A new directive on sustainability reporting is soon a reality for EU companies. The Corporate Sustainability Reporting Directive – or more commonly known as CSRD – will replace the current Non-Financial Reporting Directive (NFRD), aiming to standardise corporate responsibility and sustainability reporting. Currently, reporting is required from large companies, but in the coming years, an estimated 800–1,000 Finnish companies will be subject to mandatory reporting.
This topic might spark several questions: Where to start the process? What does it entail? And how to avoid the reporting headache? Let’s find out!
1. Familiarise Yourself with the Sustainability Reporting Timeline
2. Map Out the Mandatory Reporting Requirements
3. Define Your Company's Double Materiality
What does double materiality mean and what does it have to do with sustainability reporting and risk management? Double materiality refers to the following impacts:
- ESG impacts (Environmental, Social, Governance): the company’s operational impacts on the surrounding society and environment.
- Financial impacts: risks and opportunities affecting the company’s business operations.
Work related to ESG impacts aims to increase the company’s positive impacts and reduce the negative ones. Practically, sustainability work involves identifying and reacting to these impacts. For example, a company in the manufacturing industry might produce environmentally friendly products and services as its positive impacts. In a similar scenario, minimising negative impacts could relate to reducing emissions and pollution.
Financial impacts are strongly linked to the world of risk management – in other words, the company confronts risks and opportunities that occur externally. A current example of this is the green transition, which is revolutionising the energy industry. Consequently, companies in this sector must be particularly vigilant about changes in legislation and taxation, as they have a significant impact on the sector’s near-future risks and opportunities. Other changes, such as public attitudes towards the use of fossil fuels, can also tip the scales of financial impacts.
4. Initiate Stakeholder Work
5. Divide the Reporting Responsibilities
Sustainability work and its reporting have long been the domain of a sustainability expert. However, the sustainability reporting process concerns a wide range of employees, and it should not and need not rest on one person’s shoulders. The primary responsibility for CSRD thus shifts to the CFO. To ensure smooth handling of responsibilities in the future, gather a team and jointly discuss the following topics:
- Clarifying reporting responsibilities
- Defining the roles of management and the board
- Establishing new operational models.
Do you want to ensure that your organisation elevates its ESG profile, promoting sustainable business and strengthening stakeholder trust?
Read the blog on how to assess double materiality as part of CSRD sustainability reporting and explore the CSRD Double Materiality Tool!