As we step into a new year 2024, European Union businesses stand on the cusp of a new era. 2024 marks the commencement of the Corporate Sustainability Reporting Directive (CSRD), a seismic shift in the corporate landscape. The landmark mandate demands comprehensive reporting on environmental, social and governance (ESG) performance of large companies and groups across the European Union (EU). The directive offers an opportunity for companies to solidify their commitment to sustainability and unlock a competitive advantage.

To kickstart their CSRD reporting journey, companies can take the following important steps:

Materiality Assessment

Double materiality assessment is an important element in CSRD reporting. It helps in determining the topics that are most relevant to businesses and stakeholders, both in terms of financial impact and environmental and social impact. Materiality dictates the disclosure requirements that a company needs to meet. Conducting a thorough materiality assessment by involving all relevant stakeholders helps in assessing the impact and prioritizing material topics to develop a comprehensive action plan.

Strategic Alignment

Sustainability should be considered as a mainstream business practice across the value chain of a company. Integrating sustainability into a company’s business strategy organically helps in adhering to most of the disclosure requirements. Simple steps like considering environmental footprint in procurement, disclosing environmental information for the products, including sustainability as a marketing strategy, considering environmental and social impact during expansion, etc., would stand as testimonials to a company’s commitment to sustainability. It would help build trust and gives a competitive edge in the market alongside meeting the CSRD requirements.

Define clear metrics and goals

One of the main disclosure requirements in the CSRD revolves around targets surrounding several ESG parameters. The progress achieved by the company against each target are to be disclosed every year. It ensures that companies have a clear ESG roadmap carved out to 1) reduce their environmental and social impact 2) reflects the current performance of the company and 3) increases transparency among the stakeholders. Hence, setting clear and measurable sustainability targets aligned with the CSRD framework and getting it validated from renowned organisations like SBTi is pivotal. Companies should pinpoint key performance indicators (KPIs) relevant to their industry and operations. Defining these metrics facilitates tracking progress, demonstrating achievements, and identifying areas needing improvement.

Data-driven approach

CSRD requires companies to disclose more than 1000 data points across over 80 disclosure requirements. Monitoring and collecting so many data points manually is a tough ask. It is imperative to invest in advanced data collection and management systems to capture the exhaustive list of data points required by CSRD. In addition, implementing robust data collection protocols and documenting them appropriately to ensure business continuity, establishing clear data ownership and access protocols, and ensuring data quality and integrity is essential.

Transparent Disclosure

The underpinning message of the CSRD is to engage with stakeholders and earn their trust through transparent reporting on the company’s ESG performance. It is vital to consult with both internal and external stakeholders and ensure their alignment with the company’s ESG objectives. Throughout the value chain, activities like materiality assessment, ESG data collection, supplier engagement, customer feedback, community interaction, investor meet, etc, call for inputs from employees, customers, suppliers, investors, local community. Effectively instilling the values of sustainability across stakeholders is paramount, accompanied by clear communication of broader expectations to achieve desired outcomes. Building robust connections with stakeholders facilitates the extraction of valuable insights and encourages constructive feedback. Providing dedicated training to employees and suppliers is instrumental in seamlessly meeting the requirements outlined by the CSRD.

The CSRD mandate is monumental in the EU business landscape, urging companies to evolve, adapt and demonstrate leadership in sustainability. By embracing transparency, driving positive change, and proactively managing their ESG performance, companies can not only ensure compliance but also gain a competitive edge, attract responsible investors, and build trust with stakeholders. The new year brings an opportunity for businesses to redefine the way of doing business with sustainability at the forefront and let’s hope that 2024 will be a transformative year ahead!