In May 2024, two pivotal events, "CSRD: Implementation and Beyond" (15.05.24) and "How to Support Companies in Applying the European Sustainability Reporting Standards (ESRS)" (16.05.24), brought together industry leaders, policymakers, and experts to discuss the future of sustainability reporting. These conferences provided critical insights into the challenges businesses face under the new Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS).
This article delves into the key concerns raised during these events and outlines practical solutions that can help businesses navigate the evolving landscape of sustainability reporting. By understanding and addressing these issues, companies will not only achieve compliance but may also leverage these regulations for strategic advantage and sustainable growth.
Challenges to Conquer
During the confrences, the following concerns were highlighted:
- Cost and Complexity: High assurance costs and the complexity of new standards.
- Need for Clear Guidance and Tools: Clearer standards, better translations, certified tools, and expert support are needed.
- Collaboration and Standardisation: Ensuring a level playing field through collaboration and standardisation.
- Digitalisation and Data Management: Managing the large volumes of ESG data and ensuring consistent digital reporting formats.
- Opportunities and Risks: Leveraging opportunities from CSRD while mitigating risks related to compliance and reporting burdens.
Addressing these challenges is crucial, because by overcoming these hurdles, businesses can turn compliance into a strategic advantage.
Potential Solutions
During the events, several strategic solutions were named to address the complexities of CSRD and ESRS:
- Increase EFRAG Funding: Boosting EU funding for the European Financial Reporting Advisory Group (EFRAG) is crucial. This increase will expedite the development and implementation of sector-specific standards, helping businesses adapt quickly and reduce compliance uncertainty.
- Develop Certified Tools and Enhance Standardisation: User-friendly, certified online tools with automated processes, such as XBRL tagging, and hybrid expert support can simplify compliance. Investing in high-quality translations and standardising digital reporting formats ensures consistency and accuracy across frameworks like GRI, SASB, and the EU Taxonomy. The GRI CSRD Essentials guide provides a practical framework for effective ESG reporting.
- Foster Collaboration and Digital Infrastructure: Collaborative platforms for defining reporting scopes and sharing best practices can manage liabilities and promote fair competition. For example, industry-specific scopes simplify standardisation and auditing, reducing costs. Denmark’s Climate Compass, an open-source database with over 600 emission factors aligned with GHG Protocol and SBTi, exemplifies this approach and is expected to be available to other EU countries soon.
By embracing these solutions, companies can transform sustainability reporting challenges into opportunities for strategic growth and innovation.
Impact on Estonian Businesses
For Estonian businesses, key challenges of CSRD/ESRS implementation lie in setting an appropriate scope of the value chain to be included in reporting, managing digital data storage, and determining relevant data points for reports. Using certified tools for streamlined reporting and fostering industry collaboration to share best practices can help address these issues. By embracing these strategies, Estonian companies can ensure compliance, enhance ESG integration, and foster sustainable growth in the European market.
Key message
Putting aside all the technical matters related to CSRD/ESRS and ESG in general, if you walk away with one message it would be this – you are not alone! In this new era of sustainability reporting, collaboration and collective mission are key to help you navigate in the unknown sea of ESG. If you are seeking guidance on any ESG-related issue, our ESG experts are one email, call, or message away!
Here are some ready-made materials on ESRS by our Global ESG experts for you to consume: