The introduction of the Corporate Sustainability Reporting Directive (CSRD) is a significant step towards a more sustainable future for companies. It presents a whole 15,000 companies in Germany with the new challenge of preparing a sustainability report. The final version of ESRS Set 1 was published by the EU Commission on July 31, 2023 and is now also available as a German translation. They form the framework of the CSRD and specify which sustainability information companies must disclose.
However, there are still many hurdles for reporting companies to overcome on the way to a complete sustainability declaration.
To make this process easier, in this post we want to identify the 5 key mistakes that can be made when preparing for CSRD reporting.
1. delay CSRD reporting as long as possible
One potential problem is delaying CSRD reporting until the last possible moment before the reporting obligation arises.
Of course, implementing the ESRS in the company in order to achieve CSRD compliance is time-consuming, resource-intensive and exhausting. The figures also show this: According to the study “ESG Strategy and Reporting – Status and Implementation in German SMEs” by IMI and PwC Germany, 76 percent of companies in Germany do not feel prepared to achieve their ESG goals and comply with legal requirements.
And who doesn’t tend to put complex tasks to one side for the time being?
But: The legislation allows for a period of preparation because it is aware of the enormous challenges that many companies are facing.
Companies can therefore use the time remaining until 2026 to familiarize themselves with the reporting process and practice it before a full sustainability declaration is required.
Trying out the ESRS early on allows for smoother data collection, more accurate measurements and the chance to tackle unforeseen challenges.
In contrast, waiting until the mandatory CSRD not only builds unnecessary pressure, but also limits the opportunity to refine your approach.
Tackle CSRD sooner rather than later and contact us for a free trial of Code Gaia.
Our comprehensive solution offers you the opportunity to present your environmental data and ESRS indicators in an understandable way and to analyze them efficiently. We also help you with optimization and reporting and offer you the best possible personal support.
2. ignoring the roles of other departments when preparing the sustainability statement
The preparation of a CSRD-compliant sustainability statement goes beyond the sustainability teams. It is therefore a serious mistake to ignore the accounting, legal, finance and HR departments in the reporting process.
For example, other departments hold valuable financial data and make financial decisions that are material to CSRD reporting. Inaccurate information can undermine the credibility of your sustainability statement and affect stakeholder and investor confidence. Collaboration between sustainability and finance teams is therefore essential for a more accurate representation of the company’s financial performance and its alignment with ESG objectives.
In the Code Gaia software solution, your data can be collected decentrally and tasks can be delegated within your company. This saves you the tedious and time-consuming task of collecting data across different departments and allows you to better divide up the work with your colleagues.
3. reliance on secondary and tertiary sources
A comprehensive understanding of the ESRS, which form the framework of the CSRD and should be included in the scope of a CSRD software, can only be gained through direct access to the source.
Relying solely on secondary and tertiary sources for information can lead to misunderstandings and errors. Many resources contain interpretations or half-truths that do not match the official ESRS.
To avoid misinformation, it is best to always refer directly to the ESRS documentation and guidelines. Familiarize yourself with the primary source to ensure accurate reporting and compliance with the standards.
We also recommend that all reporting managers bookmark the following legal acts so as not to lose track of them:
- Accounting Directive Directive 2013/34/EU
- Non-Financial Reporting Directive (NFRD) Directive 2014/95/EU
- Corporate Sustainability Reporting Directive (CSRD) Directive (EU) 2022/2464
- ESRS (Annex I of the Delegated Regulation)
In our software solution, we guide you step by step through the ESRS. The ESRS requirements are integrated here and can always be found in the original text so that you can verify them yourself.
4. neglecting the importance of the sustainability declaration
A key element of CSRD reporting is the sustainability declaration. It forms the basis for all sustainability measures, ambitions and targets. The better the sustainability management already functions, is communicated and consolidated, the easier the reporting will ultimately be. In the past, some companies have treated the sustainability statement merely as an image and marketing tool and have failed to really integrate it into their management report or to treat it with the same degree of care.
The CSRD stipulates that the sustainability statement must be included in the annual management report and companies must adhere to the reporting requirements set out in the ESRS. Failure to comply with these requirements can lead to legal consequences, similar to providing false information in an annual report.
In addition, more and more consumers, investors and stakeholders are attaching importance to companies acting sustainably. By complying with the CSR Directive and creating a meaningful sustainability statement, companies can therefore strengthen their credibility and have a positive impact on society.
Make your transformation visible with software-supported sustainability reports! Code Gaia’s reports make it easy for you to communicate your sustainability efforts credibly and transparently.
5. overlooking the concept of “double materiality”
The ESRS introduces the concept of“double materiality”.
This assessment identifies both the environmental and social impacts of your business and the impact of environmental and social issues on your business, which form the basis for your CSRD reporting (ESRS 1, Sections 3.4 and 3.5).
Failure to take this concept into account can lead to incomplete reporting. Be careful with supporting companies that offer an “all-in-one” solution . Double materiality is often overlooked here.
Also ensure that your reporting reflects a balanced approach that takes into account the environmental and social impacts on your company as well as your company’s influence on these external factors.
The Code Gaia sustainability team offers you a double materiality analysis on request. Talk to us:
Conclusion
CSRD reporting plays a critical role in transparently communicating a company’s commitment to sustainability and responsible business practices. By avoiding the above mistakes, companies can improve the accuracy, credibility and impact of their CSRD reporting. Through early engagement, interdisciplinary collaboration, direct information gathering, integration of the sustainability statement and consideration of the concept of double materiality, comprehensive and meaningful CSRD reporting is achieved.
It is time for us to take responsibility together and steer our companies towards a sustainable future. Our modern ESG reporting software can do a lot of the work for you!
Our solution is designed to effectively support your environmental and sustainability efforts by seamlessly integrating analysis, optimization, reporting and support. With a time saving of 90% compared to traditional sustainability reporting, Code Gaia takes all the administrative tasks off your hands so you can focus on what really matters: the sustainability transformation of your business.
Take a look at Code Gaia’s features for yourself and contact us for a free trial!
FAQ
What is the CSRD?
The CSRD is a directive that obliges companies to disclose their sustainability information in accordance with the ESRS .
What are the ESRS?
The CSRD defines the legal framework for the type of information to be disclosed and determines who must disclose it. It delegates the specific preparation and presentation of this information to the ESRS (European Sustainability Reporting Standards). The European Sustainability Reporting Standards (ESRS) are therefore the framework for fulfilling the requirements of the CSRD (Corporate Sustainability Reporting Directive).
Why is the sustainability declaration important?
The sustainability statement outlines a company’s sustainability strategies, goals and achievements and demonstrates its commitment to responsible practices. It is decisive for the decisions of stakeholders, investors and customers of the respective company.
What does double materiality mean in the ESRS?
This approach identifies both the environmental and social impacts of your organization and the impacts of environmental and social issues on your organization, which form the basis for your ESRS reporting (ESRS 1, Sections 3.4 and 3.5).
Can non-compliance with the CSRD have legal consequences?
Yes, failure to include the sustainability declaration can have legal consequences.
How can companies avoid misinformation in CSRD reporting?
Companies should refer directly to the official ESRS documents and guidelines and not just rely on secondary sources to ensure accurate reporting. In our software solution, the ESRS requirements are integrated and can always be found in the original text so that you can verify them yourself.
