Wider reach, bigger scope

This year, sustainability reporting takes centre stage. In January, the EU Corporate Sustainability Reporting Directive (CSRD) came into effect. It is the most comprehensive and far-reaching sustainability reporting regulation to date.

Not only will it make non-financial reporting compulsory for many more companies – approximately 50,000 companies in total – its impacts will be felt up and down the value-chains of these companies, within and outside the EU, as my colleague Nicola Stopps explained.

Moreover, the CSRD significantly expands the scope of corporate sustainability reporting. If you were to list all individual requirements stated in the various European Sustainability Reporting Standards (ESRS) documents, you would end up with a list of close to a thousand items. No wonder therefore that companies can feel overwhelmed by the prospect of having to comply with the CSRD within a relatively short timeframe.

Four reasons not to feel overwhelmed by the CSRD

There is no question that the CSRD is highly ambitious and will require significant change to how companies manage and report on sustainability matters. Yet many of the requirements are not new and companies may find that they have much of the data already collected and can build on existing initiatives. Here are four reasons not to feel overwhelmed.

1. The CSRD provides structure to ongoing sustainability strategy development and implementation.
   In many companies the CSRD accelerates a process that is already underway. We hear from many organisations that they want to move from ad hoc, qualitative sustainability initiatives to running a coordinated and focused sustainability agenda that aligns with the commercial strategy of the business. For these companies, the CSRD is timely and helpful, as it provides a robust and systematic approach to identifying priority topics, setting targets, rolling out initiatives and measuring progress.

2. Companies will not have to report on all indicators.
   It is important to realise that companies don’t need to report on all topical ESRS standards. There is a clear list of data points that are mandatory for all companies. The other reporting requirements are determined by the outcome of the materiality assessment.

3. Many companies have some of the required information already available.
   Looking into the detailed ESRS requirements, many companies find that they have various elements already in place. For example, they may have started measuring their carbon footprint and set targets reduce it. Similarly, companies with a sound talent agenda will find that they can comply with many requirements of the ESRS for Own Workforce.

4. The guidelines provide flexibility in meeting more complex reporting requirements over time.
   The CSRD guidelines recognise that building a robust approach to sustainability takes time. In many areas the ESRS guidelines are strict and specific, but they also offer some flexibility for reporting in the first few years. In cases where companies cannot collect information about impacts in the value chain, after making reasonable efforts, it can use estimates based on supportable information. If a company has not yet implemented policies, actions and targets for a material topic, it can report a timeframe in which it aims to have these in place. And in the first year, companies do not have to publish comparable information for at least two years if they do not have historic data available.

How CSRD preparation can be made manageable

Despite the complexity and scope of the CSRD, we believe that preparation for compliance can a manageable process. Bringing it back to the very essence, the ESRS standards are a checklist – albeit a very long one.

We always recommend a systematic and pragmatic approach, starting with a gap analysis to map which ESRS requirements a company already complies with and where it doesn’t yet, before prioritising and addressing the gaps systematically.

Author: Sytze Dijkstra, Netherlands Country Manager, Simply Sustainable

If you are interested to learn more about our approach to CSRD preparation, please contact us.