Feb 15 2024

CSRD Compliance Checklist: Is Your Business Ready?

CSRD Compliance Checklist: Is Your Business Ready?

The introduction of the Corporate Sustainability Reporting Directive (CSRD) marks a significant milestone in the European Union's efforts to promote sustainable finance and drive the transition to a low-carbon, resilient economy. As the successor to the Non-Financial Reporting Directive (NFRD), the CSRD significantly expands the scope and depth of sustainability reporting requirements for companies operating in the EU.

Under the CSRD, nearly 50,000 large companies and listed SMEs will be required to disclose detailed information on a wide range of ESG topics, including climate change, biodiversity, human rights, and anti-corruption. Companies will also need to report in accordance with mandatory EU sustainability reporting standards, obtain independent assurance of their sustainability disclosures, and digitally tag their reports for machine readability.

The CSRD will be implemented in stages, with the first set of companies (large public-interest entities already subject to the NFRD) needing to report under the new standards for financial years starting on or after 1 January 2024. Other large companies and listed SMEs will follow in subsequent years.

With the clock ticking towards the first CSRD reporting deadlines, it's critical for businesses to start preparing now to ensure they are ready to meet the new requirements. But given the complexity and breadth of the CSRD, it can be difficult to know where to start and how to prioritize actions.

To help companies navigate this challenge, we have developed a comprehensive checklist of key actions and considerations for CSRD compliance. This checklist is based on our analysis of the CSRD requirements, as well as insights from leading sustainability experts and practitioners. It covers all the essential elements of a successful CSRD compliance strategy, from understanding the scope and applicability of the directive to implementing robust data management and governance practices.

By working through this checklist and assessing your company's current state of readiness against each item, you can identify gaps and priorities for action, and develop a clear roadmap for achieving CSRD compliance. The checklist can also serve as a useful tool for engaging internal and external stakeholders, and for communicating your progress and plans to management, investors, and regulators.

Of course, every company's journey to CSRD compliance will be unique, depending on factors such as size, sector, geographic scope, and existing sustainability reporting practices. The checklist is not intended to be a one-size-fits-all solution, but rather a starting point for developing a tailored approach that aligns with your company's specific needs and context.

So let's dive in and explore the key elements of CSRD compliance readiness.

CSRD Compliance Checklist

Understand the scope and applicability of the CSRD

  • Determine whether your company falls within the scope of the CSRD based on size, listing status, and other criteria
  • Identify which sustainability topics and KPIs are material to your company and sector, based on the mandatory EU reporting standards and stakeholder expectations
  • Assess the readiness of your existing sustainability reporting practices and disclosures against the CSRD requirements, and identify gaps and areas for improvement

Establish clear governance and accountability for CSRD compliance

  • Assign responsibility for CSRD compliance to a specific executive, committee, or function, with clear reporting lines and oversight from the board
  • Establish a cross-functional CSRD working group or steering committee, with representation from key functions such as finance, sustainability, legal, and IT
  • Define roles and responsibilities for data collection, validation, reporting, and assurance, and provide training and resources to support effective execution
  • Integrate CSRD compliance into the company's overall sustainability strategy, risk management, and performance management frameworks

Implement robust data management and governance practices

  • Map out the data requirements and sources for each sustainability topic and KPI, and identify gaps and challenges in data availability, quality, and consistency
  • Establish processes and systems for collecting, validating, and managing sustainability data from across the organization and value chain, leveraging automation and digital tools where possible
  • Develop a data governance framework that defines data standards, policies, and procedures, and assigns ownership and accountability for data quality and integrity
  • Conduct regular data audits and assessments to identify and address errors, inconsistencies, and areas for improvement

Engage with stakeholders to inform materiality and reporting

  • Conduct a materiality assessment to identify and prioritize the sustainability topics and KPIs that are most relevant and important to your stakeholders and business
  • Engage with internal and external stakeholders through surveys, interviews, focus groups, and other channels to gather input and feedback on your sustainability reporting and performance
  • Establish ongoing stakeholder engagement and communication channels to keep stakeholders informed and involved in your CSRD compliance journey
  • Use stakeholder insights to inform your CSRD reporting strategy, disclosures, and performance targets

