Assurance and CSRD: The roadmap to transparent sustainability reporting

Assurance and CSRD: The roadmap to transparent sustainability reporting

The Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standard (ESRS) mark a significant shift in the way organisations approach sustainability reporting. Ensuring that the data reported is not only relevant but also reliable is at the heart of these new directives.

ESG company Position Green recently offered guiddance into the fundamentals of ESRS assurance readiness.

At the core of this shift is assurance. An assurance engagement, in essence, is about getting an independent third party to review an organisation’s reported data, like GHG Accounting, and verify its accuracy against a pre-decided set of criteria, such as GHG Protocols. This not only instils greater trust in the reported information but also aligns with the broader aims of the CSRD, which are to reduce economic systemic risks, increase capital flow to socially and environmentally responsible companies, and empower civil society and trade unions in holding companies accountable for their societal and environmental impact.

The CSRD outlines five specific areas that require limited assurance. These include ensuring compliance of sustainability reporting with both the CSRD and ESRS; undertaking the double materiality assessment; marking up sustainability reporting as per Article 29d (ESEF); and abiding by the reporting standards stipulated in Article 8 of Regulation (EU) 2020/852, also known as The EU Taxonomy.

When it comes to assurance, there are two main types: limited and reasonable assurance. While reasonable assurance necessitates a comprehensive examination of a company’s sustainability records, providing readers with a high degree of trust, limited assurance requires less evidence, fewer procedures, and offers a lower level of confidence. Given the intricate details involved in obtaining reasonable assurance, the European Commission has, for now, settled for the limited assurance requirement.

The journey to CSRD readiness involves five pivotal steps: double materiality assessment, gap analysis, data management, organisational setup, and adjusting reports to reflect the CSRD. Throughout these stages, assurance readiness plays a crucial role, with certain steps like data management and organisational setup demanding more assurance attention. The CSRD assurance mandate applies to all companies under its purview.

For organisations, comprehending the assurance process can lead to smoother preparations and enhanced interactions with assurance teams. This process typically unfolds over five stages: starting with gauging the feasibility of an engagement, gaining insights into the entity, designing and executing the necessary assurance procedures, evaluating findings, and finally, crafting the assurance report.

Non-compliance doesn’t come without its challenges. Companies face two primary risks: reputational, stemming from issues in the report, and the risk of not meeting publication requirements, the latter of which could lead to severe consequences depending on the operating country. Proactive preparation and the right expertise can significantly reduce these risks.

Assurance isn’t a one-price-fits-all. Costs vary based on several factors, including company size, industry sector, and listing status. It’s crucial to be well-prepared ahead of reporting to manage these costs effectively.

Position Green offers a comprehensive ESRS Solution that caters to the complex demands of ESRS and CSRD. By streamlining data collection and ensuring compliance, we aim to guide organisations towards transparent reporting, helping them lead their sustainability agenda.

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