Is awareness growing in your organization regarding the social and ecological impact of your business? And is it driven by conviction or with the new CSRD regulations in mind? Either way, reporting on sustainable entrepreneurship is becoming a reality for nearly 50,000 European businesses. How do you do this credibly and in accordance with the rules? Let me give you some tips and tricks.
Another day, another abbreviation. CSRD? That stands for Corporate Sustainability Reporting Directive. With this directive, the European Union sets new standards for companies to report on their ESG impact. Yet another abbreviation. ESG? We use this term to monitor the three pillars of sustainability and corporate responsibility of a company – alongside financial performance – which are environment, social issues, and governance.
Due to the more detailed reporting requirements of the CSRD, the number of companies required to comply with the directive is increasing. This, in turn, leads to a new 'wave' of sustainability reports. Additionally, investors are seeking out companies that demonstrate sustainable business practices. Those who fail to comply will likely face limited or no access to future financing.
CSRD: unknown, unloved
First, some background on the first abbreviation that will soon become part of your everyday vocabulary: the CSRD.
The European Union aims to collect data through the CSRD in a reliable and comparable manner. In addition to familiar themes such as climate, the standards also cover topics like biodiversity, water, and the entire value chain. For most companies, these themes are still uncharted territory. Many only communicate about their priorities and remain silent about the rest. This fosters greenwashing: the impact that is not mentioned is unknown and likely negative.
It is important to investigate your risks across the twelve CSRD reporting domains and report on them: from climate change to biodiversity and ecosystems. This involves not only the impact of your business on the world but also the impact of the world on your business. The CSRD refers to this as 'double materiality'.
3 tips to get your started
To escape the pitfalls of greenwashing and window dressing and to comply with the CSRD, it's relevant to understand why you're reporting and what you want to monitor. The following questions can help you get started:
1. Why, for whom, and what are you reporting on sustainability for?
Why do I want to report? For whom do I want to report? Who are the stakeholders who will read this report? What data are available? How reliable are my current data? How can I automate data collection to prevent human errors? The result of your answers? A broader support for your report, because you have a clear understanding of the why and your stakeholders. You also ensure that your report is better substantiated year after year. And you make it clear how exactly you are making progress.
2. Build your report on a solid sustainability strategy
An authentic sustainability report is always based on a well-founded sustainability strategy. Therefore, ask yourself: do we have such a solid strategy?
Prepare your organization for the perfect sustainability strategy through these four focused steps:
Step 1. Define what CSR, ESG, or sustainability mean for your organization. Which trends are important? What is your company's mission, and what does it look like in ten or twenty years? These fundamental questions provide the right context for a good start.
Step 2. Identify the matters that are important for your organization and stakeholders. What priorities do you want to focus on? Through stakeholder surveys, you will find out where there is support. Which themes are close to their hearts? The outcome of this step provides direction for your future policies.
Step 3. Now that you know your focus, it's time for strategy. Review your priorities from the previous step. Use them to formulate actions. And do so 'SMART': with Specific, Measurable, Acceptable, Realistic, and Time-bound objectives. Because the SMARTer your objectives, the easier it is to translate them into tangible indicators. Put everything into a plan, and off you go!
Step 4. The impact on your organization and society is ultimately what matters. Impact measurement tells you how effective your policy is and how you follow up on projects and actions. Does the strategy achieve the desired outcomes? Or do you need to adjust?
3. Go for integrated communication and reporting
Also, ask yourself this question: is our non-financial information in line with the regulations and the financial performance and ambitions of our company? In other words, are we ready for integrated communication and reporting?
As an SME, you have some more times to collect your data for the CSRD. This gives you extra time to meet the data requirements of larger companies. Because the latter must already report and will therefore ask you plenty of ESG questions.
One advice: Be alert to the questions you receive from your stakeholders. Especially those questions to which you find it difficult to answer. These are the warning signs that indicate where your weaknesses lie. And they urge you to reflect and take action.
Interested in more?
The AMS Learning Network ESG IMPACT will be a leading catalyst to inspire and empower people and organizations to navigate ESG complexity.
A strong ESG proposition can drive value creation in various ways: attracting more customers, cost reductions, productivity uplift, and investment and asset optimization. It therefore makes a lot of sense for companies to invest in a more sustainable operating model.
A lot has been written and launched about ESG, related to the EU Green Deal, the EU Taxonomy, and the CSRD with the European Sustainability Reporting Standards. Together with the AMS partners, we felt that what was missing was a learning network, to inspire each other, and co-create a roadmap to achieve an integrated sustainable business strategy.
