Essential strategies for meeting CSRD & ESRS reporting requirements in 2025
As 2025 approaches, businesses across the EU and beyond must brace for significant changes under the CSRD.
According to Position Green, this directive extends to non-EU parent companies with significant operations in the EU, as well as to subsidiaries required to maintain group-level disclosures. What sets 2025 apart is the introduction of mandatory third-party assurance for sustainability disclosures, underscoring the need for impeccable data accuracy and traceability.
Moreover, businesses can expect tailored ESRS reporting guidelines specific to sectors such as energy, agriculture, and textiles, alongside the requirement to perform double materiality assessments which examine both societal impacts and the influence of sustainability on financial performance.
Step 1: Implement double materiality assessments
At the core of the ESRS reporting is the double materiality concept, necessitating businesses to identify significant impacts, risks, and opportunities from two angles: how their operations affect the environment and society, and how sustainability issues influence business outcomes.
For those new to this, performing a double materiality assessment can seem daunting due to its complexity and the rigorous assurance it demands. However, these assessments are crucial, forming the foundation of comprehensive ESRS reporting, allowing businesses to align with both regulatory requirements and stakeholder expectations.
Step 2: Develop robust data management systems
With the stringent assurance requirements set for 2025, reliance on manual processes and basic tools like spreadsheets will no longer be viable. Businesses will need to adopt robust ESG software solutions that automate data collection, centralize data storage, and ensure audit readiness with in-built traceability features.
These advanced systems are essential not only for error minimization and workflow streamlining but also for meeting the unique needs of different organizational entities such as subsidiaries and joint ventures.
Step 3: Enhance collaboration across the value chain
The CSRD emphasizes the need for comprehensive data collection that extends beyond the immediate boundaries of the company. This will involve gathering input from a wide array of stakeholders including suppliers and partners, particularly when addressing Scope 3 emissions.
Effective collaboration, clear communication of expectations, and the establishment of data-sharing protocols will be vital for meeting the disclosure requirements under the CSRD.
Step 4: Opt for an appropriate reporting strategy
Depending on the structure of your organization, choosing the right reporting strategy—whether a top-down or a bottom-up approach—will be crucial. This decision should consider factors such as the maturity of your governance practices, portfolio complexity, and where expertise is concentrated within your organization.
This strategic choice will influence how impacts and materiality are assessed across various levels of the organization.
Step 5: Focus on training and internal accountability
Ensuring compliance in 2025 is as much about people as it is about systems. Organizations must provide ongoing training on the ESRS requirements and the functionalities of reporting platforms.
It’s also critical to define clear roles and responsibilities to prevent overlaps and ensure that each department understands its role in the reporting process. Building internal expertise will also decrease the dependency on external consultants, fostering a more self-reliant approach to sustainability reporting.
Businesses with expansive and varied operations may find it challenging to consolidate data effectively. Utilizing a uniform approach to impact thresholds across subsidiaries can aid in this process, ensuring alignment at the group level. Additionally, preparing for mandatory assurance by maintaining audit-ready data systems and staying updated with sector-specific ESRS updates will be crucial for a smooth transition into the new regulatory landscape.
2025 will not only expand the scope of businesses impacted by ESRS but also differentiate those who effectively integrate compliance with strategic value creation. Businesses that adeptly navigate these changes will do more than just meet regulatory expectations; they will enhance their resilience, attract investment, and build stronger trust with stakeholders.
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