Integrating Corporate Sustainability Reporting in Corporate Performance Management
25 October 2022 – written by Rianne Snijder
Companies are becoming increasingly aware of their business operations’ social and environmental impact, 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 their 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 to become more transparent in these three main topics, which is indicative of a company’s sustainability performance and the potential financial risk for investors.
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:
- Global Reporting Initiative (GRI)
- Sustainability Accounting Standards Board (SASB)
- Climate Disclosure Standards Board (CDSB)
- Carbon Disclosure Project (CDP)
- Integrated Reporting (IR)
In addition, these companies experience an increase in data volumes, challenging operational teams to rapidly integrate new data reporting standards into their reporting processes.
Regulation to hold companies accountable for their social and environmental impact was 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 is aimed 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 the social and environmental impact of companies. These standards are compiled by the European Financial Reporting Advisory Group (EFRAG), based on the existing sustainability reporting standards.
In February 2022, the CSRD was approved by the European Council and is expected to be approved by the European Parliament in April 2022. After which, it will be sent to the European Commission for ratification.
In the coming months, cpmview will regularly post updates, blogs and articles about the developments of the CSRD. Upcoming topics include:
- Difference between Non-Financial Reporting Directive vs. Corporate Sustainability Reporting Directive
- Role of the CFO in Corporate Sustainability Reporting
- Start preparing for CSRD
- 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, as well as external auditing obligations.
With our experience in 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.