Your CSRD reporting will impact your credibility, financial rating, and preferred partner-supplier-employer status. It can also help to protect you against greenwashing accusations.

But for that, you need to follow the instructions. The ESRS standards contain detailed questions. There are over 2000 datapoints whereof more than 400 require a Yes or No answer.

As we are currently supporting our customers navigate towards CSRD excellence, we have picked out 5 things to get right from the start:

⭕ Assess all topics listed ESRS 1 AR 16 when conducting your double materiality assessment.

For example, S1 is divided into 17 granular topics, connected to different impacts, risks and opportunities (IROs).

These topics are also found in the European Social Charter, which is complementary to the European Convention on Human Rights, protecting civil and political rights.

⭕ Assess your specific impacts, risks and opportunities – not only the sustainability topic.

The method described in the ESRS (confirmed by the French CNCC) requires an assessment at the IRO level and not only at the topic level.

⭕ Don’t consider a topic not material just because you think you are managing the connected impacts and risks well.

Materiality is a user-driven concept. A sustainability topic (including omissions of information on such topics), is considered material if, individually or in the aggregate, it could reasonably be expected to influence decisions of intended users taken on the basis of your information.

By declaring a sustainability topic not material, you are telling your stakeholders, trust me, there is nothing important for you to see here, please move on. That’s an important responsibility and you need to be prepared to back it up if someone challenges you.

⭕ Don’t provide biased or manipulated information and leave out unfavorable aspects.

ESRS 1 specifically states that the information shall be complete, accurate and neutral.

Information is neutral if it is not slanted, weighted, emphasized, de-emphasized or otherwise manipulated to make it more likely that the users will receive that information favorably or unfavorably.

It shall be balanced and granular enough not to obscure material information.

⭕ Don’t confuse positive and negative impact, and risk mitigation with opportunities.

A positive impact is not just avoiding a negative impact – you do not have a positive impact simply because you avoid doing harm. Positive impact is about increasing positive outcomes for people and the environment based on evidence❗of actual outcomes.

An opportunity is not simply mitigating a risk. It requires a proactive❗stance leading to new business opportunities and positive stakeholder relations that you intend to pursue and that can be calculated in monetary value (ESRS2.48).

⭕ You are welcome to contact us to get CSRD-ready with Cleerit ESG.

A corrigendum to the ESRS was published in the Official Journal of the European Union on Friday April 19.

The corrections do not call into question the requirements spelled out in the ESRS, mandatory under CSRD, but mainly rectify mistakes in paragraph numbers, misspellings and unclear wordings.

In some cases, the wording matters more. For example:

➡ The corrected wording in ESRS 1 Annex I now specifies anticipated, as opposed to potential, financial effects.

➡ The wording in ESRS S1 is now consistently own ‘workforce’ and not own ‘workers’.

➡ In ESRS 2, the DR IRO-1 covers the process to identify and assess material impacts, risks and opportunities – and not the ‘processes’.

➡ On page 96, in Annex I, ESRS E1 ‘Climate change’, Appendix A ‘Application requirements’, paragraph AR 34, table, first column, last row, the total energy consumption (MWh) is calculated as the sum of lines 6, 7 and 11 (and not 6 and 11).

➡ On page 178, in Annex I, ESRS S1 ‘Own workforce’, paragraph 100, it is now specified that the company shall disclose ‘any related fines’ and not only ‘material’ fines.

➡ On page 217, in Annex I, ESRS S3 ‘Affected communities’, table of contents, DR S3-4, the correction specifies that it is about ‘managing’ material risks as opposed to ‘mitigating’ material risks.

⭕ You can download the corrections in English, French and Swedish here:

Corrigendum to the ESRS (en) >>
Rectificatif aux ESRS 19-04-2024 (fr) >>
Rättelse till ESRS 2024-04-19 (sv) >>

⭕ You are welcome to contact us if you need a solution and support to implement CSRD and ESRS reporting in your organization.

Companies or groups with less than 750 employees do not have to report on these ESRS standards for the first 2 years of preparation of their sustainability statement under CSRD:

➡ E4 Biodiversity and ecosystems
➡ S1 Own workforce
➡ S2 Workers in value chain
➡ S3 Affected communities
➡ S4 Consumers and end-users

But does that mean that it’s ok to forget about these standards for 2 years?

The answer is no.

Especially if the company has identified actual or potential adverse impacts related to the topics covered by these five standards.

Under ESRS 2 (17), the company still needs to report the list of matters covered by these standards in AR 16 ESRS 1 Appendix A, that have been assessed to be material as a result of the company’s materiality assessment.

