CSRD: The revolution for the real estate market

Real estate plays a crucial role in the CSRD and dual materiality analysis. Whether you are a tenant, real estate investor, project developer, property manager, builder or asset manager, the CRSD affects everyone directly or indirectly.

Are you curious about:

• What exactly the CSRD entails

• The core objectives of the CSRD

• The role of the CSRD in the ESG landscape

• The relationship between the CSRD and ESRS

• How dual materiality supports the CSRD

• The impact of CSRD-ESRS on the real estate market

• How to get started with a sustainability report

• The added value of EYE Real Estate

Then this blog is especially for you!

What is the CSRD? 

The CSRD (Corporate Sustainability Reporting Directive) is an EU directive that requires companies to report extensively on their environmental impact, social and governance issues (ESG). This directive replaces the previous Non-Financial Reporting Directive (NFRD). It applies to large companies and some medium-sized enterprises. Reports must meet uniform standards and are checked externally. The obligations start in 2024, with first reports in 2025. The aim is to promote transparency and sustainability within the EU.

The core objectives of the CSRD

The European Commission has established three core objectives for the CSRD (Corporate Sustainability Reporting Directive):

1. Improving sustainability information:The aim is to ensure more relevant, reliable and comparable ESG data from companies. This enables stakeholders, such as investors and consumers, to make more informed decisions.

2. Harmonization of Reporting Standards:The CSRD strives for uniform reporting standards within the EU, so that companies' sustainability performance can be reported and compared in a consistent manner.

3. Promoting Sustainability and Responsibility:The directive encourages companies to take responsibility for their impact on the environment and society, in line with the EU's broader sustainability goals, such as climate neutrality by 2050.

How does the CSRD fit into the ESG landscape?

In the Paris climate agreement EU member states have agreed to limit global warming to well below 2 degrees Celsius. With a clear view at 1.5 degrees Celsius. To achieve this goal, a package of measures and policy initiatives have been drawn up. This set of agreements becomes the Green dealnamed. 

The main climate objectives  of the Green Deal are:

• At least55% net CO₂-reductionby 2030

• 95% net CO₂- reductionby 2050

To finance this green transition, both public and private financial flows must be used for sustainable economic activities. This requires a clear insight into how sustainable companies really are. This enables investors, banks, end users and other stakeholders to make responsible investment decisions.

In this broader ESG landscape, the CSRD plays a crucial role. The CSRD integrates ESG principles into core corporate reporting and governance, leading to greater transparency, accountability and support for sustainable investments within European business.

The relationship between the CSRD & ESRS

TheESRS (European Sustainability Reporting Standards)and theCSRD (Corporate Sustainability Reporting Directive)are closely linked and together form a foundation for sustainability reporting within the European Union.

Looking for the ESRS metrics? Be sure to read our blog about ESG in real estate

The CSRD imposes a general obligation on companies to report in detail on their sustainability activities. The ESRS provides the specific standards and guidelines that companies must follow to meet these obligations. Together, the CSRD and ESRS ensure harmonized, transparent and reliable sustainability reporting within the EU.

Double materiality as a backbone

Dual materiality provides a holistic view of a company's sustainability profile. It recognizes that a company's impact extends beyond its financial results and emphasizes companies' broader responsibility for their role in society and the environment. This marks a fundamental shift in how companies and investors approach risk, opportunity and sustainability.

When reporting CSRD, companies must adopt two perspectives:

1. Impact materiality: The impact of business activities on society and the environment, including greenhouse gas emissions.
2. Financial materiality: How sustainability issues, such as climate change, impact financial results.

A materiality analysis helps to identify relevant information for stakeholders. Information is material if its omission or misrepresentation could influence the judgment of stakeholders. Scope 1, 2, and 3 emissions play a crucial role in this. The classification of Scope 1, 2 and 3 emissions has been determined by it Greenhouse Gas Protocol(GHG). Scope 1 includes direct emissions, Scope 2 includes indirect emissions from purchased energy, and Scope 3 includes other indirect emissions throughout the value chain. This analysis provides companies with insight into their total CO₂ footprint and helps develop effective climate strategies. Each company will conduct a unique materiality analysis, which is in addition to the mandatory reporting points of the CSRD-ESRS.

The impact of the CSRD on the real estate market

The CSRD and ESRS have significant consequences for the real estate market:

• Increased Transparency:Real estate companies must provide detailed ESG reporting, which can portray your company in a positive light to investors and tenants.
• Costs and Investments:Investments in sustainable technologies and reporting may involve initial costs, but offer opportunities for long-term savings and value creation.
• Enhanced Risk Management:By proactively managing ESG risks, companies can better prepare for future challenges and regulations.
• Attractiveness for Investors:Sustainable real estate projects are becoming increasingly attractive to investors, which can lead to higher valuations and better financing conditions.
• Compliance and Competitive Advantage:Complying with the new standards can provide a competitive advantage by demonstrating your commitment to sustainability and attracting additional market segments.
• Stimulus for Innovation:The focus on sustainability encourages investments in innovative and energy-efficient solutions, making your real estate portfolio future-proof.

The CSRD and ESRS offer real estate companies not only challenges, but also valuable opportunities to distinguish themselves in an increasingly sustainable market.

Looking for more information about the CSRD and its impact on the real estate market? Be sure to read our blog: CSRD: The revolution for the real estate market

Boost your company with a CSRD report

Sustainability is no longer a trend, but a necessity for modern companies. Discover how effective sustainability reporting not only reduces your environmental impact, but also strengthens your brand and increases your competitive position. Start today to implement a strategic approach that not only delivers results, but also increases your business value. Follow these steps for success:

In conclusion

The CSRD imposes the following obligations on companies:

• Measuring and Reporting:Companies must measure and report their long-term objectives in accordance with ESG criteria.
• External Control / audit:There is an obligation for external audit according to the ESRS standards.
• Reporting of Non-Financial KPIs:Companies must report on non-financial KPIs, with a focus on social (Social) and environmental aspects (Environment).
• Double Materiality:Reports must comply with the double materiality principle, which includes both the impact of the company on the environment and the impact of the environment on the company.

EYE Real Estate: Your partner for sustainable and profitable real estate

Under the CSRD, with its emphasis on dual materiality reporting, it is essential to involve key stakeholders in the value chain when assessing your organization's ESG impact. This can be a challenge because not all stakeholders in the real estate chain have the right resources or knowledge to evaluate ESG topics from this perspective. The chain is often fragmented, and the required information is not always immediately available. Moreover, there is sometimes a lack of urgency or expertise to properly tackle this complex matter.

Don't worry, we are ready for you. With our extensive knowledge and experience in the real estate market, we can fully support you in providing insight into both the qualitative and quantitative ESG impact of your real estate. We do not do this alone, but together with our trusted network partners, so that you are assured of an approach that is both thorough and future-oriented.

Would you like to know more about how we can help you make your real estate portfolio more sustainable? Please contact us today without obligation for an introduction. 

Contact EYE Real Estate