- Fewer companies are now in scope
- Some companies have a two-year reprieve on figuring it out
- No one will have to get reasonable assurance
- Double materiality still stands
The question on a lot of minds is, what should I do now?
Well of course that all depends on why you were doing CSRD reporting in the first place. If it was viewed as a tick-box, compliance, please prevent the company from getting a big fine exercise, my guess is your company will breathe a sigh of relief and stop putting any resource into the effort.
But I really hope that wasn’t why you were reporting. Regulatory compliance is a good motivation. But I have always maintained that CSRD provided a huge opportunity for companies to get to grips with the real sustainability impacts of their business, and to have collaborative and strategic conversations with all parts of the business on moving the needle on the risks and opportunities that matter from a sustainability perspective.
What to do now
- Decide whether you view reporting as a tool for action or a distraction
Personally, I’m in the action camp. But I’ve heard and read a lot of folks saying that reporting is a distraction from the ‘real’ work of sustainability. I think this is absolutely crazy. How on earth can you know whether any strategies, policies, programmes, or investments are having an impact if you are not measuring baseline data and outcomes? It speaks to a reporting-driven programme, rather than seeing reporting for what it is – a tool for managing change.
Viewing reporting as a tool for managing change helps to keep the focus where it belongs – on measuring outcomes of the investments you are making or the risks you are managing. Otherwise, we’re all just operating on gut feelings.
- Revisit the double materiality assessment
Much of the challenge of complying with CSRD has been driven by, in my view, double materiality assessments that were not rigorous or specific enough. Your company typically will not have more than 5 to 10 material topics. Even 10 would be a stretch for many companies. Yet I’ve seen materiality assessments that commonly present 15, 20, or even 25 material topics. No wonder CSRD has been regarded as a waste of resources. No company, unless they are hugely complex and operating in multiple, unrelated sectors, should have that many material topics. There’s simply no way to prioritise and act on that many issues and the whole exercise becomes irrelevant.
If your company has more than 10 material topics, you should revisit that materiality assessment and increase your thresholds so that you are only acting on the most material issues.
- Focus your reporting (whether now voluntary or not) on what really matters
Businesses still have a responsibility to their stakeholders in managing risks and opportunities. Reporting should be used as a management tool. For example, if we have deemed a topic material, that now means we should be able to report on our management approach, policies, programmes, and results. If we cannot do that, perhaps we should question whether the topic is really material. If it truly is material, perhaps this is a signal that we are not prioritising it enough. Now is an opportunity to see the ESRS as a tool for guidance, rather than a report card on how well your response lines up to the standard.
Finally, a bit of guidance on EFRAG: take some time to rewrite these standards into plain language – that alone would be a huge reduction in the reporting burden for companies!
Whether you’re new to sustainability reporting or have years of experience, evolving regulations are reshaping the landscape. If you need help thinking about how you can prepare, please get in touch with Sarah Roper.
