The expectations and requirements on companies’ ESG activities as well as reporting are rapidly increasing. With the new reporting directive CSRD, the standard by which nearly 50,000 EU companies will have to report their climate and environmental impact is changed. Is your company ready?
Many large enterprises in the Nordics have reported for several years already, with an increasingly digital approach. According to the 2021 ESG Index, the ranking podium is exclusively Nordic with Finland on top, followed by Sweden and Iceland. Norway ranks 4th. So far so good.
Now, the Corporate Sustainability Reporting Directive (CSRD) will set a higher bar for sustainability reporting. Adopted by the European Commission in November 2022, the CSRD will replace and build on the Non-Financial Reporting Directive (NFRD).
It is expected to be implemented by January 2024. At a later stage, it will expand the number of companies that have to comply and will become the norm for nearly 50,000 companies in the EU, compared to about 11 700 companies covered by the current rules.
What are the new CSRD requirements?
With the new CSRD requirements, the EU is tackling the problem of quality reporting by establishing a common reporting framework that improves benchmarking of companies. The more reliable information can, in turn, be used by investors and other stakeholders to re-orient investments towards more sustainable technologies and companies.
All in all, the CSRD extends the scope and reporting requirements of the already existing regulatory framework NFRD. It introduces more detailed reporting requirements on companies’ impact on the environment, human rights and social standards, based on common criteria in line with the EU’s climate goals.
Among other things, the CSRD is adding additional requirements on sustainability risk (including climate change) affecting the company as well as the company’s impact on society and environment (the double materiality concept). It will also require more forward-looking information, including targets and progress.
Accurate data is at the heart
What are the consequences to companies? The new directive will be challenging for reporting companies, as data collection and auditing is an arduous process requiring time and resources. The CSRD will require sustainability data to be submitted in a standardized digital format and the data will need to include a “digital tag” so it can be fed into the European single access-point database for transparency and comparison purposes.
Quality data sits at the heart of sustainability reporting, but many companies struggle to harvest any reliable data at all from their siloed flora of cross-functional units. This is where Cognizant can help. By advancing sustainability data management, we help companies build an effective and efficient reporting process. It is about automating and enhancing the quality of reported data using integrated data strategies, making reporting more proactive using cloud data foundations for ESG information ecosystems, and building seamless connectivity and data exchange across stakeholders using data-sharing platforms.
If your company must comply with the CSRD, you must act now. I recommend you start by reading How to overcome the top three challenges of sustainability reporting. Also, visit our web section dedicated to sustainability services.