Navigating the CSRD: A Comprehensive Guide for Sustainability Leaders
The sustainability world at the moment is flooded with talk about one thing, the Corporate Sustainability Reporting Directive. Otherwise known as CSRD. In this blog post Sustaira’s Global Sustainability Lead Rory O’Sullivan will attempt to give you a comprehensive high-level understanding of the directive, step-by-step walking through the high level approach many companies are taking, where to be cautious and some top-tips. Rory will be sharing these, along with many more in our upcoming CSRD webinar, for further detailed explanation and the chance to ask any burning questions you can sign up via the link at the bottom of this page.
Example CSRD journey our clients typically follow
Step 0: Legal Scoping
Yes, this guide starts with Step Zero. Why not step 1? Because this is not a real step, it is more a reminder. Go and speak with your legal teams, your finance teams, and your executive management about CSRD. Understand where your organization is responsible for reporting, what you currently report on, do a legal scoping exercise with proper advice to check which of your business entities or subsidiaries are in scope. In short, follow the below guidance.
Step 1: A Double Materiality Assessment
Materiality refers to the relevance and significance of specific sustainability issues for a company. For CSRD reporting, materiality helps determine which aspects should be disclosed. Sustainability leaders must identify and prioritize material impacts to provide meaningful information to stakeholders. Also, important to understand is that this process should be done in a robust manner, EFRAG recently disclosed more guidance on this, look to that and consult with your assurance partner on precisely how to approach your materiality assessment. Lastly, your materiality assessment should be a double-materiality assessment, considering internal effects on your business and external impacts on the world around you.
Examples of Material Sustainability Impacts:
Carbon Emissions: Companies need to report their greenhouse gas emissions, including Scope 1, 2, and 3 emissions. This data informs investors, customers, and regulators about a company's environmental footprint.
Water Usage: Water scarcity and quality are critical sustainability concerns. Reporting water usage helps companies manage risks and demonstrate responsible resource management.
Supply Chain Risks: CSRD encourages companies to disclose supply chain risks related to human rights, labor practices, and environmental impacts. Transparency in this area fosters responsible sourcing and supplier engagement.
For more instructions on how to conduct a DMA, please contact Sustaira or see below to join our upcoming webinar on all things CSRD.
Top-Tip: Don’t always think negatively. Sometimes important material matters will also be positive opportunities or positive impacts on your ecosystem, these should also be prioritized.
Step 2: Checking Definitions and performing a gap assessment:
Once you have identified your material topics for reporting (and aligned them with European Sustainability Reporting Standards (ESRS) topics) you need to make sure that everyone in your organization understands and defines them in the same way. This may not be as easy as it sounds. For example with CO2 emissions, are you all measuring the same scope 3 categories in the same way? Or another example, with Gender Pay Gap, is your organization calculating it in the same way (using the same methodology: FTE vs. headcount etc.). This process should go hand-in-hand with performing a so-called gap assessment. Comparing what you measure / collect / report today against what you will need to in the future. The output of which should be a lovely table of reporting topics, nicely defined with clear indication if it is currently measured, not-measured but data available, or unmeasured (for example).
Step 3: Making a data strategy & preparing to report
Making a plan on how you will be ready is arguably the hardest part. It requires a lot of communication with your organization and don’t be afraid to lean on experts within their field. Ask people how they would measure it, and assign responsibility. It is also important to consider the following at the stage (steps 3.1 & 3.2). You should be ensuring that the work is also robust and manageable for the long-run, this is not just once but you need to be setting up a long-term reporting & control system within your organization for ESG data. If in doubt, go and speak to colleagues in finance, understand how financial data is reported, and see if they can help you.
Step 3.1 Digital Reporting Solutions
Digital tools and platforms streamline CSRD reporting processes. Sustainability leaders can leverage these solutions to enhance accuracy, reduce manual effort, and improve data accessibility. It can also assist in auditing your report, workflow management and ensuring data is handled accurately. See below some challenges and benefits associated with using software in preparation of your report. We will give a demo in our upcoming webinar on CSRD of our solution for CSRD reporting.
-
Implementing digital reporting systems requires investment, training, and data integration. Companies must address cybersecurity concerns and ensure data privacy. However, good software providers will understand these issues and be able to navigate them with you and reduce risk.
-
Automation speeds up reporting cycles, reduces errors, and facilitates real-time data analysis. Digital platforms also enhance stakeholder engagement by providing interactive reports. A platform can serve as a universal source of truth to your disclosures, and ensure the audit trail is maintained.
Step 3.2 Pre-Assurance
Arguably, I should have mentioned this sooner. CSRD reporting requires 3rd party assurance on your report. You absolutely shouldn’t wait until your ready to publish to begin speaking with your assurance partner. Whilst they cannot (for independence reasons) give you advice on the content of your report, they can (and should) give you feedback regarding the assurance requirements. Have conversations with them, and share with them what you are planning on doing, and how you plan to make sure your report meets requirements. Engaging in this process of pre-assurance can avoid some difficult conversations down-the-line and ensure there are no unpleasant surprises.
Step 4. Collect your data, and prepare your report
If everything has been done properly above then this step should be the easiest. Be aware the first time around will probably be the hardest, so make sure that you take care to work to collect data earlier than deadlines, and manage workloads on your team carefully. Most importantly, ensure that everything you are disclosing is accurate and honest. And even more importantly ensure that you learn from the first report, in order to improve the second. There is nothing wrong with not being as complete as you would like, so long as you have a plan to improve you report overtime.
Involve top-level management in your report, ensuring that responsibility is clear on the board for the contents of the report. This is the only way to ensure that for the long-run the report, its contents, and the commitments promised within it are going to be maintained.
Extra-Tip: Practical Insights for Sustainability Leaders
Streamlining Data Collection and Ensuring Accuracy
Centralize Data: Create a centralized repository for sustainability data. This ensures consistency and simplifies reporting.
Engage Stakeholders: Collaborate with internal teams, suppliers, and investors. Their input enhances data accuracy and builds trust.
Use Technology Wisely: Invest in user-friendly software for data collection, validation, and reporting.
Remember, the CSRD is an opportunity for companies to demonstrate their commitment to sustainability. By following best practices and leveraging digital solutions, sustainability leaders can navigate the CSRD effectively and contribute to a more transparent and responsible business landscape. For more detail and if you have any questions, we advise you to join our upcoming CSRD webinar via the link below.
Dive deep into the Corporate Sustainability Reporting Directive (CSRD) and its profound impact on companies, society, and investors. This session will illuminate the path to understanding material sustainability impacts such as carbon emissions, water usage, and supply chain risks. Learn how to conduct a robust Double Materiality Assessment (DMA) and discover the common pitfalls and opportunities that come with CSRD reporting. Plus, we’ll explore how digital solutions can streamline and enforce your reporting process.
