Who will be affected by CSRD and ESRS, and when?
The table below lists the different types of companies that will be required to publish sustainability reports and the timetable for the entry into force of the new reporting obligations. An important element is the requirement for companies based outside the EU but generating revenues of more than €150 million within the EU to report on sustainability.
How and when to prepare for ESRS?
The European Sustainability Reporting Standards were developed based on existing standards and guidelines. When reviewing the standards, we find many similarities to the GRI Standards, SASB, and TCFD guidelines. Nevertheless, in our opinion, the ESRS are much more demanding not only than what is reported today, but also than the latest version of the GRI Standards 2021.
There is little time left to prepare for reporting in ESRS, and from our experience working with clients—regardless of whether they are public, private, or start-up companies—the biggest challenge is collecting numerical data. Since the first reports will cover the year 2024, we should have an efficient data collection and consolidation system in place by the end of next year.
Here are a few tips on how to prepare for ESRS:
Stage 1: Download and carefully review all standards, in particular:
- Pay attention to ESRS 1 General Principles – this is where the key principles of the standards are described, definitions of many terms (in ESRS we use the terms: value chain, impact, risks, opportunities when reporting) and the method by which the materiality assessment of environmental and social issues must be carried out is described.
- Take a look at the figures required for performance measurement (e.g., in standard E1 – Climate change, E2 – Pollution, E3 – Water and marine resources, E5 – Resource use and circular economy, or S1 – Own workforce).
Stage 2: Review the data collection systems in your organization – meet with the HR, personnel, health and safety, purchasing, maintenance, controlling, and administration (environmental data) departments and compare the ESRS requirements with the data currently being collected. Depending on whether the organization has previously published an ESG report, audited it, and how the organization and awareness of ESG in the company look like, the gap between ESRS requirements and the state of data collection in the company will be greater or smaller. One thing is certain: ESRS are very demanding, and thorough preparation for these standards is a process that should be started as soon as possible.
Stage 3: Together with the people responsible for specific areas of activity in the organization, prepare an action plan, the key point of which will be to develop a tool (e.g., an Excel file) for collecting non-financial data under ESRS. We are in favor of automation – the digitization of processes. There are companies on the market that offer tools for collecting and processing non-financial data, but make sure that the provider is familiar with the GRI Standards 2021, the specifics of the future ESRS, and that the proposed tool will be simple and user-friendly for your organization. Our experience shows that in the initial stage of ESG reporting, the simplest, widely available tools (Excel) work best. At MATERIALITY, we have developed and tested a data collection tool – if you would like to learn more about it, please feel free to contact us at any time and request a quote.
Stage 4: Calculation of the Gender Pay Gap, CEO Pay Ratio indicator, the S1-14 Fair Remuneration indicator, or calculating emissions in scopes 1, 2, and 3 will be mandatory in ESRS standards, so you will probably need to ask an external expert for help to calculate these indicators correctly, but treat cooperation with such a company as an investment in development and education, because ESG is here to stay.
The European Sustainability Reporting Standards (ESRS) are demanding, but they introduce a new quality to ESG reporting and will be a challenge for every organization. At MATERIALITY, we encourage you to start educating yourself in this area as early as possible and to engage in intensive preparatory work, regardless of the standards used to prepare reports previously.
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