CSRD: keys to a transition towards sustainable reporting

The Corporate Sustainability Reporting Directive (CSRD) establishes a common framework for businesses on environmental, social, and governance (ESG) issues. The adoption of the  CSRD is part of the European Green Deal, which aims to make the European Union the first carbon-neutral economy by 2050.

Thus, it aims to harmonize corporate sustainability reporting and improve the availability and quality of published data. Each year, companies will be required to publish sustainability information, adhering to the European Sustainability Reporting Standards (ESRS). 

In this article, our RSM experts provide keys for a transition to sustainable reporting, sharing their advice and feedback on the challenges faced and overcome.

Our Support for a Transition to Sustainable Reporting

Drawing on our experience, we have developed a structured methodology to help companies navigate this regulatory transformation.
 

A Timeline Tailored to the Needs of Businesses

Our support begins ahead of regulatory deadlines to allow for a gradual and effective adaptation. A typical support program lasts 6 to 8 months, depending on the initial maturity of the organization.
 

The Main Stages of Support

1. Launch phase  

   The launch phase is critical for laying the foundations of the mission and ensuring structured support. It starts with a scoping meeting aimed at precisely defining the scope of the company, taking into account its specific operations and value chain.

   This step also validates the project timeline, key contacts, and expected deliverables. It is also a time for raising awareness among contributors to ensure their understanding of the “technical” concepts involved in the mission.

2. Double Materiality Analysis

   The double materiality analysis is a key step in supporting companies to meet the CSRD requirements. It identifies material sustainability issues by intersecting two essential dimensions: impact materiality and financial materiality.

   To do this, an analysis of the company’s sustainability context is essential. It helps identify sector-specific and regulatory issues unique to the company. This step frames the analysis and directs the work based on the issues faced by the relevant sector(s), the expectations of stakeholders, and the characteristics of the value chain.

   At the end of this analysis, we produce a comprehensive identification of the impacts generated by the company’s activities and the risks and opportunities (IROs) the company may face.

   Each identified IRO is evaluated through a materiality rating process that distinguishes:

   1. Impact materiality, which measures a company’s effects on the environment and society;
   2. Financial materiality, which assesses issues likely to influence the company’s economic performance or financial situation.

3. Gap Analysis

   This step involves:

    - Initially analyzing the materiality of the information between all existing data points and those that are truly relevant to the company.

   -  Then, evaluating the gaps between the company’s current practices and the expectations defined for issues identified as material following the double materiality analysis

   In short, this analysis measures the remaining work required to align the company with the CSRD reporting requirements, distinguishing between available information, partially available information, or missing information that the company will need to disclose.

4. Sustainability Report Writing

   Once the previous work is completed, the company can begin drafting its report. However, this will still require internal organization so that each contributor understands their role.

   The sustainability report, being governed by specific publication requirements, is expected to provide precise answers regarding the company’s sustainability strategy, policies, actions, indicators, and targets concerning its material IROs.

   The data collection phase should not be overlooked. Depending on the company, this may require consolidation tools, although for a first exercise, most organizations we have supported have proceeded without them.
    

CSRD: What Have We Learned?

We have supported several large companies across various sectors (industry, engineering, media, etc.), with different levels of maturity regarding ESG issues. Some already had structured policies, while others were just discovering the subject and needed to integrate these new requirements into their strategy.

During our missions, the organizations we supported faced various challenges.

• Completeness of the Value Chain:

One of the novelties and challenges posed by the CSRD is the exhaustive coverage of the company’s value chain. The regulation does not define the scope of this, which can make its modeling and the identification of associated impacts, risks, and opportunities complex. This is especially true for the engineering sector, where ancillary activities can be diverse (project management assistance, consulting, technical expertise, project ownership, etc.). The CSRD encourages companies to carefully examine their business relationships—both direct and indirect, their geographical locations, and the sectors in which they operate.

• Stakeholder Impact Rating:

Another difficulty lies in the rating of impacts by stakeholders. This is indeed a process that can be confusing, especially when it is a new exercise. This mechanism can lead to misunderstandings or resistance from those tasked with carrying out this rating, particularly for those unfamiliar with the concepts of impact materiality and financial materiality, or with certain technical topics. Therefore, it was necessary to provide educational support and ensure that each IRO was accompanied by definitions and illustrative examples to facilitate understanding.

•  Engagement of Internal Stakeholders:

In response to the previous challenge, one of the main obstacles is mobilizing internal employees who are not initially involved with ESG topics. For some of them, the CSRD approach may seem distant from their daily activities. This is why we recommend establishing a steering committee and/or project committee at the start of the mission. This approach helps raise awareness and integrate contributors early on, ensuring they are engaged.

• Access to Data and Structuring Policies: 

Beyond challenges related to data collection and reliability, structuring strategies and policies is a critical issue, especially for complex topics like biodiversity. These topics require clear commitments, which are often nonexistent or insufficiently detailed in companies’ internal documents. We had to assist them in developing or formalizing these policies, not only to meet CSRD requirements but also to strengthen the integration of sustainability into their overall strategy.
 

What Solutions and Best Practices?