10 Essential Features to Look for in CSRD Software

The introduction of the Corporate Sustainability Reporting Directive (CSRD) is set to transform the sustainability reporting landscape in the EU, requiring nearly 50,000 companies to disclose detailed information on their environmental, social, and governance (ESG) performance. For many businesses, complying with the CSRD will require significant changes to their reporting processes, data management, and governance structures.

One of the key decisions companies will need to make in preparing for the CSRD is choosing the right software to support their sustainability reporting. With the CSRD's expanded scope, mandatory reporting standards, and digital reporting requirements, businesses will need robust and flexible tools to efficiently collect, manage, analyze, and disclose their ESG data.

However, with a growing number of sustainability reporting and ESG data management solutions on the market, each with its own unique features and capabilities, it can be challenging for companies to know where to start. Choosing the wrong software can lead to inefficiencies, errors, and compliance risks, while investing in the right solution can streamline reporting processes, improve data quality and insights, and enable more effective decision-making and communication.

To help companies navigate this complex landscape and make an informed decision, we've compiled a list of 10 essential features to look for in CSRD software. These features are based on insights from industry experts, case studies, and best practices, and are designed to address the key requirements and challenges of CSRD reporting.

Whether you're evaluating your existing reporting tools or looking to invest in a new solution, considering these features can help you select a software that meets your business needs, aligns with your sustainability strategy, and enables CSRD compliance. So let's dive in!

Feature 1: Comprehensive coverage of CSRD requirements

The first and most essential feature to look for in CSRD software is comprehensive coverage of the directive's requirements. The software should be fully aligned with the CSRD's scope, reporting standards, and digital reporting format, and should enable companies to efficiently collect, manage, and disclose all required ESG data.

This includes:

- Support for the full range of sustainability topics covered by the European Sustainability Reporting Standards (ESRS), including environmental matters, social and employee matters, respect for human rights, anti-corruption and bribery matters, and governance aspects
- Ability to report using the double materiality perspective, considering both the impact of the company on sustainability issues and the impact of sustainability issues on the company's development, performance, and position
- Compatibility with the European Single Electronic Format (ESEF) for digital reporting, including iXBRL tagging and a machine-readable format
- Integration with the European Financial Reporting Advisory Group (EFRAG) taxonomy and other relevant taxonomies and frameworks
- A software that fully covers the CSRD requirements can help companies ensure completeness, consistency, and compliance in their sustainability reporting, and avoid the risk of gaps or errors.

Feature 2: Flexible and customizable data model

Another key feature to look for in CSRD software is a flexible and customizable data model that can adapt to a company's specific ESG data needs and structures. While the CSRD provides a common set of reporting standards, each company's sustainability context, material topics, and data sources are unique.

A software with a flexible data model can enable companies to:

- Define and map their own ESG metrics, indicators, and data points, in addition to the ESRS requirements
- Customize data input forms, templates, and workflows to match their existing processes and systems
- Adapt to changes in reporting standards, taxonomies, and stakeholder expectations over time
- Support different levels of data granularity and aggregation, from site-level to corporate-level reporting
- A customizable data model can help companies streamline data collection, improve data quality and consistency, and enable more meaningful analysis and reporting.

Feature 3: Robust data collection and integration capabilities

To efficiently collect and manage ESG data for CSRD reporting, companies need a software with robust data collection and integration capabilities. This includes the ability to:

- Integrate with a wide range of data sources and systems, such as ERP, HR, and facility management systems, sustainability-specific software, and external data providers
- Automate data collection and validation through APIs, data connectors, and ETL (extract, transform, load) processes
- Support both manual data entry and bulk data upload, with data validation and error-checking features
- Handle both quantitative and qualitative data types, as well as different units of measurement and data formats
- Enable data traceability and auditability, with clear data lineage and version control
- A software with strong data collection and integration capabilities can help companies save time and resources, reduce errors and inconsistencies, and ensure data quality and reliability.

