New CSRD Climate Reporting Standards Will Challenge Firms

New CSRD Climate Reporting Standards Will Challenge Firms

With the EU's Corporate Sustainability Reporting Directive (CSRD) set to come into effect in 2024, firms are gearing up to meet the new climate reporting requirements. Based on our analysis, firms will struggle most with the following three climate disclosure challenges within the CSRD:

1. Sophisticated sustainability-related data across their entire value chain
   
   
2. Forward-looking and retrospective qualitative and quantitative reporting
   
   
3. Detailed environmental factor reporting across five topics: change mitigation and adaptation; water and marine resources; resource use and circular economy; pollution; and biodiversity and ecosystems

 

The CSRD's requirements will force firms to ramp up their internal and external resources. For instance, the CSRD states that organizations will have to report on activities that negatively impact biodiversity. However, biodiversity measurement is a nascent field with little methodological consistency to collect, aggregate, and assess data. As a result, firms need to be on the lookout for providers of this kind of data and experts to analyse and report on it.

Additionally, the CSRD demands multifaceted data and sustainability metrices. Firms should already be working closely with their IT departments to identify gaps in data collection and management. Investing in the necessary tools now can alleviate many of the challenges organizations might experience at a later stage in the reporting process. As the Global Corporate Survey 2023: Net Zero Budgets, Priorities and Tech Preferences shows, more than 70% of net zero leaders agree or strongly agree that their organization’s CIO or chief technology officer (CTO) supports net zero priorities and requirements, and many IT departments are eager to collaborate. Ultimately, the CSRD is a comprehensive regulation that will require a cross-functional team to oversee and manage the reporting process.

The Verdantix report on the CSRD provides insights into how firms can overcome the challenges of complying with these new disclosure requirements. Verdantix clients can click here to read the full report: Strategic Focus: The Most Challenging Climate Reporting Requirements Of The EU’s CSRD.