Sustainability Reporting

4 Essential Steps to Prepare for the CSRD in 2024

February 12, 2024

As companies familiar with reporting will know, there are many moving parts to any reporting process, let alone to comply with new legislation such as the Corporate Sustainability Reporting Directive (CSRD). The financial year 2026 will be the first year of CSRD implementation in member states, making 2024 the final year to prepare before the actual data collection period commences. These are the four essential steps to ensure you are ready for CSRD compliance.

Conduct a double materiality assessment

The CSRD requires companies to conduct a double materiality assessment to identify relevant disclosures. This concept of double materiality is central to the CSRD. Incorporate it into the materiality assessment by ensuring that disclosures have outwards impact (impacts on communities or the environment, for example) and inwards financial impact on the company. The entire assessment process can be lengthy, key to which is business activity mapping, stakeholder engagement. Reporting organisations must disclose the materiality assessment process and how double materiality has been used to determine the reporting subjects.

Understand the ESRS framework

The European Sustainability Reporting Standards (ESRS) is the framework for reporting under the CSRD. They consist of two general cross-cutting standards and ten topical ESG standards. The cross-cutting standards are mandatory regardless of industry, while only those topical standards deemed material must be included in your disclosures. The outcome of the double materiality assessment should inform your selection of topical standards for reporting. The ESRS are compatible with other international reporting standards such as the Global Reporting Initiative (GRI) and IFRS Standards. You do not need to go back to the drawing board if these are already in use by your organisation – they can be easily integrated with the ESRS. However, gaps may still remain between the ESRS and your current reporting practice, hence the importance of the next step.

Review data repository and identify gaps

After the double materiality assessment and identification of relevant ESRS topics, you can now go through the list of ESRS disclosures for each material topic and compare those with your current data points. This is how you can identify gaps in the data and what is required by the CSRD. With that knowledge, you’ll be able to initiate processes for data collection to fill those gaps. Ensure that for each topic you have information on the four reporting areas: governance, strategy, Impacts, Risks and Opportunities (IROs), and metrics and targets.

Additionally, the CSRD requires disclosures to be presented in the XBRL format, a digital reporting standard which is also used in financial reporting. Data management can be a painfully tedious and time-consuming experience but there are systems at your disposal that can greatly simplify the process. Automated data management is highly recommended rather than a manual approach since data repositories grow over time and tracking becomes complicated.

Communicate new or revised reporting processes

Any changes to existing processes should be communicated to the relevant stakeholders. For example, if any of the topics in the ESRS Social Standards which concerns workers in own workforce, in the value chain, and communities are deemed material, you may need to inform these stakeholders of new or updated information requirements to ensure the availability and accuracy of the data collected. Stakeholders must be given sufficient time to prepare and, in some cases, training or guidance on the correct disclosures. For example, Scope 3 emissions, which are a required disclosure for

Companies will obtain some relief in the knowledge that omissions or lack of information does not necessarily constitute non-compliance with the CSRD, so long as the omission or lack of reporting is explained (for example, a company may be in the first year of data collection and hence does not have sufficient historical data to make a meaningful analysis). Keep in mind also that certain topics are only required from year two or three of CSRD implementation based on staggered roll-out phases.

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