Develop a CSRD reporting strategy and roadmap

  • Define your CSRD reporting objectives, target audiences, and key messages, aligned with your overall sustainability strategy and stakeholder expectations
  • Determine the scope, boundaries, and methodologies for your CSRD disclosures, based on the mandatory EU reporting standards and relevant sector-specific guidance
  • Develop a multi-year roadmap for implementing and improving your CSRD reporting practices, with clear milestones, deliverables, and resources
  • Establish processes and timelines for preparing, reviewing, and approving CSRD disclosures, aligned with your financial reporting cycle and governance requirements

Implement digital reporting and assurance processes

  • Assess your current reporting systems and tools against the CSRD digital reporting requirements, and identify gaps and upgrade needs
  • Implement XBRL tagging and other digital reporting technologies to enable machine-readability and comparability of your CSRD disclosures
  • Engage with external assurance providers to plan and execute the assurance process for your CSRD disclosures, aligned with relevant assurance standards and best practices
  • Establish internal controls and documentation to support the assurance process and ensure the reliability and credibility of your CSRD disclosures

Communicate and disclose your CSRD compliance progress

  • Develop a communication plan to keep internal and external stakeholders informed and engaged in your CSRD compliance journey, using multiple channels and formats
  • Disclose your CSRD compliance plans, progress, and performance through your annual sustainability report, website, and other relevant channels, aligned with the CSRD reporting requirements
  • Seek feedback and input from stakeholders on your CSRD disclosures and reporting practices, and use this to inform continuous improvement and innovation
  • Participate in industry and stakeholder forums and initiatives to share best practices, learn from peers, and contribute to the development of the CSRD reporting ecosystem

Monitor and adapt to regulatory and market developments

  • Stay informed on regulatory updates, guidance, and clarifications related to the CSRD, and assess the implications for your company's compliance strategy and practices
  • Monitor market and stakeholder developments related to sustainability reporting and assurance, including emerging best practices, standards, and technologies
  • Adapt your CSRD compliance strategy and practices as needed to respond to changing regulatory and market expectations, and to drive continuous improvement and value creation
  • Engage with policymakers, standard-setters, and other stakeholders to provide input and feedback on the development and implementation of the CSRD and related regulations By working through this checklist and taking action on each item, companies can build a strong foundation for CSRD compliance and position themselves for success in the new era of sustainability reporting.

However, it's important to remember that CSRD compliance is not a one-time exercise, but an ongoing journey of continuous improvement and innovation. As the CSRD requirements and market expectations continue to evolve, companies will need to stay agile and adaptable, and to continuously monitor and enhance their reporting practices and disclosures.

This will require not only technical compliance with the CSRD standards and regulations, but also a deeper integration of sustainability into the company's strategy, governance, and culture. It will require leadership and commitment from the top, as well as engagement and collaboration across functions and stakeholders.

Ultimately, the companies that will thrive in the new era of sustainability reporting will be those that embrace the CSRD not just as a compliance burden, but as an opportunity to drive meaningful change and create long-term value for their business, stakeholders, and society.

As a sustainability professional and business leader, I believe that the CSRD represents a historic opportunity for companies to step up their game and demonstrate their leadership on the critical issues of our time, from climate change and biodiversity loss to social inequality and human rights. By using this checklist as a starting point and roadmap, companies can take concrete steps towards building a more sustainable, resilient, and inclusive economy that works for people and planet.

The journey ahead may be challenging, but the rewards – in terms of reduced risk, enhanced reputation, increased innovation, and long-term value creation – are well worth the effort. With the right tools, partnerships, and mindset, any company can become a leader in the new era of sustainability reporting and performance.

The time to act is now. Let's seize this moment and rise to the challenge of the CSRD and the sustainability imperative. The future of business – and our planet – depends on it.

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