The implementation of the Corporate Sustainability Reporting Directive (CSRD) marks a significant milestone in the evolution of sustainability reporting within the European Union. It aims to hold companies more accountable for their environmental and societal impacts through enhanced and more transparent reporting. The urgency and complexity of the CSRD compel organizations to act, yet the process can seem daunting. However, with a strategic step-by-step approach, businesses can effectively tackle this challenge.

This article was written by Mario van den Broek and Cem Adiyaman. Mario ([email protected]) and Cem ([email protected]) are part of RSM Netherlands Business Consulting Services with a strong focus on ESG and business strategies.

We have been working extensively with our clients to help them get prepared for the CSRD journey. As a part of that, crucial steps such as the Double Materiality Assessment, the CSRD Gap Assessment but also the Data collection and ESG Technology tooling should certainly be considered. However, there have been several important steps that must be taken for companies to even get started with their CSRD journey.  These steps often are overlooked and relate to items such as entity allocation, team selection and data preparation. 

The initial step in preparing for the CSRD is to conduct a thorough scoping exercise to identify the relevant legal entities within an organization that are required to report. This is particularly complex for international corporations with multiple legal entities across various jurisdictions. Accurate delineation is important as it defines the scope of reporting efforts and lays the foundation for the entire CSRD implementation.

Following this critical step, it is important to bring in the right expertise to navigate the CSRD requirements. The complexity and breadth of the reporting necessitate many companies to engage external experts specialized in sustainability reporting and related regulations. These experts can provide valuable insights and help develop a clear and achievable implementation plan.

The next phase involves the collaboration between the selected legal entities and external experts. This requires strong coordination and communication to ensure the CSRD requirements are fully integrated into business processes and that the reports are accurate and timely. Earlier, we also wrote an analysis on the importance of alignment between a company ESG (or sustainability) policy and building a tax governance framework. This dynamic ensures that multiple teams within the organisation must carefully be involved. 

In that respect, we note that the heart of CSRD implementation lies in establishing a robust internal organizational structure whereby forming a dedicated CSRD team is key. This team should include employees from various departments, such as HR, finance, and sustainability departments, to ensure a multidisciplinary approach. It is important that these team members are not only chosen based on their motivation but also on their specific knowledge, skills, and the strategic position of their department within the organization. As an extension, intrinsic motivation should not be overlooked, however, it is vital for companies to invest in training and development to ensure their employees are not only fully equipped to meet the CSRD requirements but also that they are aware of what it all entails to become CSRD compliant. This could range from specific training on sustainability reporting to broader educational initiatives that raise awareness and understanding of sustainability issues within the organization.

Lastly, effective CSRD implementation requires ongoing evaluation and adaptation of processes and strategies. This means organizations should regularly review their reporting practices, gather feedback from stakeholders, and be willing to make changes to enhance the quality and relevance of their sustainability reports.

By carefully following these steps and investing in the necessary knowledge, expertise, and resources, organizations can not only comply with the CSRD requirements but also improve their overall sustainability performance and make a positive contribution to both the environment and society.

RSM is thought leader in the field of tax and sustainability consulting. We offer frequent insights through training and sharing of thought leadership that is based on a detailed knowledge of European Green Taxes, ESG regulation, and practical applications in working with our customers. If you want to know more, please reach out to one of our consultants.