CSRD: Driving Environmental Accountability and Social Resilience

The Corporate Sustainability Reporting Directive (CSRD) aims to enhance sustainability disclosure requirements, beginning with large companies in the European Union (EU) market. It introduces more extensive and ambitious reporting requirements compared to its predecessor, the Non-Financial Reporting Directive (NFRD). 

CSRD differs from the Global Reporting Initiative (GRI) in its approach, instead emphasizing transparency in policies, procedures, and measures. This shift ensures organizations demonstrate real actions rather than superficial claims.  

Because CSRD’s effectiveness relies on well-defined targets and measurement policies, some organizations will find it challenging. To enhance CSRD reporting, companies must follow a structured approach:  

• Step One: Define a clear strategy that assesses impacts and opportunities 
• Step Two: Implement action plans with well-defined targets and involve relevant personnel 
• Step Three: Measure performance against set goals 

Of the 12 European Sustainability Reporting Standards (ESRS), 50 percent are environmental. Detailed data on environmental impacts, including carbon footprint, life cycle analysis, recycling quotas, and other ecological aspects are required. CSRD requires “double materiality”, meaning companies must provide sustainability reports audited by third parties and describe how such sustainability issues affect their business as well as how their business affects people and the environment. 

Below is the summary of each ESRS: 

ESRS Environmental Standards 

E1: Climate Change 

• Organizations must disclose their greenhouse gas emissions and other climate-related impacts. 
• They must also disclose their climate change adaptation and mitigation measures. 

• This standard is designed to help organizations reduce their climate impact and prepare for the effects of climate change. 

E2: Pollution 

• Organizations must disclose their air, water, and waste pollution data. 
• They must also disclose their pollution prevention and control measures. 
• This standard is designed to help organizations reduce their pollution impact and protect the environment 

E3: Water and marine resources 

• Organizations must disclose their water use and other water-related impacts. 
• They must also disclose their water management measures. 
• This standard is designed to help organizations reduce their water impact and protect water resources. 

E4: Biodiversity and ecosystems 

• Organizations must disclose their impacts on biodiversity and ecosystems. 
• They must also disclose their biodiversity conservation and restoration measures. 
• This standard is designed to help organizations protect biodiversity and ecosystems. 

E5: Resource use and circular economy 

• Organizations must disclose their resource use data and other resource-related impacts. 

• They must also disclose their circular economy measures. 
• This standard is designed to help organizations reduce their resource use and promote a circular economy. 

ESRS Social Standards 

Aside from environmental impact, CSRD also involves reporting b on social impact.  This includes disclosing information on workforce health and safety, contractors, workers in the value chain, affected communities, and consumers. This broader perspective recognizes the importance of societal aspects, human rights, and social responsibility. 

Of the 12 European Sustainability Reporting Standards (ESRS), 40 percent are social. 

Below we offer a summary for each: 

ESRS Social Standards  

ESRS S1: Own Workers 

This standard delves into a company’s internal workforce dynamics. It assesses matters like employee well-being, diversity and inclusion, training, and working conditions.  

ESRS S2: Workers in the Value Chain 

Focusing on the broader value chain, this standard evaluates the treatment and rights of workers beyond the organization’s immediate employees.  

ESRS S3: Affected Communities 

This standard highlights a company’s interactions with local communities impacted by its operations. It looks at engagement, stakeholder communication, and initiatives to uplift these communities.  

ESRS S4: Consumers 

This standard revolves around consumer welfare and protection and examines how a company ensures product safety, communicates effectively with consumers, and addresses concerns and feedback.  

ESRS Governance Standards 

Of the 12 European Sustainability Reporting Standards (ESRS), one is focused on governance. 

G1: Business Conduct 

The business conduct standard seeks to understand how reporting companies are structured, how they manage risks and opportunities, as well as their corporate culture. 

SAI360’s Efforts to Support CSRD 

CSRD reporting requires a multifaceted approach that manual processes can’t facilitate. SAI360’s comprehensive ESG software and learning solutions leverage technology to provide the building blocks for a robust ESG compliance and governance strategy.  

Automation provides streamlined data collection that meets regulatory requirements, minimizes the potential for human error, and is assessable within a centralized system for reporting. This transformational shift yields cost and time savings and upholds higher precision. Moreover, such streamlining of operations extends beyond mere regulatory compliance, fostering well-informed decision-making and a steadfast commitment to environmental sustainability.   

Here are several examples of SAI360’s ESG capabilities at work: 

• Capture CSRD-related impacts, risks, and opportunities centrally and alongside all enterprise risks to ensure sustainability risk management is integrated within the overall risk management strategy  

• Track the implementation of action plans for all types of impacts, risks and opportunities across Environmental, Social and Governance  
• Create, implement, and ensure compliance with all Environmental, Social and Governance policies  
• Embed ESG into corporate culture and extended enterprise by educating employees, board members, and third-party partners on important policies such as working conditions, work-related rights, equal opportunities, child labor, forced labor, and other human rights  
• Digitalize and automate the procedures required to meet CSRD disclosure requirements. 
• Define metrics and related targets and automate the data collection 

• Conduct data analysis to identify trends and patterns to monitor performance over time
• Easily identify which action plans are not working and undertake a targeted review of action plans and policies for optimal results  
• Efficiently support the ESRS reporting by providing data with less effort 
• Conduct assurance assessments to test preparedness and compliance, ensure adherence to standards, and safeguard an organization from penalties 

Ultimately, the ESRS is a comprehensive reporting system designed to enhance transparency, accountability, and sustainability practices within companies, providing stakeholders with a better understanding of a company’s performance across ESG domains. SAI360 simplifies CSRD compliance by streamlining data collection, as well as automating tasks and reporting.­­­  

Read more about this topic in our whitepaper, ESG: A Cultural Evolution.   

To start a conversation on how SAI360’s comprehensive ESG software and training solutions can support your organization’s CSRD preparation efforts, click here.