Top Three Disclosure Challenges Firms Will Face Under CSRD

From 2024, firms across the EU will be subject to the Corporate Sustainability Reporting Directive (CSRD). Mandating greater breadth and depth of climate reporting, the CSRD will present three significant disclosure challenges.  

1 – Limited sophistication of sustainability-related data across the entire value chain

The CSRD demands multifaceted data and sustainability metrices across a firm’s value chain. Addressing this begins with recognizing the existing weak spots: sustainability leaders should partner with IT departments to identify gaps in data collection and management. This will also reveal technology needs, prompting decision-makers to invest in the necessary tools now rather than contend with the challenges that will otherwise arise at a later stage in the process.

2 – Facilitating forward-looking and retrospective qualitative and quantitative reporting

CSRD requirements will force firms to ramp up their internal and external resources as they work to deliver retrospective- and forwards-looking disclosures. The reporting standards flag retrospective reporting back to a base year (for emissions calculation, for example), and plans forward to the short term (1-5 years), medium-term (5-10 years), and long-term (10+ years). The forward-looking reporting requirements will be particularly hard to address and may require firms to invest in new capabilities such as scenario modelling functionalities.

3 – Delivering detailed environmental factor data across five distinct topics

Reporting under the CSRD will involve in-depth information on a range of environmental impacts. The five topics firms will have to disclose for are: change mitigation and adaptation; water and marine resources; resource use and circular economy; pollution; and biodiversity and ecosystems. Biodiversity measurement will be especially challenging, as it is currently a nascent field with little methodological consistency to collect, aggregate, and assess data.

Maya Hilmi

Maya is a Net Zero, Climate Risk Analyst. She is currently specialising in carbon management, ESG regulations, and identifying climate risk solutions. Prior to joining Verdantix, Maya interned at Cardano Advisory where she gained experience in covenant, sustainability, and pensions corporate finance matters. Maya holds a master's degree in Conflict Resolution in Divided Societies with Distinction from King's College London, and an undergraduate degree in International Relations from SOAS, University of London.