I will start with some seemingly paradoxical advice: if you have little time, wait, and if you have more time, start right away. This paradox is only apparent, because the alternatives refer to two groups of companies that are in diametrically different situations. And since their situations differ, the preparations should also have a different dynamic and consist of different actions.
Companies that will prepare reports in accordance with ESRS as early as 2024 have the least time to prepare. These are companies that are subject to non-financial reporting obligations, i.e., approximately 150 of the largest listed companies. These companies must have fully functional ESG data monitoring systems in place in less than seven months, i.e., by January 1, 2024. At the same time, however, these are companies that have at least several years of experience in reporting non-financial information, usually in accordance with GRI or SIN standards. These companies also have experience in collecting and consolidating ESG data, and have determined the materiality of the sustainability issues they report on each year.
Before preparing the report for 2024, a materiality assessment will have to be carried out in such a way that it meets the requirements of the ESRS. Although Commission representatives have unofficially mentioned that they do not plan to make any significant changes to the standards after the consultations, which will last until July 7, 2023, other groups interested in the CSRD are increasingly voicing strong outrage at the EC's drafts for straying too far from the directive's objectives. Therefore, I would advise holding off on decisions and actions for a few more weeks. Some key elements of the standards system may still change. It would be a shame to revise in September decisions made hastily at the end of June. For such experienced and advanced companies, a few weeks will not make much difference.
The situation is completely different for a much larger group of large enterprises, numbering around 3,500 in Poland, which will start reporting in 2025. With a few exceptions, almost none of them have ever reported on sustainability issues. What is more, most of them are not yet aware of their upcoming obligations and how much preparation they have ahead of them. These companies should start educating themselves as soon as possible, i.e., learn about the directive and the standards themselves. If certain elements of the directive change, it does not matter, because it will take several weeks or months just to understand the scope of information that will need to be disclosed. This is also a time for intensive work with management and supervisory boards. Significant funds must already be secured in the 2024 budgets to prepare for the new obligations.
Now, after getting acquainted with the standards, you can also start designing an ESG data monitoring system. After all, you need to identify all data owners and the systems in which the data is collected (and, unfortunately, often determine that certain types of data are not collected anywhere). You don't need the ESRS published in the Official Journal of the EU for this, just the draft. The most important argument for decision-makers in many companies is the fact that the directive itself has been adopted and is in force. Companies that will only report for 2025 should also begin examining the compliance of their activities with the EU Taxonomy of environmentally sustainable activities. These regulations will apply to them at the same time as the CSRD, and they are already fully known and in force.
In the coming months, we will devote space in our newsletter and blog to discussing preparations for reporting in accordance with the CSRD directive and ESRS standards. In the meantime, we invite anyone who is not yet familiar with the new regulations to take our updated course. Introduction to CSRD and ESRS. It is an intensive, less than 3-hour course that allows you to understand what the directive is, how the standards work and what they contain, and what each company will have to do to report in accordance with these regulations. The course has been updated to reflect the legal status as of early June. We will carry out another update after the Commission issues the final delegated acts, but we have introduced a rule that anyone who has taken the course (at any time) will have access to all updates until January 1, 2024.
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