CSRD: Is it nonsense or does your organization really need to get going now?
In this blog, read why taking action now is essential, what challenges organizations face and how technology can help make your organization CSRD-compliant.
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A fundamental change
The Corporate Sustainability Reporting Directive (CSRD) is not a trend, but a fundamental change in how organizations should report their sustainability impacts. Recently, we from Innovadis attended a valuable CSRD session aimed specifically at decision-makers in the construction industry. This session offered practical insights for organizations just starting out, as well as for organizations that already need to meet CSRD obligations and want to determine their next steps.
How do you practically tackle CSRD and meet the requirements without losing sight of your core business?
What is CSRD and
to whom it applies
CSRD is a European directive that requires organizations to report extensively on their sustainability performance. The goal is to make organizations accountable for their environmental, social and governance (ESG) impact. The directive increases transparency and promotes sustainability, which eventually leads to greater trust among stakeholders and consumers. For now, the CSRD applies only to organizations that meet at least two of the following criteria:
- Organizations with more than 250 employees
- More than €50 million in sales per year
- More than €25 million on the balance sheet
The implementation will take place in phases:
- Organizations under theNon-Financial Reporting Directive (NFRD): as of fiscal year 2024
- Large organizations (see criteria above): as of fiscal year 2025
- Listed SME organizations: as of fiscal year 2026
- Non-EU organizations: as of fiscal year 2028
For large listed organizations within the NFRD, they must report according to CSRD standards as early as 2024, with 2023 as a crucial year of preparation.
Note: You must also report on the previous fiscal year. This means you must already have this data available.
Not just an obligation, but an investment in the future-proofing of your organization
The benefits of CSRD reporting
Although the CSRD is seen primarily as an obligation, establishing good sustainability reporting also offers significant benefits to organizations.
1.
Better corporate reputation
Transparent sustainability reporting strengthens the trust of customers, investors and other stakeholders. Organizations that show they take their impact seriously are seen as more attractive and trustworthy.
2.
Cost Savings
By mapping processes and resource flows, inefficiencies can be identified. This often leads to cost savings.
3.
Access to funding
Banks and investors increasingly value ESG performance. Organizations that demonstrate sustainable operations have easier access to capital or can obtain financing on better terms.
4.
Competitive Advantage
A strong sustainability strategy and transparent reporting can increase differentiation in tenders and with clients who weigh sustainability heavily in their choice.
5.
Being prepared for regulations
The CSRD is part of a broader movement toward stricter sustainability obligations. By investing in reporting and sustainability now, you are building a foundation to respond smoothly to future legislation.
The challenges
surrounding CSRD
During the session, it became clear that many organizations do not yet feel the urgency because the obligation does not apply directly to them. Moreover, the room for interpretation in the regulations is causing division and uncertainty among both organizations and auditors. Some reactions we thus heard in the room.
Our organization
is not yet ready for this.
We focus on revenue growth;
this must not be compromised.
We don't affect stakeholders in our value chain anyway.
Besides the fact that accountants (who play a key role in reviewing CSRD reports), also struggle with the interpretation of the rules, there is still one theme that affects everyone. Namely: CO2 impact.
CO2 impact mapping is a must for all organizations
Why starting now is essential
CSRD is not an issue of "if," but of "when. Waiting until regulations catch up with you or competitors are further along is not an option.
A focused approach can help. As an organization, start small, for example with the theme of CO2 (which is relevant to any type of business). This provides a concrete entry point to map your value chain and determine where you can make the most impact.
How to handle this?
- Within the CO2 theme, choose a focus, such as a specific product group or supplier
- Create a plan for collecting and centralizing data
- Test solutions in a defined area
- Expand further as you gain more experience
Start today and work focused
Why a focused
approach works
A focused approach offers numerous benefits, especially for organizations still at the beginning of their CSRD journey:
- Low barrier to entry
By starting with a defined project, such as a specific product group or supplier, you prevent the scale of the challenge from becoming overwhelming. - Slowly get used to the topic
A small, focused approach gives your organization a chance to become familiar with the processes and requirements of CSRD. It helps employees and management develop a sustainable mindset step by step. - Facilitating Culture Change
By starting small, you can create internal support. Successes in a pilot project show that change is achievable, which increases willingness to take further steps. - Minimizing risks
By testing first in a limited context, you can learn from mistakes and address challenges before scaling up to a broader implementation.
Technology makes it easier
Why carbon impact is an inescapable issue
The CSRD requires organizations to publish their sustainability strategy, targets and progress (also known as the effort requirement). According to the European Sustainability Reporting Standards (ESRS), they must report on:
Environment
- Climate Change
- Pollution
- Water and marine resources
- Biodiversity
- Material use and circular economy
Social
- Own employees
- Workers in the chain
- Impact on communities
- Customers and end users
Governance
- Governance, risk management and internal control
- Business conduct / business behavior
The topic of CO2 impact (under environment) affects every organization. Whether you are a manufacturer or wholesaler, sooner or later you have to reduce your CO2 emissions and report them transparently. The ultimate goal? Showing the CO2 impact of a purchase on the receipt.
This requires fully mapping your value chain (upstream and downstream) and collecting relevant data. From experience, this sounds easier than it is. Some challenges here include:
- Obtaining data from foreign suppliers, for example, from China
- Processing return flows at retailers
- And, storing and making this data usable
How technology can help your organization
The right technology can help you become compliant faster. Consider:
- iPaaS solutions
For collecting and sharing data. - PIM systems
For centralizing product information. - ERP systems
To optimize processes around procurement, production and logistics and integrate them with sustainability data. - Data analysis tools
For understanding the impact on your value chain and identifying areas for improvement. - Supplychain monitoring tools
To increase transparency in your supply chain, such as tools for tracking carbon emissions from suppliers. - Workflow and project management tools
To organize internal processes more efficiently and better coordinate compliance projects.
With the right tools, you can not only comply with the CSRD, but also position your organization as a sustainable and future-proof player.
Innovadis helps
get you started
At Innovadis, we understand that the road to CSRD compliance can be complex. That's why we offer comprehensive support:
- Strategic advice
Help develop an IT roadmap for making your organization CSRD compliant. - Implementtechnology
Such asiPaaS, PIM and supply chain solutions that fit your specific needs. - Data optimization
Settingup processes and tools for collecting, processing and reporting relevant data. - IncreasingAdaptability
Innovadishelps you respond flexibly to future legislations and market trends. - Long-term partner
Collaborate to continuously improve your sustainability strategy and maintain competitive advantage.
Let's create positive
impact together!
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