For each material matter, the company also needs to report a brief description of:

⭕ how the company’s business model and strategy take account of the impacts of the company related to those matters;

⭕ any time-bound targets the company has set related to the matters in question;

⭕ the progress it has made towards achieving those targets;

⭕ whether its targets related to biodiversity and ecosystems are based on conclusive scientific evidence;

⭕ the company’s policies in relation to the matters in question;

⭕ the actions the company has taken to identify, monitor, prevent, mitigate, remediate or bring an end to actual or potential adverse impacts related to the matters in question;

⭕ the result of such actions;

⭕ the metrics relevant to the matters in question.

You are welcome to contact us if you need help to get started

With Cleerit ESG you get collaborative platform tailored to each user profile, so that you can work together while preparing to get CSRD-ready.

Every single ESRS disclosure point has been digitized – to help you navigate the standards, learn, prepare and create your first CSRD report.

We look forward to helping you get CSRD-ready.

Climate change risk assessment is a challenge we need to master under CSRD, as global economic losses from disasters are increasing, and insurers are starting to get cold feet.

ESRS E1 (AR 11) requires the company to explain:

➡ whether and how it has identified climate-related hazards, and screened whether its assets and business activities may be exposed to these hazards;

➡ whether and how this screening has been informed by high emissions climate scenarios such as “Hot house world” or “Too little, too late”;

➡ whether and how it has taken into consideration the likelihood, magnitude and duration of the hazards, as well as the geospatial coordinates specific to the company’s locations and supply chains.

We have 3 years to learn to quantify these risks in monetary amounts, but we need to qualify and disclose on them from year one in the CSRD report.

A recent study showed that only 46% of all large companies currently assess, quantify and publish (or declare that they take into account) their physical climate risks – and 78% do not include their climate transition risks.

This is a real challenge. It will be a key area of scrutiny for the financial market and insurers, as there has been a sevenfold increase in reported losses from climate disasters since the 1970s.

Extreme weather is causing loss of property, destruction of assets and business interruptions, with financial effects hitting our businesses.

Storms have been responsible for 33% of the climate costs, heatwaves for 16% and floods and droughts for 10%.

⭕ To get your climate-related physical risks under control, you need to create a register with all your physical assets (offices, factories, warehouses, etc.) and indicate the GPS coordinates for each location.

⭕ When you’ve come this far, there are easy-to-use tools and science-based data available to help you get the overview you need to understand, manage and disclose on your climate-related physical risk exposure in your CSRD-report.

You are welcome to contact us if you need help to get started.

Are you ready to assume personal responsibility under CSRD?

Do you have skills, processes, systems, policies, action plans and allocated resources in place to oversee sustainability impacts, risks and opportunities?

How do you oversee the setting of targets related to material sustainability impacts, risks and opportunities (IROs), and how do you monitor progress towards them?

Your company will have to answer these questions, and many more, when you fill in ESRS 2, mandatory for all companies subject to CSRD. Here are some examples.

The undertaking shall disclose:

⭕ the identity of the management and supervisory bodies (such as a board committee or similar) or individual(s) within a body responsible for oversight of IROs. (ESRS2.22.a)

⭕ how each body’s or individual’s responsibilities for IROs are reflected in the undertaking’s terms of reference, board mandates and other related policies. (ESRS2.22.b)

⭕ a description of management’s role in the governance processes, controls and procedures used to monitor, manage and oversee IROs, incl whether dedicated controls and procedures are applied to the management of IROs and, if so, how they are integrated with other internal function. (ESRS2.22.c.iii)

⭕ how the management and supervisory bodies and senior executive management oversee the setting of targets related to material IROs, and how they monitor progress towards them. (ESRS2.22.d)

⭕ a description of how the management and supervisory bodies determine whether appropriate skills and expertise are available or will be developed to oversee sustainability matters, incl how those skills and expertise relate to the undertaking’s material IROs (ESRS2.23.b)

⭕ including whether the bodies and/or its members have access to other sources of expertise, such as specific experts and training and other educational initiatives to update and develop sustainability-related expertise within these bodies. (ESRS2.AR5)

A recent assessment of large companies in France carried out by the leading network of entrepreneurs in France, MEDEF, together with Deloitte and EY showed that:

➡ Not even half of the companies publish (or declare that they take into account) the analysis of at least one climate scenario and quantify their climate risks – and 4 out of 5 do not include climate transition risks.