Feature 4: Advanced data analytics and visualization

To gain meaningful insights from their ESG data and communicate them effectively to stakeholders, companies need a software with advanced data analytics and visualization capabilities. This includes:

- Dashboards and data visualization tools that provide real-time visibility into key ESG metrics and performance indicators
- Benchmarking and peer comparison features that enable companies to assess their performance against industry standards and best practices
- Scenario analysis and modeling tools that allow companies to explore the impact of different sustainability strategies and initiatives
- Predictive analytics and machine learning algorithms that can identify trends, risks, and opportunities in ESG data
Customizable and interactive reporting formats, such as graphs, charts, and infographics, that can be easily shared with different stakeholder groups
A software with strong analytics and visualization capabilities can help companies derive actionable insights from their ESG data, track progress against sustainability goals, and communicate their performance in a compelling and transparent way.

Feature 5: Collaboration and workflow management

Preparing CSRD reports requires collaboration and input from multiple departments and stakeholders across the organization. Therefore, it's important to choose a software that enables effective collaboration and workflow management, including:

- Role-based access control and permissions that allow different users to input, review, and approve data based on their responsibilities
- Collaborative data collection and validation workflows that streamline the process of gathering and verifying ESG data from different sources
- Task assignment and progress tracking features that help teams manage and monitor the reporting process from start to finish
- In-app communication and notification tools that facilitate real-time collaboration and ensure everyone is on the same page
- Version control and audit trail functionality that documents all changes and approvals made to the data and reports
- A software with robust collaboration and workflow management features can help companies improve efficiency, accountability, and transparency in their CSRD reporting process.

Feature 6: Assurance and verification support

The CSRD introduces mandatory assurance requirements for sustainability reporting, similar to those for financial reporting. To comply with these requirements and ensure the reliability and credibility of their ESG disclosures, companies need a software that supports external assurance and verification processes. This includes:

- Functionality for auditors and assurance providers to access, review, and validate the sustainability data and reports within the system
- Detailed audit trails and data lineage that document the source, history, and any changes made to each data point
- Support for assurance standards and frameworks, such as ISAE 3000 and AA1000AS, with pre-built templates and checklists
- Integration with third-party assurance tools and platforms to streamline the verification process
- Ability to generate assurance-ready reports in a timely and efficient manner
- A software with strong assurance and verification support can help companies reduce the time and cost of compliance, improve the reliability and credibility of their ESG disclosures, and build trust with stakeholders.

Feature 7: Alignment with other reporting frameworks and standards

While the CSRD provides a comprehensive and standardized approach to sustainability reporting, many companies also need to align their disclosures with other reporting frameworks and standards, such as GRI, SASB, TCFD, and the UN SDGs. A software that supports multiple reporting frameworks can help companies:

- Map and harmonize their ESG data across different standards and disclosure requirements
- Identify and leverage synergies and overlaps between different reporting frameworks
- Ensure consistency and comparability of ESG disclosures across different communication channels and stakeholder groups
- Stay up-to-date with changes and updates to different reporting frameworks and standards over time
- A software that aligns with multiple reporting frameworks can help companies streamline their reporting processes, reduce duplication and redundancy, and provide a more holistic and integrated view of their sustainability performance.

Feature 8: Stakeholder engagement and communication

Effective CSRD reporting requires ongoing engagement and communication with a wide range of stakeholders, including investors, customers, employees, suppliers, regulators, and civil society organizations. A software that supports stakeholder engagement and communication can help companies:

- Identify and prioritize key stakeholder groups and their information needs and expectations
- Conduct materiality assessments and stakeholder surveys to gather input and feedback on ESG issues and reporting formats
- Provide customized and interactive reporting formats tailored to different stakeholder groups, such as investor presentations, customer scorecards, and employee dashboards
- Enable real-time and two-way communication with stakeholders through integrated feedback and dialogue mechanisms
- Track and analyze stakeholder engagement metrics and outcomes to continuously improve the reporting process
- A software with strong stakeholder engagement and communication features can help companies build trust, accountability, and responsiveness in their sustainability reporting and management.

