If your company is one of the 50,000+ corporations soon to be affected by the European Union’s Corporate Sustainability Reporting Directive (CSRD), getting up to speed can feel overwhelming.
But with the right checklist and support systems in place, you can achieve CSRD compliance faster than you think. This step-by-step guide will walk you through how to prepare for the CSRD, no matter where you’re starting from.
1. Know your timelines.
The start of CSRD reporting obligations varies depending on the type of organization. Companies that are already reporting under the EU’s Non-Financial Reporting Directive (NFRD) will be required to report under CSRD by 2025. Other large EU companies not subject to NFRD will need to begin reporting in 2026. Other non-EU companies with an EU presence will need to report by 2029. See a detailed timetable here.
These timelines appear generous, but companies will need to make use of every minute to prepare given the vast amount of data gathering, organizing, and reporting required under the rules. We suggest getting started as soon as possible and even reporting voluntarily ahead of your initial deadline to make sure you’re ready.
2. Put a team together.
The CSRD’s sustainability reporting requirements are extensive, and even companies with a comprehensive track record of disclosure compliance will need to allocate resources to prepare for them. There are 12 European Sustainability Reporting Standards (ESRS) that firms have to report against, covering everything from climate change to resource use and the circular economy. On many of these topics, companies have not had to disclose detailed information before.
The size of your organization and the complexity of your sustainability risk profile will dictate how many people you’ll need on your CSRD preparation team, but at a minimum you’ll need one — and likely many more — team members fully dedicated to getting your company CSRD-compliant. You may choose to hire externally or assign responsibility to existing climate or sustainability team members. Whichever route you take, know that the newness of the CSRD requirements mean that nobody is an expert yet. Invest in training and competency-building to help your CSRD task force get up to speed with the new regulations.
3. Understand materiality.
Since disclosure requirements under CSRD depend on the material sustainability topics relevant to each organization, reporting will differ among companies and industries. While all companies reporting under the CSRD must submit general requirements and disclosures (ESRS 1 and 2), and virtually all will be required to report climate change risks and opportunities (ESRS E1), the other ESRS standards you’ll need to report to depend largely on the nature of your business and your exposure to different types of sustainability risk.
A comprehensive materiality assessment will determine which standards you’ll need to comply with. Be sure to interview all relevant internal and external stakeholders for their feedback, and leverage competitor benchmarking tools and existing published disclosures to help identify material risk factors.
One notable feature of the CSRD is its concept of double materiality. Double materiality is where financial materiality (sustainability concerns that generate financial risks or opportunities for a company’s future cash flows and enterprise value), meets impact materiality (a company’s impact on people and the environment). Put simply, double materiality requires a company to explain how its activities affect people and the environment, as well as how sustainability factors impact its own businesses and operations.
This will require a far deeper materiality assessment than most companies have done before (essentially, a double materiality assessment), so it’s important to dedicate sufficient time and resources to this step.
4. Prepare your data.
Data collection is arguably the most challenging part of any sustainability reporting effort. Each of the ESRS asks for significant amounts of qualitative and quantitative data, so establishing data pipelines and management systems early on is crucial. Make sure your CSRD team is well connected with the relevant departments and key contacts they will need data from. Reach out to suppliers early and start working on data collection and sharing, and what you’ll need from them going forward.
Look into the systems and tools that can help you collect, manage, organize, and maintain your data. Depending on your existing reporting commitments, you may not need to completely reinvent the wheel here, but rather add to your existing reporting processes to comply with what’s new under the CSRD.
Go deep on climate
Since most companies covered by the CSRD will be required to report under ESRS E1, the climate change standard, we recommend that companies go particularly deep on climate. Manifest Climate maps your disclosures against ESRS E1 requirements to measure alignment and identify gaps.
5. Streamline reporting and disclosure processes.
Many companies required to report under the CSRD may already be making voluntary reports that align with the Task Force on Climate-related Financial Disclosures (TCFD). Some may also have to comply with International Sustainability Standards Board (ISSB) reporting requirements, or other jurisdiction-specific sustainability disclosure frameworks. Although the new CSRD requirements will add more work to your plate, complying with CSRD need not be done in isolation from your other reporting commitments.
Because most sustainability and climate reporting frameworks and standards are built from a common base — the TCFD — we recommend companies use this as the foundation for their disclosures. Doing so can streamline compliance with mandatory requirements, including those introduced by the CSRD. Using the TCFD as your common language and conducting disclosure assessments based on the framework can make it far simpler to streamline cross-jurisdictional reporting requirements.
6. Stay up to date on CSRD news and updates.
Emerging regulations like CSRD are subject to changing timelines and requirements, so it’s important to stay up to date on changes that may affect your organization. Manifest Climate’s database of timely and relevant insights and articles can keep your climate team ahead of the game.
Getting started on your CSRD journey? Manifest Climate can help.
Manifest Climate is a Climate Risk Planning software solution that helps companies supercharge their climate strategies. Our platform is the world’s best at assessing climate disclosures. We help to highlight your climate disclosure and management gaps and provide data-driven recommendations for improvement. Our technology also helps your team save up to 75% in manual effort and up to 50% in compliance costs.
