Evidencing CSRD compliance: Which data do you need to focus on?

27 Dec 2024

With CSRD reporting proving to be a minefield for so many companies, we reveal the insight and tools that are making the task more manageable.

While organisations may have had almost two years to get to grips with the CSRD, demonstrating compliance and reporting on progress remains a widespread challenge.

Which metrics should be monitored? Which KPIs must be reported on? What does 'good' look like? Regardless of the sector in which you operate, CSRD compliance can be achieved, but not without taking a deep-dive into your overall operations through an ESG lens.

Best practice dictates that all areas of the business with an impact of environmental, social or governance should be identified. However, this is only the start. Once these areas have been identified, only then can the second layer of equally all-encompassing work start – data collection, analysis and interpretation.

Catherine Beare, Intertek Regional Director for Business Assurance UKI & Iberia, explains: 

"Data collection is crucial to ensuring CSRD compliance, but it can only be achieved if the correct systems, which will enable the data to be collated and analysed accurately and consistently, have been implemented.

"Fundamentally, all data must be analysed, interpreted and reported in accordance with the European Sustainability Reporting Standards (ESRS). Furthermore, it must be regularly audited to make sure it remains accurate and reliable, which is no easy feat. However, with the right technological investment, there is no reason why it cannot be achieved."

Under current CSRD reporting guidance, organisations are required to report on 913 ESRS data points. This includes voluntary data points and various different data types (e.g. monetary, narrative, percentages and volumes), as well as EU regulation, for instance, Sustainable Finance Disclosure Regulation (SFDR)-driven data points.

Meanwhile, what is classed as being acceptable data for one company, may not necessarily be the same for another, making CSRD reporting a unique requirement for each and every organisation. As a result, two-thirds of companies feel confident about being ready to report under the CSRD, but more than half (59%) cite data quality and availability as a key challenge and obstacle.

"Given the scale of the required data and range of variables involved, it's easy to see how organisations can quickly become overwhelmed and daunted by the prospect of evidencing compliance. But by establishing a clear and objective outlook on which details are relevant vs. irrelevant based on their activities and properly preparing their data, companies can develop an effective CSRD-reporting strategy they can fine-tune as they go along," explains Catherine.

Data preparation: How companies can perfect their data (in 7 steps)

1. Determine applicability
   Confirm whether your company falls under the CSRD's scope (e.g. EU companies and large non-EU companies with operations in the EU).
2. Conduct a gap analysis
   Review all existing sustainability practices, policies and data collection practices. Pinpoint missing data, incomplete processes and any areas requiring improvement, such as Scope 3 emissions tracking and human rights due diligence.
3. Develop a reporting strategy
   Focus on the most material sustainability issues for your business and stakeholders. Establish milestones that will enable you to prepare your first CSRD-compliant report before the first reporting year.
4. Establish robust data collection processes
   Use ESG reporting software to consolidate and manage data efficiently. Implement systems for gathering Scope 3 emissions and human rights data from suppliers. Use templates or frameworks to standardise data collection and make it verifiable and comparable.
5. Strengthen governance and internal expertise
   Train employees from across the company (e.g. finance, legal, sustainability and operational departments) on CSRD requirements and sustainable practices. Make sure sustainability is a Board-level priority that is regularly reviewed.
6. Align your data with the following frameworks and standards
   • EU taxonomy - identify eligible and aligned economic activities based on the EU taxonomy for sustainable activities
   • Climate standards - follow frameworks, such as the GHG Protocol, TCFD or Science-Based Targets Initiative (SBTi), for climate disclosures
   • Social standards - use standards, including GRI or the UN Guiding Principles on Business and Human Rights.
7. Involve external experts
   Partner with third party auditors for independent verification of your sustainability data and hire consultants to help conduct valuable gap analysis and roadmap exercises.

Data collection: 3 ways companies can guarantee robust data collection

Compliant data collection is a significant responsibility for organisations sector-wide. Spreadsheets may be a tried-and-tested method, but unfortunately, companies that use them can only get so far when fulfilling their CSRD reporting duties.

Fortunately, technological advances mean that dedicated software designed to simplify the process does now exist. Aggregating emissions data from multiple sources, the technology is capable of identifying reduction opportunities with the greatest impact and generating tailored automated reports.

CSRD reporting success is undoubtedly underpinned by investing in the right tools and systems that enables companies to:

1. Build a centralised data collection framework

This can be achieved by:

• Implementing ESG software - use platforms, such as Sphera, EcoVadis or Enablon to centralise data-gathering, track progress and ensure accuracy
• Integrating systems - connect existing systems (e.g. ERP, HR systems and procurement software) to ESG platforms for seamless data flow
• Using templates for manual data - where automation isn't possible, use standardised templates for collecting data from internal teams and suppliers.

2. Engage with internal teams

This can be achieved by:

• Enabling cross-functional collaboration - involve departments, such as finance, HR, legal, procurement and operations
• Establishing clear responsibilities - assign specific roles for collecting and verifying data
• Implementing training programmes - educate teams on the CSRD requirements and data accuracy best practices.

3. Address supply chain data (Scope 3 and social metrics)

Supply chain data, especially for Scope 3 emissions and human rights, can be challenging, but it can be tackled through:

• Supplier engagement - provide suppliers with guidelines and training on data reporting and standardise tools, such as the CDP Supply Chain Program for emissions data
• Collaborate for accuracy - partner with suppliers to improve data collection methods, including proxies for hard-to-measure areas
• Audit sampling - conduct audits of high risk suppliers to validate key data.

Evidencing CSRD compliance is challenging, but it isn't impossible. By developing a clear strategy and investing in CSRD software, companies can ensure compliance and significantly fast track their efforts now, and for many years to come.

More information

For more information about the CSRD and the implications for organisations, visit our dedicated Corporate Sustainability Reporting Directive Resource Hub, which includes a wealth of webinars and podcasts with our experts, FAQs, factsheets and more.