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.
- 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. - 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. - 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.
