Under CSRD & ESRS, conducting stakeholder surveys to define what sustainability matters are material to your organization is no longer fit for purpose. Nor is a narrow focus on data collection.
Stakeholder concerns and evidence of actual and potential impacts are now in focus, not ranking the relative importance of different sustainability matters.
ESRS is process oriented. Numerical data only account for 30% of the disclosure requirements.
70% of ESRS is about contextual narrative disclosure, and more than 40% of the disclosures require accounting for policies, targets and actions for material topics, according to detailed Minimum Disclosure Requirements (MDR).
The material topics are to be found in the list of 92 topics provided in ESRS 1 (AR 16) that the company shall consider, together with entity-specific material topics.
When asked, “from a data collection point of view, how should business adapt to meet the requirements of mandatory regulations?”, Chiara Del Prete (Sustainability Reporting TEG Chair EFRAG), answered:
“I wonder whether collection of data is entirely capturing the transformational element of what we are trying to achieve in terms of direction of travel.”
“To the extent that they have policies, targets and actions in place to identify, mitigate, prevent and account for their impacts on people and environment – those data will be the same as those we would like to see coming into reports.”
“This is to say that there is much more than collection of data.”
CSRD & ESRS support the European Green Deal – a new growth strategy that aims to transform the Union into a fair and prosperous society, with a modern, resource-efficient and competitive economy where there are no net emissions of greenhouse gases in 2050 and where economic growth is decoupled from resource use.
In 2022, McKinsey estimated that to reach net zero emissions, an additional $3.5 trillion a year must be invested in physical assets for energy and land-use systems until 2050.
That is the greatest reallocation of capital in history.
So, surveys and data collection will not be enough. Building awareness, skills and transparency – and closing the gap between sustainability, strategy and execution – will be key to success.
Exit stakeholder questionnaires. Enter robust due diligence processes.
Exit narrow focus on data collection. Enter efficient risk management and strategic plans supported by evidence, actions & resources and KPIs.
And, exit manual spreadsheets and glossy ESG-brochures.
Enter holistic, inclusive, fit-for-purpose system support supporting both sustainability strategy and reporting.
Reporting is necessary, but if we are looking to transform, reporting is only a means to an end, not the end.