Last updated on December 05, 2024
In a Nutshell
- EFRAG has published a study containing findings and recommendations based on the first voluntary CSRD reports of 28 companies
- Most companies recognize the strategic value of double materiality analysis and integrate its results into corporate strategy, but there is still room for improvement in integrating it into the gap analysis of ESRS data points
- Companies face challenges in mapping their value chains and standardizing ESG reporting processes
- A clear structure, expertise and IT transformation are crucial for effective CSRD implementation, defining responsibilities and ensuring relevant, consistent data
From 2025, the first companies will have to publish a sustainability report in accordance with the Corporate Sustainability Reporting Directive (CSRD) for the 2024 financial year. As a first test run, some companies have already published voluntary CSRD reports in accordance with the European Sustainability Reporting Standards (ESRS) in 2024. The European Financial Reporting Advisory Group (EFRAG) has comprehensively analyzed these first-time adopter reports and made them available to the public in a study.
The results provide companies involved in sustainability reporting with valuable insights, best practices and supportive advice. We have looked at the EFRAG study and filtered out the most important findings for you.
Findings in the Four Focus Areas of a CSRD Report
EFRAG has analyzed the voluntarily published CSRD reports of 28 major European companies. In the resulting study, practices and challenges in the initial phase of ESRS implementation were compiled in four focus areas:
- Double Materiality Assessment
- ESRS Data Points
- Value Chain
- ESG Reporting — Organizational Approaches
Double Materiality Assessment in CSRD reporting
The CSRD reports analysed show that most companies recognize the value of an objective and evidence-based double materiality analysis as a strategic exercise for reporting and prioritizing ESG management in line with the ESRS standards.
The importance of input from internal experts and stakeholders is recognized and efforts are made to involve them in a structured manner. Various options for this involvement are being considered.
Around 85% of companies intend to integrate ESG reporting and the results of the double materiality assessment into their corporate strategy and decision-making.
ESRS Data Points
Many companies have not yet integrated the results of the double materiality assessment into their gap analysis of the ESRS data points to be reported. This could lead to more data points being included in the gap analysis than required by the ESRS standards, with the risk of losing focus on the truly relevant information. Added to this is the increasing complexity of data procurement for a large amount of data.
The double materiality assessment serves as the basis for the reporting of ESG topics and therefore determines the scope of the data points to be reported.
Around 80% of companies mention the complexity of obtaining data for CSRD reporting.
Value Chain
Some companies have adopted a simplified, aggregated representation of the value chain (i.e. only upstream, downstream and own operating activities). However, this is not sufficient for the CSRD report. In particular, the following questions should also be asked: Who uses my product? What happens to my product at end of life? What happens to the remaining production materials (outputs) that are not directly processed in the product? In which countries/regions are my suppliers and their suppliers located (upstream value chain)?
Around 90% of companies are still working on refining their mapping of the value chain and finding the right level of detail.
ESG Reporting — Organizational Approaches
The following findings are based on the interviews conducted. In most cases, EFRAG has found that the new reporting requirement triggers a renewed organizational approach to ESG reporting.
The companies agree that CSRD reporting:
- improved cross-functional collaboration (e.g. between sustainability, finance, risk, IT and business units).
- highlighted the need for standardization of ESG reporting processes, including data quality controls (similar to financial reporting), particularly in preparation for audit.
- has required additional skills and resources, including the need for IT transformation to be implemented under different timelines.
Around 85% of companies recognize the need for IT transformation.
Our Dos & Don’ts for Your CSRD Report
Based on the 28 voluntary CSRD reports, we recommend the following:
Recommendations for your CSRD Report (Dos)
- Create a clear structure: Clearly define responsibilities in the reporting process, similar to financial reporting
- Use expert knowledge: Conduct workshops and interviews with internal and external experts to gather informed input
- Targeted communication: Promote a common understanding of reporting obligations internally and externally to provide consistent and understandable ESRS data
Risks that you should avoid in your CSRD Report (Don'ts)
- Beware of subjective assessments: Supplement qualitative statements with tangible evidence to avoid greenwashing
- Avoid superfluous data: Focus on relevant information without losing the overview due to too many ESRS data points
- Avoid sources of error: Make sure to take care of ESG software early on, where you can define responsibilities and collect qualitative and quantitative data
Conclusion: Our Tips for Complying with the CSRD Directive
- Establish processes: Develop clear procedures for data collection and reporting, to ensure reliability.
- Define responsibilities: Encourage the establishment of clear responsibilities and cross-departmental collaboration.
- Conduct a data gap analysis: This can be done most efficiently with ESG software. Remember to integrate the results of the double materiality assessment into your gap analysis.
- Strengthen IT integration: Say goodbye to confusing spreadsheets and rely on specialized software solutions for data collection.
Centralized data collection and clear communication of project requirements are crucial. Allocate sufficient time and resources for the materiality analysis and the preparation of the sustainability report, and ensure that internal or external expertise is available to successfully implement your CSRD report.
ESG software solutions can make sustainability reporting more efficient and act as a helpful tool for the sustainability team.
Sunhat's AI reporting software makes sustainability reporting according to CSRD easier for companies thanks to:
- simplified data collection and management,
- the linking of external requirements and internal data and
- optimized processes and collaboration between departments.
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