Feature 9: Regulatory compliance and updates

The CSRD is part of a rapidly evolving regulatory landscape for sustainability reporting, both in the EU and globally. Companies need a software that stays up-to-date with the latest regulatory developments and supports compliance with changing requirements over time. This includes:

- Automatic updates and alerts on changes to the CSRD and ESRS requirements, taxonomies, and digital reporting formats
- Pre-built compliance templates and checklists aligned with the latest regulatory standards and best practices
- Regulatory intelligence and guidance on how to interpret and apply new reporting requirements in different contexts and scenarios
- Support for regulatory reporting and filing processes, such as submitting reports to the European Single Access Point and national authorities
- Audit-ready documentation and evidence to demonstrate compliance with regulatory requirements
- A software with strong regulatory compliance and update capabilities can help companies stay ahead of the curve, reduce compliance risks and costs, and demonstrate leadership in sustainability reporting and governance.

Feature 10: Scalability and integration with broader sustainability management

Finally, it's important to choose a CSRD software that is scalable and integrates with a company's broader sustainability management and strategy. As sustainability becomes increasingly embedded into core business operations and decision-making, companies need software that can grow and adapt with their needs over time. This includes:

- Ability to scale data collection, management, and reporting processes across different business units, geographies, and value chain partners
- Integration with other sustainability management tools and systems, such as carbon accounting, supply chain management, and product lifecycle assessment software
- Support for setting, tracking, and reporting on sustainability targets and key performance indicators (KPIs) aligned with the CSRD and other frameworks
- Scenario analysis and modeling capabilities to explore the financial and sustainability implications of different business strategies and decisions
- Alignment with broader corporate reporting and management processes, such as financial reporting, risk management, and strategy development
- A software that is scalable and integrated with broader sustainability management can help companies drive continuous improvement, innovation, and value creation through their CSRD reporting and beyond.

Conclusion

Choosing the right software is a critical step in preparing for CSRD compliance and unlocking the full value of sustainability reporting. By considering these 10 essential features, companies can select a solution that meets their specific needs, aligns with their sustainability strategy, and enables efficient, reliable, and insightful ESG disclosure.

However, it's important to remember that software is just one piece of the puzzle. To truly succeed in CSRD reporting and drive meaningful sustainability performance, companies also need to invest in the right people, processes, and governance structures. This includes building internal capacity and expertise, engaging stakeholders, setting ambitious targets, and embedding sustainability into core business operations and decision-making.

As a sustainability professional and business leader, I believe that the CSRD represents a major opportunity for companies to step up their ESG management and disclosure, build trust with stakeholders, and contribute to the transition to a more sustainable and resilient economy. By embracing the CSRD requirements as a catalyst for transformation and innovation, rather than just a compliance burden, companies can position themselves for long-term success and leadership in the age of sustainability.

Of course, the journey to CSRD compliance and integrated sustainability management is not an easy one. It requires vision, commitment, and collaboration from all levels of the organization, as well as partnerships with external stakeholders and experts. But the rewards – in terms of improved risk management, stakeholder trust, innovation, and long-term value creation – are well worth the effort.

As we move into the decisive decade for climate action and sustainable development, the role of business in driving positive change has never been more critical. By leveraging the power of sustainability reporting and management, and investing in the right tools and capabilities to support it, companies can be part of the solution and help build a better future for all.

The clock is ticking, and the stakes are high. But with the right mindset, strategy, and tools, I believe that any company can rise to the challenge and become a leader in the new era of sustainability reporting and performance. The time to act is now – let's seize the opportunity and make it count.

About Newtral

Newtral AI Platform- Enterprise ESG Platform for Corporates and Supply Chain 

We help organizations automate their ESG metric measurements, tracking and reporting across company as well as their supply chain. Our platform solves for all corporate sustainability reporting and carbon accounting needs.

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