Chapter 6:
A step-by-step guide to EU CSRD compliance
So, what does it take to comply with this unique framework? We’ve broken it down into eight steps so you can easily navigate your way to success.
Step 1
Create your CSRD team
Part of carrying out a successful disclosure is building a solid foundation. This includes having the right team members and key stakeholders in place, to make sure all the right data and feedback is considered and accurate.
Here’s who we suggest and why:
Sustainability experts: It’s no surprise that sustainability experts should be at the top of your list, as they have the knowledge to help steer your assessment in the right direction. This includes the right sustainability matters that will be discussed, their risks, opportunities and impacts, as well as data that needs to be collected. Don’t be afraid to also include external sustainability experts as well, as they can offer a fresh, objective perspective.
Members from the finance team like your CFO: The Chief Financial Officer will be necessary to help draft and measure your organisation’s financial impact and performance. From revenue to asset values, there’s a lot to consider. As a key stakeholder, this information is also important to your finance team because it can be material to your organisation’s share price or effect access to finance.
C-suite members: Feedback and input from board members and your Chief Executive Officer (CEO) is also vital to help decide on certain sustainability matters which may be of interest. Many CEO’s also take responsibility for managing company sustainability strategies and compliance processes.
Investors: Your investors should also have a say in what sustainability matters should be focused on within your reporting. There may be areas of interest specific to the market that they deem important, for instance, and certain concerns they wish to address.
Step 2
Conduct a double materiality assessment
Once your team is in place, it’s time to conduct your double materiality assessment so you can decide on the sustainability matters you will focus on. As previously stated, this involves conducting both your impact and financial materiality assessments to gain greater insight into your impacts, risks, and opportunities.
When these have been identified, you have a clearer view into which sustainability matters you will focus on in your CSRD disclosure. In other words, your double materiality assessment will help you narrow down the 1,144 subtopics we mentioned earlier, to those material to your business.
Step 3
Create a gap analysis
Next, a gap analysis is necessary to understand which data you already have and what is missing when it comes to these material topics. Go back to company records pertaining to your chosen sustainability subtopics and highlight the key areas which are missing to help you comply with the CSRD framework. This will give you a place to start when it comes to data collection (more on this later!)
Step 4
Obtain required resources
Now that you’re aware of what data you already have and what you’re missing, it’s time to obtain the resources and define processes you will need to adequately collect data. For example, if a subtopic you will tackle will be work-life balance, under the standard Own Workforce (ESRS S1), you can assess this through human resources and surveys which are sent out to your employees. These surveys will have to be created with the appropriate questions to measure this subtopic.
Another resource which you could consider to simplify the collection of data, is sustainability software. This will help you digitise all forms, surveys, and documents so you can easily send them out to your employees. All the data is then housed within the platform, so you can easily assess it.
Step 5
Collect data to support your disclosure
With the right resources created and in place, you can begin to collect the right data to support your disclosure. It’s important to note that data (in this case) is not only numbers and statistics, but also action plans, goals and timelines.
Let’s say you have found that your organisation is having a negative impact on surrounding ecosystems. How will you rectify this? What steps will your organisation take to make sure the situation is not exacerbated? You must document the steps you will take in situations like these, the timeline for each, as well as the organisation’s goal in this area.
Step 6
Distill data into sustainability statement
Once all data is collected, it’s time to distill it into your sustainability statement which will be reported to the CSRD. Make sure all previously mentioned elements concerning ESRS 1 and 2 are included in your statement, as well as your material subtopics. Don't forget your organisation’s overall sustainability strategy, performance and financial figures too! This is necessary to comply with all ESRS requirements.
It’s also important to note the format of your sustainability statement. In addition to the sustainability statement itself, you must also produce a machine-readable version. This is known as the XBRL format which is done through software that extracts all relevant information into a central database. The XBRL format is necessary for tagging data and standardising reporting formats, making it easier to compare reports from different countries. It also helps to break down the language barrier as all the information is in code.
Step 7
Have a third-party auditor audit your sustainability statement
Next, it’s time to have your reports audited by a third party. This is to ensure that your organisation complies with all requirements, formats, etc. mandated by the CSRD. A mandatory part of the process, you can choose an independent auditor or a company who offers this specific service. They may come back to you with recommendations on how to modify your reports for a more successful outcome.
For the year 2024, organisations will require limited assurance, while in future years reasonable assurance, which entails a greater deep dive into your data, will become mandatory.
Step 8
Communicate results internally and publish your CSRD disclosures
And that brings us to the final step which is communicating all results internally and publishing your CSRD disclosures! Communicate your results to all stakeholders by publishing your sustainability statement on your website and/or as a hard copy, and disclose the report to the CSRD in XBRL format.
Strengthen your sustainability strategy and make your organisation more resilient to change by evolving this process, making it better and more accurate every time. An annual requirement by the CSRD, this is a process you can modify and build upon each time you submit your disclosure.