What the CSRD means for companies: A guide to sustainability reporting

12 ESRS standards define CSRD content

The CSRD establishes clear requirements for corporate sustainability reporting through 12 European Sustainability Reporting Standards (ESRS). These standards are divided into two main categories: cross-cutting standards (ESRS 1 and ESRS 2), which set general reporting requirements, and topic-specific standards, which address specific areas such as climate, environment, social aspects, and corporate governance. The topic-specific standards are particularly relevant as they cover issues like biodiversity, resource use, and the social dimension of sustainability, which are increasingly in regulatory focus.

Materiality assessment and double materiality

A central element of the ESRS is the materiality assessment, based on the concept of double materiality. This assessment considers two perspectives: impact materiality, which examines the company’s impact on the environment and society, and financial materiality, which assesses how external factors can affect the company. Double materiality allows for independent consideration of both perspectives, meaning that a topic is reportable if it is material in either perspective. This differentiated approach helps ensure that companies make their sustainability reporting comprehensive and transparent.

Challenges posed by the CSRD

Implementing the CSRD presents companies with several challenges. One of the biggest is collecting and providing the necessary data along the entire value chain rather than just the supply chain. This not only requires the adaptation of internal processes but also close collaboration with suppliers and other business partners to obtain reliable and relevant data. Data quality is also crucial, as reports are increasingly reviewed by external parties, such as investors and regulatory bodies, potentially necessitating (process) adjustments in previously unexamined departments.

Further challenges include:

• • Reputational Risks: Companies must ensure accurate reporting to avoid allegations of greenwashing.
• • Resource Constraints: A shortage of skilled personnel and high costs complicate implementation.
• • Establishing New Data Flows: Sustainability data are often being collected for the first time, requiring new processes and responsibilities.
• • Complex Consolidation: Decentralised data collection (from multiple areas, potentially non-EU subsidiaries, minority interests) requires complex consolidation.

The goal should be to integrate data sustainably into existing ERP systems rather than creating parallel systems in Excel or expensive new systems. New and adjusted data flows should be aligned with existing processes, such as in finance and risk management, to avoid discrepancies between reports and reduce the necessary level of quality control. This requires a well-thought-out and robust data concept.

Viewing sustainability reporting as an opportunity

Despite these challenges, the CSRD also offers numerous opportunities. Companies view the new reporting directive as value-adding and consider it relevant to their strategic work (see Figure 3). Companies that proactively implement the requirements can gain a competitive edge by being seen as sustainability leaders by partners and employees. Honest reporting provides an opportunity to showcase a company’s values, allowing it to stand out from the crowd.

Increased transparency in reporting also allows companies to strengthen their credibility with customers, investors, and the public, which may become increasingly important for future financing (see Figure 4). A recent survey shows that 88% of banks believe sustainability criteria will play a significant role in lending decisions. Already, 51% of banks consider sustainability factors, which can lead to different interest rates or even rejection of loan applications.

By aligning with best practices from other companies, such as through benchmarking, companies can continuously improve their strategies. Additionally, extensive analysis of their value chain can uncover (financial) optimisation potential. Addressing existing environmental and climate risks enables companies to manage and mitigate these risks in the long term. Engaging with sustainability and the transparency it creates can thus optimise existing processes and make risks visible early on.

Start early

Companies that take action in 2024 have the opportunity to position themselves optimally for reporting requirements from 2025 onwards. Addressing CSRD requirements in a timely manner allows for a deeper understanding of the new regulations' complexity, strategic decisions on the level of detail in reporting, and better control over time and financial resources for implementation. This approach helps avoid overly complex solutions and time-consuming corrections later.

Steps that every company should take in 2024 include:

• • Assign responsibilities and allocate dedicated resources.
• • Conduct a materiality assessment to identify relevant sustainability topics and data points.
• • Develop data concepts to prepare processes for handling and, if necessary, collecting required data.

Conclusion

The CSRD marks a significant step towards a more sustainable corporate world. For companies, it is essential to see the new requirements not as a burden but as an opportunity. Those who act early and use the new reporting obligations strategically can not only minimise regulatory risks but also benefit in the long term from a stronger market position and insights from the analyses. The CSRD should be understood as an impetus to question and further develop sustainability practices – for the benefit of the company and society.

nxt statista as a partner in CSRD implementation

As experienced management consultants, we support companies to professionally and efficiently meet the requirements of the CSRD. For over 20 years, we have stood for strategic excellence and data expertise. Our in-depth knowledge of EU regulations and deep expertise in our focus industries make us a valuable partner in implementing the CSRD. Our market research experts help you better understand your stakeholders and gather data for the materiality assessment. Supported by experts in data science and data engineering, our consultants develop customised reporting solutions. We understand the needs of departments and management, and we can also communicate effectively with software engineers and programmers. Our in-house marketing agency then brings the report and findings to life in an engaging way.