Integrating Corporate Sustainability Reporting Directive (CSRD) in Corporate Performance Management
In this article, we describe the regulations around Corporate Sustainability Reporting Directive (CSRD). Companies are becoming increasingly aware of the social and environmental impact of their business operations, leading to the introduction of sustainability reporting standards, referred to as Environmental, Social, and Governance reporting (ESG).
- Environmental – highlights how companies use energy and manage their environmental impact. E.g., energy efficiency, climate change, carbon emission, biodiversity, and waste management.
- Social – identifies how a company encourages its people and culture and how its business operations affect the overall community. E.g., Inclusivity, employee engagement, customer satisfaction, health and safety, and human rights.
- Governance – Entails a company’s internal system of controls, practices, and procedures. E.g., company leadership, board diversity and structure, shareholder rights, bribery and corruption, and lobbying.
ESG reporting helps companies become more transparent in these three main topics, indicative of a company’s sustainability performance and the potential financial risk for investors.
Listed companies & CSRD
For a group of large, listed companies, ESG reporting is regulated by the Non-Financial Reporting Directive (NFRD). These companies are allowed to choose from different reporting frameworks, such as:
In addition, these companies experience increased data volumes, challenging operational teams to integrate new data reporting standards into their reporting processes rapidly.
Regulation to hold companies accountable for their social and environmental impact is limited under the NFRD, which caused incomparable reports and unreliable data.
As a result, the European Union (EU) announced it is working on a new sustainability directive, named the Corporate Sustainability Reporting Directive (CSRD), and aims to be in effect by 2024 (Fiscal Year 2023).
The CSRD regulation will require more European companies to comply with standards that will improve the reliability and comparability of companies’ social and environmental impact. Based on the existing sustainability reporting standards, the European Financial Reporting Advisory Group (EFRAG) compiles these standards.
CSRD: A Unified Reporting
How to become CSRD compliant?
In February 2022, the European Council approved the CSRD. It is expected to be approved by the European Parliament in Q2 – Q3 of 2022. After which, it will be sent to the European Commission for ratification.
Cpmview regularly posts updates, blogs, and articles about the developments of the CSRD.
- Difference between Non-Financial Reporting Directive vs. Corporate Sustainability Reporting Directive
Upcoming topics include:
- Corporate Sustainability Reporting Directive Roadmap
- Role of the CFO in Corporate Sustainability Reporting
- Start preparing for the Corporate Sustainability Reporting Directive
- Embrace CSR reporting in compliance with CSRD in SAP Analytics Cloud & OneStream.
As we will highlight in our blogs, becoming CSRD compliant will, most likely, become the responsibility of the CFO due to the collection and consolidation of data, monitoring accuracy with internal audits, and external auditing obligations.
With our experience streamlining reporting processes, solving complex data management puzzles, and XHTML formatting, we will guide you to complete your integrated reporting to become CSRD compliant by 2024.
(Updated on 1 June 2022)