➡ Only 31% publish water consumption reduction targets, 13% declare the number of production sites located in or near sensitive areas in terms of biodiversity, 30% have formalized objectives related to the circularity of products and their packaging.

➡ Only 53% publish indicators related to the gender pay gap of their employees at group level, and 8% provide information to compare low wages to decent wages.

❓ Do you still manage ESG performance with Excel? (Do you also manage your financial performance with Excel…?)

You are welcome to contact us to get CSRD-ready with robust Sustainability Strategy, Governance, Performance Management and Reporting capabilities.

On 5 January 2023, the EU Corporate Sustainability Reporting Directive (CSRD) entered into force.

The CSRD is an EU “directive” (2022/2464) – a legislative act that sets out a goal that EU countries must achieve.

The CSRD supports the Union’s legal framework and the objectives of the EU Green Deal.

The EU Green Deal is the new growth strategy of the European Union, which aims to transform the Union into a modern, resource-efficient and competitive economy with no net emissions of greenhouse gases (GHG) by 2050, while leaving no person and no place behind.

It will contribute to the EU objective of building an economy that works for the people, strengthening the Union’s social market economy, helping to ensure that it is ready for the future and that it delivers stability, jobs, growth and sustainable investment.

To succeed the Green Deal, it is necessary for the EU to reorient capital flows towards sustainable investment in order to achieve sustainable and inclusive growth, manage financial risks stemming from climate change, resource depletion, environmental degradation and social issues, and foster transparency and long-termism in financial and economic activity.

Disclosing relevant, comparable and reliable sustainability information amongst companies is a prerequisite for meeting those objectives.

The EU Commission was therefore empowered to adopt mandatory common sustainability reporting standards, to ensure that information was comparable, and that all relevant information was disclosed consistent with EU needs.

Building on the double materiality principle, the standards needed cover all information that is material to users of that information.

The development of mandatory common sustainability reporting standards was also necessary to

✔ Enable the assurance and digitalisation of sustainability reporting

✔ Facilitate its supervision and enforcement

✔ Reach a situation in which sustainability information has a status comparable to that of financial information

The adoption of such mandatory common sustainability reporting standards was completed by means of a delegated act on the first set of European Sustainability Reporting Standards (ESRS) on 31 July 2023.

ESRS is now to be used for sustainability reporting by all undertakings subject to the CSRD.

These mandatory sustainability reporting standards (ESRS) specify the information that undertakings are to report in accordance with CSRD articles 19a and 29a-b.

🍃 ESRS is where sustainability meets company strategy and sets the stage for real transformation.

You will need CSRD-compliant and ESRS-ready sustainability strategy & reporting software to succeed.

➡ Contact us if you are interested in a one-month trial of the SaaS solution Cleerit ESG for 65 € per month and user.

The entire ESRS framework has been integrated and digitized to facilitate for you to create a best-in-class CSRD compliant sustainability report.

Yesterday (24/1) the European Parliament’s Legal Affairs Committee approved a 2-year delay for sector-specific ESRS standards, until June 2026, including sustainability reporting from third-country companies.

This delay should enable the companies to focus on the implementation of the first set of general ESRS adopted on 31 July 2023, mandatory under CSRD.

It will also rationalise reporting obligations for companies, as well as provide the European Financial Reporting Advisory Group (EFRAG) with more time to develop the new standards.

However, MEPs believe that sector-specific sustainability standards enable comparisons between companies and are therefore valuable source of information for investors.

That is why although they agree with the delay, they also suggest that the Commission publishes eight sector-specific reporting standards (specific to oil, energy and mining industries) as soon as they are ready before the deadline.

“We will delay the deadline for sector specific standards under the Corporate Sustainability Reporting Directive (CSRD) by two years in order to give EFRAG the time to develop quality standards and give companies the time to put them into practice. Companies have been putting up with too much bureaucracy in years of crisis, from Covid to inflation.” (Rapporteur Axel Voss)

The proposal was made by the EU Commission in October, as part of its 2024 Commission Work Programme, which included reducing reporting burdens for companies as one of its priorities, and highlighted the postponement of the deadline for the adoption of sector-specific ESRS as one of the key actions listed.

Sector-specific European Sustainability Reporting Standards (ESRS) should clarify what exactly and to what detail should companies in particular sectors disclose about their impact on people and the planet, including on decarbonisation, biodiversity or human rights since methods and impacts differ depending on the sector.

Reporting obligations for non-EU companies with turnover above 150 million euro and their branches in the EU with turnover above 40 million euro will start to apply in 2028, based on the upcoming standards.

Source : Press release

#getCSRDready,  #CleeritESG