Is your company ready for the future of sustainability reporting? Find out how you can stay ahead of the curve with the new CSRD requirements coming into effect in 2025.
What is going to happen:
The so-called ESG reporting will be a fixed and mandatory part of the annual financial report for many European companies. ESG stands for “Environment, Social, Governance” and that indicates that a broad spectrum of sustainability matters is measured. Just like the “regular” annual figures, the ESG reporting will also be subject to financial auditing.
This is the result of the new European directive on corporate sustainability reporting for companies, also known as the CSRD (Corporate Sustainability Reporting Directive). The date by which they must comply with this obligation depends on the size of your organization. From the financial year starting in 2024, large companies that are already required to report on the basis of the Non-Financial Information Disclosure Decree must include an ESG report. From the 2025 financial year, the obligation will apply to all large companies. With effect from the 2026 financial year, all listed SMEs must include an ESG reporting.
What is a “large company”:
A large company is a company with more than 250 employees and/or more than € 25 million in net turnover and/or with a balance sheet total from more than € 25 million.
Examples: A well-earning service provider with 50 people can therefore already be required to draw up an ESG report. But also, a just started-up Temporal Labor Agency with 300 part-timers that does not even reach € 25 million turnover yet.
Smaller subsidiaries of listed or large companies may also be subject to the CSRD obligation.
What does this mean for business operations (The Challenge):
The obligation to include ESG reporting will lead to a significant change in current business operations and company policies. In addition to doing business, companies now also must pay attention to sustainability in the various processes and provide written accountability for this.
This means that directors must be more aware of sustainability issues when they start new business initiatives and/or change existing business processes. But probably even more importantly, they must also must look very carefully at how ESG reporting can be drawn up, based on existing business processes. The latter will be the most crucial one for many companies. Because without proper automation, many companies will have little or no ability to draw up an ESG report without incurring significant additional costs.
How to approach this (The solution):
Even if ESG reporting is not yet mandatory for your company, it is wise to start early. This has the great advantage that the required processes can be properly mapped out and that the right decisions are made in a practical and timely manner.
Just as “regular” annual figures do not always have one source but several, ESG reporting will have many more sources, both in terms of datasets as in terms of diversity of source systems. In addition, it is important that these sources are documented. In the event of modification of the data before further processing can take place, the adjustment must also be documented, in particular, the decision moments. The entire process of data collection, data processing and reporting must therefore be transparent and traceable as it is part of the annual financial audit.
This process therefore requires good automation solutions, but also a proper implementation method:
By this we mean:
- Setting up a strategic sustainability framework
- Sustainability measurement for the CO2 footprint
- Determining topics within the 3 frameworks (Environment, Social, Governance), possibly also framework 4: Customers and products
- Determining KPIs
- Data collection
- Identification of sources
- Setting up the reporting and KPI dashboard
In addition to starting on time, the right approach is also very important. The ultimate goal will be the same for many companies. It is about having a good sustainability policy and reporting but remaining competitive!
Experienced partners
Q7 Consulting and Kompasteam have more than 15 years of experience in KPI reporting and the associated automation solutions. They have started a collaboration to jointly offer a solid approach with a proper automation solution. There are many ESG reporting tools on the market, but most of them only solve a part of the problem: the final reporting. However, that is not the biggest problem, the final report itself is not very complex. The real challenge lies in collecting the data smartly and documenting it adequately. And that includes a good process.
If you want to remain competitive as a company and also set up a good ESG report, please send us an email to contact us. We will then discuss the possibilities with you.