Compliance with CSRD: the challenges and strategic benefits for business

Sustainability has evolved from being an optional consideration to an imperative for businesses worldwide. With new obligations such as the EU’s Corporate Sustainability Reporting Directive (CSRD), companies increasingly need to embrace sustainable practices and be able to report on their impact. If you haven’t come across CSRD before, take a look at our blog that explores the context of and reasons for CSRD.

Corporate sustainability is far from being a negative. The evidence is clear that growing consumer demand for ethically produced goods and services has already turned sustainability into a competitive edge for brands.

If the long-term viability of businesses is intrinsically linked to the health of the planet, sustainability is going to be essential for securing our future success. CSRD is being phased in from this year (reporting in 2025 for the year 2024). Who will be affected by these obligations, and what are the challenges and opportunities offered by corporate sustainability?

What is the CSRD implementation timeline?

CSRD is currently mandatory for larger organisations already subject to the Non-Financial Reporting Directive (NFRD), including larger listed firms (500+ employees), public interest entities, and banks or insurance firms.

From next year, large private companies meeting certain thresholds of turnover and employee numbers will be affected, followed the year after by public SMEs. Also falling within the scope of CSRD are non-EU companies that are listed or have subsidiaries or branches in the EU (again, under certain conditions).

Which EU companies are obliged to report?

What challenges does corporate sustainability reporting present?

This new reality for organisations is going to require competent people and the right systems. It’s a fledgling market, so the tools available to support the recording and reporting of data are still nascent. Compliance requires both time and capital; whether you choose to manage this in-house or outsource to consultants, you need to be thinking about your long-term solution for collecting, managing, and reporting on this vital data and make sure your processes are fit for purpose.

Eight benefits of corporate sustainability reporting

Challenges aside, what are the benefits? Sustainability reporting is far more than a box-ticking exercise. Smart businesses know that CSRD presents a range of opportunities, even for those not currently targeted by the directive. Whether you’re within the scope of CSRD or considering voluntary compliance, here are some potential advantages and benefits to consider.

1. CSRD turns data into a common language

CSRD means everyone is using a standardised reporting language. This doesn’t just make data more reliable; it also means it’s easier for anyone to compare sustainability information across different companies. Also, consider the many ways organisations could leverage this data beyond mere reporting if they viewed it as a valuable business asset.

2. Uncover new business opportunities

Preparing for CSRD will involve reviews, gap analysis, and strategy development – evaluating the organisation through the lens of people, process, and technology. The insights you gain in areas such as data strategy, availability and systems capabilities, and people and resourcing capabilities will power decision-making across the business.

3. Leverage sustainability data to stimulate innovation

The insights gained from sustainability data can drive positive change and creative solutions. By examining data related to environmental and social impacts, companies can uncover opportunities for innovation - developing greener products, enhancing operational efficiency, or finding new ways to address social issues.

4. Marketing messages you can stand over

Because CSRD is all about comparable data, you can incorporate Environmental, Social, and Governance (ESG) claims that are credible and substantiated in your marketing communications. This helps to build trust with consumers who are increasingly prioritising ethical and sustainable brands.

5. Attract investors and partners

There’s a strategic opportunity for organisations committed to tangible actions and results in environmental protection, social responsibility, and ethical governance practices. The enhanced market reputation you’ll gain with investors, customers, and other stakeholders can attract investment and forge partnerships that support long-term growth and impact.

6. Safeguard your brand and ensure long-term resilience

Strengthen your ability to withstand shocks by proactively assessing potential risks related to ESG and addressing them head-on to mitigate negative consequences such as reputational damage or regulatory sanctions. This strategic approach not only safeguards the brand's integrity but also fosters trust with stakeholders.

7. Better resource use creates a win-win scenario

Another benefit of adopting sustainable practices is the ability to streamline resource usage, cut waste, and lower expenses. This means making the most efficient use of resources while also reducing waste throughout operations. The opportunities to improve efficiency and reduce overheads will enhance profitability in the long run - a win-win scenario for both business and the planet.

8. Inspire and engage employees

Bringing employees into sustainability initiatives can improve morale, motivation, and productivity. By involving staff and encouraging their contributions, companies can tap a wealth of creativity, passion, and commitment to drive meaningful change. This inclusive approach is great for your employer brand and fosters a positive workplace culture built on shared values and collective action.

Sustainability reporting is a reality we should all prepare for

Reporting won’t happen on its own. Corporate sustainability reporting will take time, people, and money. Data collection and management will require new processes, workflows, and systems. This in turn is already driving demand for professionals with expertise in everything from data analysis to sustainability to compliance.

We’ll look at the roles that are emerging or transforming as a result of the new regulatory landscapes here in Europe and worldwide in a future blog, but it’s safe to say that few organisations already have the full complement of capabilities and knowledge required to collect and report on accurate and complete data as well as understand and act on the insights such data will provide.

This complex task is going to need expertise across the business. Building consensus, managing expectations, and addressing diverse stakeholder interests will require effective communication and engagement strategies. Those organisations that have already opted to report on ESG as part of their sustainability initiatives and corporate responsibility efforts have a head start. It’s up to the rest of us to catch up.