The European Corporate Sustainability Reporting Directive has been in force for a year and a half. Don’t see reporting requirements primarily as an obligation, but as a way to structurally set yourself and achieve sustainability goals.
Today, when the European Union’s Corporate Sustainability Reporting Directive (CSRD) has been in force for a year and a half, responsibility and leadership in the field of nature and the environment are central. CSRD requires all companies in Europe to publish information on the environmental and social impacts of their operations and the impact of their environmental, social and governance initiatives on business.Environment, society and administrationor ESG). Therefore, the question is: how do you meet the requirements of CSRD and how does it provide you with an opportunity for holistic change?
The current ESG scenario
This so-called ESGbenchmarking is important for two reasons: it gives a better picture of the company’s sustainable development and gives insight into the company’s goals and strategies. This benchmarking It systematically compares the company’s environmental impact, social practices and management standards with those of others. In this way, it helps identify gaps or deficiencies in sustainability and plan future strategies, as well as promote transparency, accountability and risk management.
However, the challenge is that companies often report their best efforts and past performance, whereas ESG benchmarking requires companies to assess their progress against their goals. In addition, the evaluation criteria for good performance vary by sector.
From basic reporting to proactive ESG goals
Now that CSRD is encouraging companies to commit to up-to-date measurement methods and scientifically based goals, companies should use that ESG data themselves to set their own goals and manage those goals within the organization.
It is an important element in making this possible real time gathering information about events to create ESG insights. For example, if you collect information from your organization when taking out a loan, leaving a shipment, or making a new purchase, this information enables the conversion of operations and compliance from something abstract to material and concrete, which translation helps you baseline reveal. This step answers questions about your organization’s performance, the fault, but also the necessary measures, the necessary investments, and so on. Just like the financial data you use to discuss performance incentives and budgets, use this ESG data in a cyclical model to better manage operational performance and change.
The bottom line is that there is no single regulatory framework for everyone to follow. Different governments, industries and trade associations have different goals and compliance models, but they all start by entering the same information.
CSRD is an example of future security. Companies need to move from basic reporting to proactive ESG goals, using real-time data to manage performance and the changing requirements of regulations such as CSRD. Some of the most successful companies are taking a holistic approach, going beyond compliance reporting to strategically using sustainability data to create value and sustainability.
Three main CSRD requirements
CSRD sets out three key requirements: a wide range of disclosure initiatives, traceable data and better collaboration with stakeholders. This applies more specifically to:
- A wide range of disclosure initiatives – When companies report on sustainable development, they should focus on essential topics that are most important to them and that may vary depending on the industry and operation.
- Traceable data – Regulation will continue to be improved in the coming years. In that scenario, traceable data from manual processes is needed, and companies need machine-readable data and a standardized data model to ensure accuracy.
- Better cooperation with stakeholders – Collecting ESG information is no longer solely the responsibility of the organization’s responsibility team. The number of new regulations and the need for traceable data require wider collaboration between stakeholders, including technology and complianceteams, financial and purchasing departments and the sustainable development team. You also need to look at all of these activities to see who owns, controls and verifies the data.
At a recent workshop in Amsterdam Making an impact: leadership through ESG data, technology and partnershipswe have emphasized the importance of such a vision. Manoj Mathew, Global Head of Sustainability Practice, says, “When we prepared the ESG report at Cognizant this year, for the first time, four stakeholders – the Chief Sustainability Officer, the CFO, the Chief Operating Officer and the Chief Sustainability Officer Practice – Certify separately the different parts of the report. Usually only the sustainability the director approves the entire report.” It is already an indication of the cooperation between all departments.
Comprehensive change with CSRD
CSRD helps companies strengthen their foundations by better defining goals and understanding what is important. CSRD then helps prioritize this as well, setting goals and creating a data and technology strategy to achieve these goals and track progress real time can measure.
Interestingly, CSRD compliance will already help you to respond well to the upcoming Corporate Sustainability Due Diligence Directive (CSDD) in the European Union and regulations imposed by the US Securities and Exchange Commission.
CSRD enables the use of data in business. By committing to CSRD, questions naturally arise about how you as a company can buy differently, create financial products and manage risks. In short, CSRD forces companies to rethink data models, prioritize concrete essentials, and use data for more than just reporting. All of this offers opportunities for comprehensive change.
About the author: NAME is POSITION at COMPANY.