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EY: How we can leverage CSRD to drive sustainability and innovation

أكتوبر 29, 2024
8:09 ص
In This Article

Key impact points:

  • CSRD mandates extensive ESG reporting, driving transparency and accountability for large companies.
  • Leveraging ESG data unlocks opportunities for sustainable innovation and long-term success.
  • Scalable technology solutions are essential for effective CSRD compliance and strategic growth.

The European Corporate Sustainability Reporting Directive (CSRD) is set to revolutionize how large and publicly listed companies disclose their environmental, social, and governance (ESG) practices.

A new era of transparency

Phase 1 of the CSRD targets large companies meeting at least two of these criteria: over €50 million in net turnover, more than €25 million in balance sheet totals, or an average of 250 employees annually. This directive unfolds progressively through to 2029, aiming for entities to measure, understand, and communicate their ESG impacts transparently, consistently, and comparably.

There are more than 800 individual data points within CSRD, of which almost 200 are mandatory. It incorporates quantitative and qualitative metrics to measure the impacts, risks, and opportunities of upstream, own-operations, and downstream activities, based on a thorough double materiality assessment.

Moving beyond compliance

Companies now have the chance to extend their vision beyond mere compliance by leveraging the wealth of data and analytics at their disposal to unlock untapped opportunities.

“Preparation and presentation of comprehensive ESG reports provides organisations with actionable insights about their business that they did not previously have.”

We are working with many of our clients to use that information to identify new opportunities and mobilize strategies that will drive sustainable innovation, including sourcing strategies, new manufacturing processes, and optimized product lifecycle management.

The role of technology

Organisations are increasingly recognizing that a well-defined sustainability strategy is essential for long-term success. As they develop and refine these strategies, the need for technology that not only supports but also enhances their sustainability goals becomes clear.

“Our role is to guide clients through the intricacies of sustainability planning, ensuring that the technology solutions we recommend are not just tools for compliance, but powerful allies in their quest for sustainable innovation.”

These solutions should be adaptable and scalable, evolving with the organisation’s growth and sustainability ambitions. By integrating advanced data management systems, we help clients meet their ESG reporting needs and provide a platform for performance monitoring and management, as well as scenario modeling to shape future initiatives.

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Ensuring assurance

For assurance, it’s essential to have systems in place that can accurately track and document ESG initiatives, allowing for third-party verification. This helps confirm that the reported data is complete, accurate, and consistent with relevant standards and frameworks. Assurance processes also provide stakeholders with confidence that the organisation’s ESG disclosures are trustworthy and that it is committed to transparency and accountability.

Delivering value through technology

Scalable, adaptable, and flexible technology should provide the backbone of every organisation’s ESG strategy. Organisations require a technology solution that will streamline the data integration process and automate the collection, collation, analysis, and reporting of ESG data for relevant reporting frameworks (e.g., CSRD, EU Taxonomy, GRI, CDP, CSDDD, and SBTi).

A recent NASDAQ research report that interviewed 150 global sustainability, finance, and legal executives found that investment in ESG software is helping to improve organisational collaboration, mitigate risks, and meet ambitious ESG and sustainability goals.

  • 86% said that ESG software has improved the quality of ESG reporting and communications with stakeholders.
  • 78% noted it improved their ability to manage progress towards their ESG objectives.
  • 81% of executives are aiming for leadership and industry competitiveness through their ESG and sustainability strategy.

Overcoming challenges

One of the predominant challenges for many organisations relates to value chain reporting. The need to share detailed, potentially sensitive data between value chain partners brings an added level of complexity.

“Value chain reporting requirements for scope 3 emissions and on social areas, such as child labour and modern slavery, challenge the traditional definition of an organisation’s boundaries.”

To meet these challenges, companies need technology that is adaptable to different frameworks, with integration capabilities for internal systems like ERP and HR, and automated data exchange for the supply chain. A future-proof solution that meets today’s reporting and ESG management needs, while also incorporating evolving regulatory requirements, is essential.

Summary

CSRD is in force, and while the new sustainability reporting requirements may seem vast, the opportunity it provides to explore innovative options is compelling. The need for an ESG reporting solution that is adaptable, scalable, and integrated is clear.

Related Article: CSRD Prep: Companies Merging Green with Financial Goals

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