With the introduction of the Corporate Sustainability Reporting Directive (CSRD) in the EU from January 2023, businesses should be preparing their sustainability reports in line with the new legislation. However, a recent VinciWorks survey found that most businesses are unlikely to be ready for the new reporting mandate.
This article covers the need for business leaders to be ready to report on their sustainability performance in line with CSRD. It includes what steps you can take to prepare, and the business benefits involved in being ahead of the legislative landscape.
What is the Corporate Sustainability Reporting Directive
The new Corporate Sustainability Reporting Directive aims to provide a more streamlined image of companies’ sustainability performance. It aims to strengthen the reporting mandates already set out by the EU’s Non-Financial Reporting Directive (NFRD).
From January 1, 2024, the CSRD will be applicable to businesses that are currently under the jurisdiction of the Non-Financial Reporting Directive (NFRD), before extending its scope to include large companies from January 1, 2025. Companies will have to submit reports if their workforce exceeds 250 employees and their financial status meets either of the two thresholds: assets surpassing €20 million or revenue exceeding €40 million.
Failing to prepare
The VinciWorks survey covering 175 Environmental, Social, and Governance (ESG) reporting and strategy leaders found that 77% of businesses are not yet preparing to report in line with the new mandate. Additionally, respondents cited a main concern for failed preparations coming from friction in the supply chain when attempting to collect data on emissions, for example.
29% of businesses included in the survey have plans of preparing for the new reporting mandate within the next six months. But again, this leaves little room for substantial preparations ahead of its introduction.
The new reporting mandate affecting almost 40,000 more businesses across the EU than the existing NFRD. Businesses should be keen to refine and improve reporting on issues like environmental impacts within their value chain.
Getting ready to report
To avoid becoming one of the 77% of companies failing to prepare, below is a step-by-step guide to get you ready for a seamless transition to the CSRD:
Plan and establish your double materiality assessment.
One of the main differences of the CSRD from current legislation is the requirement of a materiality analysis using a double materiality approach. The double materiality approach consists of businesses publicly disclosing both their own impact on people and the environment and how sustainability issues affect their business. The assessment must cover all levels of your value chain meaning each stakeholder must be evaluated considering impacts on business operations in the short, medium and long term.
Get to grips with EU Sustainability Reporting Standards (ESRS)
Companies having to comply with the CSRD from 2024 will have to do so by reporting in line with EU Sustainability Reporting Standards (ESRS). The ESRS are the new reporting standards set out in the CSRD. The standards ensure all companies impacted by the new mandate can report on their ESG information in a consistent way, easily comparable to others. By familiarising yourself with the reporting standards, you will be better positioned to transition to the new legislation upon its implementation.
Collect and Monitor Data
For the first time, the CSRD will require businesses to report on information concerning ESG information. Businesses will need to collect and provide data on their own operations across scope 1, 2, and 3, including stakeholders in their data collection and monitoring. It’s important to get a head start with this to become familiar with auditing ahead of the new reporting mandate.
To comply with CSRD, the data monitored must be both reliable and backed up with substantial evidence and figures. For the simplest and more streamlined route of obtaining this information, Positive Planet can provide a full carbon calculation of scope 1, 2, and 3 operations. Our user-friendly processes fast track businesses through the carbon accounting stage.
Integrate Reporting
For businesses who fall under the CSRD, management reporting must be both reliable and transparent. It’s important that guidelines and frameworks are closely followed throughout this process. This allows affected businesses to generate substance behind their claims with trusted third party support. This will help comply with the new reporting mandate and solidify your data.
At Positive Planet, we use the GHG Protocol as our reporting guidance for heightened accuracy in our calculations. For carbon reduction plans, we follow the Science Based Targets initiative (SBTi) framework for target setting to ensure credibility throughout the decarbonisation process.
Begin to Voluntary Report
Possibly the most important step to ensuring sustainability is embedded within your company culture is the desire to report on your operations voluntarily. By following the requirements, you are establishing sustainability as a pillar within the business. Voluntary reporting will ensure CSRD-affected businesses are well prepared for 2024. Companies not yet within the scope to be affected by new legislation can use it to ensure a seamless transition to sustainability reporting when upcoming legislation inevitably impacts them.
What are the business benefits of strong CSRD preparations
Positive Planet’s expert team is on hand to guide you through each step so you can enjoy an array of business benefits as a result of your preparations. Some key benefits of getting up to speed with your sustainability reporting include:
Regulatory compliance: Staying on top of regulatory changes positions your business well ahead of new reporting requirements, meaning you can transition to new legislation seamlessly.
Improved transparency: Engaging with the CSRD can demonstrate commitment to your ESG strategy to stakeholders, boosting your brand image, reputation and trust, both internally and externally.
Competitive advantage: Adopting the CSRD standards early can set you apart from rival businesses who are slower to transition to the new reporting requirements. This will increase your competitiveness within the industry.
Investment attractiveness: ESG and sustainability is increasingly taking the main priority for investors when making financial decisions. So, preparing for the CSRD early can create new opportunities for additional sources of capital and enhance your investment attractiveness.
High stakeholder engagement: Transparency in your sustainability reporting can improve trust amongst stakeholders, opening doors for conversations and engagement in your net zero programme. This can enhance business productivity amongst employees and business performance through customer loyalty.
Preparing for the Corporate Sustainability Reporting Directive may seem like a daunting task. But, our team of experts are ready to support you in your preparation and reporting. Collaboration is key to ensure compliance to the new regulation.
