Corporate Sustainability Reporting Directive (CSRD)
Navigating the new EU CSRD regulation:
Understanding its impact and effect on your business
The EU Corporate Sustainability Reporting Directive (CSRD) is a new set of rules that the EU is making to help organizations be more honest and open about how they are doing their business.
The goal is to make sure that companies are taking care of the environment, treating their workers well, and doing business in an ethical way and it is part of the sustainable toolkit to achieve a net zero economy in 2050
Promote transparency and accountability
The goal is to promote transparency and accountability in the area of sustainability by encouraging companies operating in the EU to disclose information on their environmental, social, and governance (ESG) performance in a consistent and comparable manner. It starts with the listed-companies in 2024, followed by large companies in 2025 and SMEs in 2026.
Shareholder to stakeholder
he directive's primary objective is to empower investors, customers, and various stakeholders. It achieves this by offering them reliable, comparable information regarding companies' sustainability performance. This, in turn, enhances stakeholders' capacity to assess sustainability, identifying potential risks and opportunities with greater clarity.
CSRD
The new reporting directive requires organizations to gather and disclose previously undisclosed data, potentially disrupting their reporting practices. Embracing artificial intelligence globally can aid data collection and enhance sustainability reporting and performance. The global adoption of AI offers promise for improving sustainability reporting and performance through enhanced data collection.
CSRD Impact
Double Materiality
Organizations have to perform a An ESG analysis approach that evaluates the direct and indirect impacts of a company’s operations on its stakeholders and the environment.
Value Chain
The EU directive requires organizations to report about their entire value chain from raw materials to the end of a product lifecycle. This will need the involvement of many partners in the value chain.
ESG Impact
The EU directive requires companies to collect, process and publish huge amounts of data and information; new systems, processes and a governance structure will have to be set up for this.
Assurance
The CSRD stipulates that an external auditor must provide assurance on sustainability reporting, initially with limited assurance, later with reasonable assurance.
Integrated reporting
Integrated reporting combines financial and non-financial information to provide a complete picture of an organization's performance and sustainability.
European Sustainability reporting standards
Framework & Reporting standards
The Corporate Sustainability Reporting Directive (CSRD) is the framework established by the European Union for sustainability reporting. The foundation of the CSRD is the European Sustainability Reporting Standards (ESRS), which consists of twelve concept standards.
General (mandatory) standards
The first two ESRS standards are general and include some basic principles and requirements for reporting on strategy, governance, and materiality decisions. These cross-sectional standard together with ESRS E1 Climate change, ESRS S1 Own workforce and ESRS G1 Business conduct are mandatory to implement for any organization.
Specific standards
The remaining ten standards cover various ESG aspects, and all twelve standards include 82 disclosure requirements and application guidance which provides details on how the requirements should be applied. Sector-specific standards and standards tailored to SMEs are to be implemented in the future.
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Holistic approach
The new EU directive supports that organizations adopt a holistic approach in their sustainable transformation. Organizations must look at risks on a different way and from a much broader view than just financially.
New risks
Instead of focusing solely on the immediate effects or impacts of transportation, organizations must adopt a broader perspective and determine whether the amount of carbon emissions that are sequestered from the atmosphere is much higher than the emissions caused by transportation. While this may have been a point of interest in the past, it is no longer considered a significant risk
Net zero economy in 2050
Organizations identify new risks that occur from this approach. In the past transportation was never a huge risk in terms of financial risks, as for a production company, the costs are just a fraction of the total cost of sales. Nowadays the risk of pollution is likely a significant risk and one the biggest risk in preventing to achieve the net-zero objective in 2050.
ESG Strategy: Building a Sustainable Future
Corporate Social Responsibility (CSR) is a crucial aspect of modern business, and Environmental, Social and Governance (ESG) reporting plays a vital role in ensuring that a business is held to high standards of sustainability. In today’s rapidly changing world, ESG reporting is becoming increasingly important for companies to maintain their reputation, attract customers and investors, and create a better future for the world.
Prioritizing ESG Reporting
To prioritize ESG reporting, businesses must first assess their current ESG performance, develop and implement a comprehensive ESG strategy, and involve all stakeholders in the process. This will help ensure that ESG reporting is fully integrated into the business and that it meets industry standards.
Setting Goals and Objectives
In addition to involving stakeholders, it is important for businesses to set both short-term and long-term ESG goals and objectives, and track progress and measure success. This helps businesses to understand the impact of their ESG initiatives and continuously improve their reporting.
Building Blocks of Sustainability Reporting
To ensure that ESG reporting is comprehensive and accurate, businesses must consider the four building blocks of sustainability reporting: governance, strategy and performance, risks and opportunities, and impact. By following these guidelines, businesses can ensure that their ESG reporting is robust, transparent and provides valuable insights into their sustainability performance.
In conclusion
ESG reporting is a crucial aspect of CSR and helps businesses build a sustainable future. By prioritizing ESG reporting, setting goals and objectives, and considering the four building blocks of sustainability reporting, businesses can ensure that their ESG reporting meets industry standards and has a positive impact on the world.
ESG information requires a data-driven approach
Data is a crucial component of ESG reporting as it provides the basis for organizations to disclose information about their environmental, social and governance performance. The new reporting requirements under the Corporate Sustainability Reporting Directive (CSRD) mandate companies to disclose information in a consistent and comparable manner, which requires accurate and reliable data.
Data is needed to measure and track progress on sustainability performance, identify areas of improvement, and demonstrate accountability to stakeholders. Data also enables organizations to identify and prioritize key sustainability issues, set targets and goals, and evaluate the effectiveness of their sustainability initiatives. The current state of ESG programmes are not making an adequate difference for climate change fast enough.
Near the end of 2022 AI is globally adopted as part of daily life and used from an assistant during education up to scientific research in finding literature references up to being a very helpful writing assistant for any given assignment.
AI can also help organizations in the first and foremost important elements of the design and implementation of an ESG strategy. SKY DUST uses ESG expertise in combination with sophisticated AI-technology and is able to assist management in developing an ESG strategy
