The CSRD has come into force – what needs to be done?

The standards according to which the CSRD report is to be prepared are new for everyone.
There are still no best practices, no experience reports, no perfect procedure that companies can use as a guide.
It is helpful to familiarize yourself with the structure of the individual ESRS standards and, in the next step, to focus on the key disclosure requirements and data points for the company.

What is required by the CSRD?

Being affected by the CSRD means that the company is obliged to publish a sustainability report as part of the management report.
This sustainability report should not be a marketing brochure, but a detailed report that covers environmental, social and governance (ESG) issues.
It is important to note that companies are not free to choose the framework for the report – the ESRS are the standards to which they must adhere.
What makes things even more precarious is that the report – just like the management report – is scrutinized by external auditors.
It is therefore all the more important that you understand the framework, the ESRS, know exactly how the report is structured and report on the correct, key data points.

How should I proceed with the double materiality analysis?

Keyword material data points: The double materiality analysis is the core of the ESRS report.
It shows which topics must be included in your report.
In other words: which of the more than 1,000 data points your company must provide information on.
We have summarized what exactly is behind the concept of double materiality in this blog article.
And we explain what the process for analyzing double materiality looks like in this 7-step guide.

How do I set up the CSRD report according to ESRS?

Basically, you divide your sustainability statement into four parts:

1. General information
2. Information on the environment
3. Social information
4. Information on governance

The general information(ESRS 1 and 2) is mandatory for all companies.
The other three parts are based on the ESRS topic standards.
You do not have to report on all of these standards – this depends on the result of your double materiality analysis.
The ESRS are divided into the following individual standards:

The general standards ESRS 1 and ESRS 2:

So let’s start with the structure of your CSRD report.
First, let’s look at the two general standards ESRS 1 and 2, which form the basis for the rest of the report.
At first glance, the effort seems small, but:

• With ESRS 1, there are no disclosure requirements and therefore nothing directly “to do” for companies.
  But this is about what the report should look like, what it must contain and how it is structured.
  The sustainability team needs to understand this part really well, then the rest of the report will be easier.
• ESRS 2 is the omnipresent standard, so to speak.
  The key topics must be specified there; it forms the cornerstone for the work on the topic standards.
  And: Each topic standard in turn contains disclosure requirements from ESRS 2 – so you always end up here.

The 4 pillars of the thematic standards:

Next up are the topic standards(environmental, social, governance).
While you are digging through the individual standards and disclosure requirements, you should pay attention to the subdivision of the data points: Namely, they are categorized into narrative, quantitative and monetary.
This gives you a quick overview of what is required – figures or continuous text.
So that you can approach the individual topic standards in a structured manner, it helps to familiarize yourself with their structure.
This is because all ESRS standards basically follow a very similar structure.
The structure can be divided into four pillars:

This is the basic structure.
Depending on the topic section (environmental, social, governance), however, further disclosure requirements are added: For the 5 standards from the environmental area, additional information must be provided on the financial consequences that are expected as a result of environmental impacts, risks and opportunities.
In E1(Climate change), information is also required on how the achievement of sustainability goals is incorporated into the remuneration of members of the administrative, management and supervisory bodies and what the company’s transition plan for climate protection looks like.
Standard E4(Biodiversity and Ecosystem) also requires a transition plan.
In addition, the consideration of biodiversity and ecosystems in the strategy and business model is required.
And impact parameters in connection with biodiversity and ecosystem changes should also be included in the targets and parameters.
With regard to social standards, the focus is on stakeholder involvement:

• The interests and viewpoints of the stakeholder groups must already be stated in the strategy pillar.
• In the Management of impacts, opportunities and risks section, the procedures for involving stakeholders in the respective topic are then queried again.
• It also requires information on the procedures in which stakeholders can raise concerns and on the procedures for remedying negative impacts.

In the area of governance, there is only one topic standard(business conduct).
The strategy pillar is replaced here by a governance pillar, in which the roles of the administrative, management and supervisory bodies should be described.
In the area of management of impacts, opportunities and risks, additional information is required on supplier management and the prevention and detection of corruption and bribery.

Do I have to report on all data points of a material topic?

The ESRS contain over 1,000 parameters, disclosure requirements and data points that may be relevant for the preparation of a CSRD-compliant sustainability report.
But don’t worry: just because you have identified a topic as material does not necessarily mean that you also have to report on all the associated data points.
Of course, some disclosure requirements are material simply because the topic is material: for example, if the topic “E3 Water and marine resources” has been assessed as material, this automatically results in material disclosure requirements such as “Water consumption”.
However, if other disclosure requirements are not material for a company, these can also be omitted for a topic that is otherwise material and therefore reportable.
We have broken down for you how to find out which disclosure requirements actually need to be covered in your report.
Go through this checklist, work out your key data points step by step and you will quickly have a good overview in the framework.

Conclusion

There is a lot to do and to keep track of in the CSRD report.
Having an understanding of the structure and layout is essential for an efficient reporting process.
Nevertheless, the lack of benchmarks does not make the task any easier.
But we can support you.
We are already supporting many companies on their way to a CSRD report.
Our consultants have years of experience in sustainability reporting.
Get in touch with us if you need support.

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.