Worlds Collide: CSRD vs TFND

Posted 3rd October 2024


 

Introduction

In 2024, two significant biodiversity and ecosystem initiatives are set to impact companies globally and in Europe. The first is the market-led Taskforce on Nature-related Financial Disclosures (TNFD), and the second is the EU’s Corporate Sustainability Reporting Directive (CSRD). While TNFD is a voluntary framework targeting companies in both developed and emerging economies, CSRD is a mandatory directive for companies based in the EU/EEA. But what if your company must comply with CSRD but also seeks the international recognition of TNFD? Can a company engage with both, or must it choose one?


CSRD

The CSRD legislation, effective from 5 January 2023, mandates EU businesses, including qualifying EU subsidiaries of non-EU companies, to disclose their environmental and social impacts and how their ESG actions affect their business. The CSRD aims to provide clarity for investors, analysts, consumers, and other stakeholders, enabling a better evaluation of EU companies’ sustainability performance and related business impacts and risks. Key points of CSRD include:

  • Mandatory Directive: CSRD is a compulsory directive enacted by the EU, requiring companies to report on their environmental and social impacts.
  • Detailed Reporting: CSRD demands comprehensive reporting, including specific Key Performance Indicators (KPIs), covering a broad range of ESG aspects.
  • Double Materiality Assessment: CSRD introduces the concept of “double materiality,” requiring an assessment of both impact materiality (how a business impacts climate or biodiversity) and financial materiality (how climate and biodiversity impact the business financially).
  • Adoption Process: Companies must develop a process for collecting CSRD-required data by January 2024. Entities currently subject to the Non-Financial Reporting Directive (NFRD) will submit reports on 2024 data in 2025.

 

TNFD

  • Voluntary Framework: TNFD offers a voluntary framework for businesses and financial institutions to assess, report, and act on their nature-related dependencies, impacts, risks, and opportunities.
  • Disclosure Pillars: TNFD’s recommendations are structured around four pillars, aligned with the Task Force on Climate-related Financial Disclosures (TCFD) and the International Sustainability Standards Board (ISSB). The pillars include:
       1. Governance: How the organization manages nature-related risks and opportunities.
       2. Strategy: The actual and potential impacts of nature-related risks and opportunities on the organization’s business, strategy, and financial planning.
       3. Risk & Impact Management: The processes used by the organization to identify, assess, and manage nature-related risks.
       4. Metrics & Targets: The metrics and targets used to assess and manage relevant nature-related risks and opportunities.
  • Adoption Process: To adopt TNFD recommendations, organizations need to align their reporting and decision-making processes with these four pillars and register as a TNFD Adopter.
    While both TNFD and CSRD aim to enhance sustainability reporting, TNFD focuses on nature-related financial disclosures on a voluntary basis, whereas CSRD mandates broader ESG reporting.

 

Can International Biodiversity Consultants Ltd help?

IBC have been assisting European multinationals identify and document potential biodiversity impacts and are also supporting development of mitigation action programmes to address negative impacts across their global footprints.
Contact IBC via their email: info@ibioconsultants.com or use IBC’s online contact form.


References:

  • – EFRAG and TFND (2023) TFND – ESRS Correspondence Mapping. Accessed at: https://tnfd.global/publication/tnfd-esrs-correspondence-mapping/ on 18 August 2024.
  • – SDIA (No Date) Upcoming EU Reporting Standards: NFRD & CSRD & SFRD & TCFD. Accessed at: https://knowledge.sdialliance.org/transparency/upcoming-eu-reporting-standards:-nfrd-and-csrd-and-sfrd-and-tcfd on 18 August 2024.
  • – Watershed Technology Inc. (2024) New biodiversity standards in CSRD and TFND – What your company needs to know. Accessed at: https://watershed.com/blog/csrd-tnfd-nature-biodiversity on 18 August 2024.
  • – MorningStar Sustainaltics (2024) On the Ground: Exploring the Rise of TFND Reporting and Nature-Related Disclousres. Accessed at: https://www.sustainalytics.com/esg-research/resource/investors-esg-blog/on-the-ground–exploring-the-rise-of-tnfd-reporting-and-nature-related-disclosures on 18 August 2024.