Applicable since January 1, 2024, the CSRD is on the lips of all European companies currently, who are wondering how to approach the subject. If you are concerned, you must publish an extra-financial report in accordance with the new directive, which must explain your environmental, social and governance (ESG) impacts.

By wanting to increase the ambitions of the NFRD, the CSRD provides a rigorous framework to follow in order to comply. However, this framework can be difficult to understand for businesses that are not used to doing business. Stop being overwhelmed by sustainability reporting, we describe the 5 key steps you need to take to achieve compliance.

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Step 1: Conduct a double materiality analysis

THEdouble materiality analysis, or matrix of double materiality, is a Mandatory exercise for all companies concerned by the CSRD. It allows you to determine the topics on which you will report. These themes, say Hardware, are the ESG issues on which your company has a significant impact, or those that generate a risk or a financial opportunity for your business: these are the famous IRO (Impact, Risk or Opportunity).

The double materiality analysis is divided into 3 main parts, as recommended by EFRAG [1]:

Understand your context

First of all, you must define a universe of issues specific to your situation. To do this, you need to put yourself back in your sectoral, geographic, commercial context, and in your value chain, to identify the Hot Spots, IRO generators.

At the end of this stage, you should have identified the universe of issues that concern your company, and the stakeholders associated with these issues.

Engaging with your stakeholders

Once your challenges have been identified, you must take into account the opinion of the stakeholders directly concerned by these issues. The aim is to Understand with them the extent of the impacts and risks in order to obtain an initial quantification, and to identify issues that would have been forgotten.

Quantifying IROs

Based on your discussions with your stakeholders, you can quantify the impacts, risks and opportunities on criteria requested by the CSRD : severity, scope, irremediability and probability. You can thus compare your challenges, and define your materiality thresholds to obtain a list of your material challenges.

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Step 2: Perform a gap analysis

Gap analysis makes it possible to draw up a list of actions to be carried out to respond to the CSRD. To do this, you can start by listing the CSRD requirements that correspond to the results of your dual materiality analysis. This list includes quantitative requirements (what are the CSRD KPIs to measure?) and qualitative (what are the things to explain in your sustainability report?).

Then you need to identify everything you have put in place or already formalized in terms of CSR. To help you, you can answer the questions:

• What documents have you already written?
• What are the indicators that you are already monitoring?
• What actions have you put in place?

With this overview, you can remove from your list of actions all the requirements that you meet thanks to your pre-existing content.

Finally, you need to make a compliance action plan about requirements that you don't already meet. It's time to realize how much work remains to be done before achieving compliance: what policies need to be formalized, what are the goals to set, and what are the KPIs to follow.

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Step 3: Collect data for CSRD indicators

After the two preliminary exercises - double materiality analysis and gap analysis, you should have a very clear idea of what you still need to do to comply, and in particular the List of indicators to be measured. You now need to collect the data needed to produce CSRD KPIs. This step can take time, as ESG data is scattered across departments, sites, or entities in your business.

The steps not to be missed:

• Establish where the data is stored : is it stored in a tool? does it have to be measured? is it owned by a particular team?
• Understand how to retrieve it, depending on where it is stored : can it be raised automatically? Do we have to go and retrieve it using a questionnaire? by sending documents?
• Collect data and calculate indicators : once the data is collected, it must be concatenated to calculate the KPIs. Prefer to equip yourself with an efficient information system to a more laborious Excel-type spreadsheet.

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Step 4: Meet the requirements of the CSRD

In addition to measuring quantitative metrics, the CSRD asks you to meet qualitative requirements. You will therefore necessarily have to go through an editorial phase to produce your sustainability reporting.

Narrative requirements are of several types, and will require more or less explanation on your part.

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Step 5: Audit and publish your sustainability report

Your CSRD report should be certified to a moderate level of assurance before it can be published. The certifying bodies are the Statutory Auditors (CAC) and the Independent Third-Party Organizations (ITOs) accredited by COFRAC. To do this, they must have undergone specific training; the sustainability visa. [2]

Once your sustainability report has been audited, it can be published. To comply with the law, your sustainability report must be published in your Universal Registration Document or Management Report, alongside your financial statements. It should be published in XHTML format, containing the XBRL tagging of your information. This format makes it easy to find your data within the report, and to be able to easily compare companies between them.

In the long term, Europe plans to create a platform for submitting reports from all companies, the European Single Access Point (ESAP), where it will be possible to compare the results of all companies directly.

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Conclusion

CSRD is a transversal exercise that requires companies to organize themselves in order to comply with regulations. To be implemented, CSRD requires going through 5 essential steps in order to achieve compliance:

1. Carry out your double materiality analysis
2. Understand what's left to be done with a gap analysis
3. Collecting data for the measurement of CSRD indicators
4. Meeting the narrative requirements of the CSRD
5. Audit and publish your sustainability report in the regulatory format

It is up to you to take advantage of these steps to adapt them as best as possible in the context of your activity. Do you need help to become compliant? At Kiosk, we have developed a tool specially to support you in carrying out your CSRD with complete peace of mind. Contact our team!

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Sources:

[1] The EFRAG double materiality analysis implementation guide

[2] These provisions were introduced in the transposition of the CSRD into French law.