelve draft ESRS

• Multi-stakeholder focus, including investors
• Core principles for disclosure
• To date, granular requirements published for sustainability impacts, risks and
opportunities
• Broad ESG view, e.g. biodiversity, circular economy, social aspects etc.

One SEC climate proposal

• Investor focus
• Detailed requirements to report on climate only

1 Additional detailed guidance on other topics is planned for the future.

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 Global reporting requirements

Interoperability of the frameworks: The Materiality

Concept
The needs of users of sustainability
reporting information may differ. Materiality
provides the filter that helps companies
focus on what matters to users. Disclosures with a multi-stakeholder focus
Impact materiality (required by ESRS)
Impact materiality requires disclosures about
sustainability matters that relate to a company’s
actual or potential, positive or negative impacts on
Sustainability-related financial disclosures people or the environment.
Some of these disclosures may also be financially

General purpose financial reporting

material.
The principles are consistent with reporting under
GRI standards.

Financial statements

Financial materiality (required by all)

Information that would influence an investor’s
Double materiality decisions — e.g. by affecting their assessment
of the company’s cashflow prospects.
ESRS adopt ‘double materiality’
principles — aiming to report on all
significant impacts by considering
both the investor and wider
stakeholder lenses.

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 Global reporting requirements

Interoperability of the frameworks: Disclosure of

information
ISSB ESRS SEC
Yes, for financial impact and expenditure
Required in the audited financial
No, but permitted via cross-referencing No metrics, plus financial estimates and
statements?
assumptions

Yes, in a separate section or by reference

Required in the annual report? Yes, with flexible location requirements Yes, in the management report
from another section (e.g. MD&A)

Yes, to documents outside general-

Yes to a limited extent, within specific
Cross-referencing permitted? purpose financial reporting, subject to Yes, within the annual report
locations and subject to conditions
conditions

At the same time

Yes, subject to short term transition relief Yes Yes
as the financial statements?

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Global reporting requirements

Interoperability of the frameworks: Alignment with

the TCFD
Governance
TCFD

Metrics and
Strategy
targets
Risk management

Most aligned because it directly reflects the seven

Governance Most aligned. Builds on TCFD — including
ISSB

Metrics and categories of cross-industry metrics included in the

Strategy descriptions of transition plans and TCFD 2021 update. Builds on TCFD with industry-
requiring scenario analysis. targets
Risk management specific metrics.

Broadly aligned — differences arise where More granular financial impacts than the TCFD.
Governance disclosure is required only if the company
SEC

Metrics and Broadly aligned on the disclosure of targets, but with

Strategy uses the item (e.g. scenario analysis); and optional reporting of climate-related opportunities.
optional reporting of climate-related targets
Risk management
opportunities.

Governance Largely aligned — differences arise Split between policies, actions, metrics and targets.
ESRS

because ESRSs use double materiality The requirements are significantly more prescriptive
Strategy principles
Metrics and and address EU policy objectives, including alignment
Impact, risk and targets with the Paris Agreement.
opportunity management

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 Global reporting requirements

Interoperability of the frameworks: Reporting requirement of

GHG emissions
ISSB ESRS SEC
Scopes 1 and 2? Yes Yes Yes

Scope 3? Yes, with transition option* Yes Yes, if material or included in targets

Based on control and share of equity-

Basis for organisational GHG Protocol options — operational or
Operational control method investees (associates) —
boundaries financial control, or equity share
consistent with the financial statements

Yes, based on revenue and a unit of

Yes, based on net revenue for the total of
Intensity metrics? No* production for the total of Scopes 1 and 2,
Scopes 1, 2 and 3 emissions
and separately for Scope 3 (if included)

Disclose targets? Yes, if used Yes, based on Paris Agreement Yes, if used

* In December 2022, the ISSB tentatively decided to allow a one year delay in reporting of Scope 3 GHG emissions and to remove requirements to report GHG intensity metrics.

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04
CSRD readiness
assessment &
how to organize
a preparedness
project
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 CSRD Readiness Assessment & project organization

CSRD Project Approach

3.Materiality Analysis (according to CSRD)
• Conducting a materiality analysis (ESRSs
requirements)
1. Impact Analysis & ReportingStrategy 2.Materiality Navigator (according to ESRS) • Delimitation of non-material report contents to
• CSRD scoping of legal entities • Definition of material sustainability matters (sub- reduce future reporting efforts
• Groupwide reporting strategy topics) as defined per sector within the ESRS
• Delimitation of non-material disclosure and data
requirements to be analyzed
4. ReadinessAssessment
Gap assessment regarding CSRD
requirements considering the results of
the materiality analysis

6. Survey & frameworks 5. Governance& Resources

• Holistic further development of governance
• Setting up a process to collect
structures (Governance Systems)
the qualitative/quantitative
information • Creation of a resource plan for the fulfilment of
the upcoming reporting requirement
• Consideration of relevant
frameworks for the further
development of non-financial
reporting (GRI, TCFD, SASB,
etc.)
7a. Auditreadiness 7b. Integration of the managementreport
Preparation of an external audit of the non- Preparation of the integration of reporting into the
financial reporting, e.g. by conducting an management report, especially with regard to the
assurance readiness assessment time perspective

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CSRD Readiness Assessment & project organization

KPMG CSRD Readiness Assessment

What you need

Overview of the implementation status of CSRD in your
company

What KPMG delivers

Standardized and field-tested approach:

• Review as-is status

• Comparing the current reporting with ESRSs
requirements
• Formulation of recommendations for future reporting
• CSRD roadmap to efficiently close gaps

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CSRD Readiness Assessment & project organization

How KPMG can support

Knowledge provider Team composition with Helping hands for

& enabler EFRAG members ramp-up phase

Consideration of ESG Reasonable assurance Outside-in perspectives

frameworks overlaps preparation from DAX mandates

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Questions

Jan-Hendrik Gnaendiger Marco Frikkee Andrea Sternisko

Head of ESG Reporting Advisory Sustainability Reporting Partner ESG Service Group
Partner KPMG in the Netherlands EFRAG Board member
KPMG EMA [email protected] Partner, KPMG in Germany
[email protected] [email protected]

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