Demystifying ESG reporting, ensuring CSRD compliance

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On 27th March 2024 ECG held our first webinar on ESG (Environmental, Social & Governance) reporting and CSRD compliance for ECG members. The webinar served as a gateway to information from ESG Compliance experts Mary Foley of Enhesa, who is also the Forbes columnist on ESG issues, and Robert Adamczyk of the EBRD, who is also on the EFRAG board. ECG member companies Adampol and ICO Terminals offered their key ESG managers to cross question the experts on the best ways forward, to begin the ESG CSRD compliance process—because we all have to do it.  

The writing on the wall is clear, you and your company are responsible for your actions. It is your job, as a person of responsibility, to build a responsible place to work. A place that adheres to common standards that ensure both people and planet are respected. And while these common standards seem pretty much common sense, the need for an actual framework to report the metrics of complying has come about due to the sheer volume of ‘greenwashing’ that takes place. So, to be clear, you will have to comply with the EU Corporate Social Responsibility Directive otherwise known as CSRD.

From 1st January this year (2024), publicly listed companies with over 500 employees need to start reporting under the CSRD, with the report due in 2025. From 1st January 2025, companies with more than 250 employees or turnover of Euro 40 million, need to report under the CSRD framework with reports due in 2026. And from 1st January 2026 all small & medium enterprises (SMEs), but not micro-enterprises, need to start CSRD reporting with reports due in 2027.

So how does one start? The best starting point is to look at the existing metrics used for current reports under the company Environment, Health & Safety (EHS). Many larger companies will also have been used to completing the Non-Financial Reporting Directive (NFRD), which is basically the pre-emptive policy to the CSRD. Use the people power you have in your EHS reporting line and gauge the strength of the metrics and data used in the reports. Start baselining and target setting by checking the Sustainability Accounting Standards Board (SSAB). You need about 1,000 data points so begin by listing the ones you have already.

The Commission has worked hard to ensure that there is a high level of alignment between the European Sustainability Reporting Standards (ESRS) and existing sustainability standards such as those from the ISSB and GRI. The CSRD is not a trap. It’s simply a way for us all to play our part in protecting our people and planet.

“Sustainability and ESG has evolved very quickly and as such most companies are at different stages in their maturity. Those that have been reporting via Sustainability/ESG/Corporate Responsibility Reports will have made a good start,” says Mary Foley, Expert Services Director at Enhesa in conversation with ECG-the Association of European Vehicle Logistics.

Indeed, Fanni Arvai, Innovation & Sustainability Manager, ICO Terminals states that they have created a targeted division for this. “We have introduced a ‘Sustainability’ department 1 year ago,” says Arvai.

Companies often have beautifully produced ESG reports, but are these CSRD compliant?

“It depends on what reporting frameworks they have been reporting against and whether or not they have had these reports independently assured. Those Reports which do not have either element may lack the rigour required to meet the requirements of the CSRD, ” states Foley.

Arvai agrees. Existing ESG reporting structure needs to be realigned for compliance with CSRD. “No, our strategy is still under making, which is also related to the CSRD materiality analysis. We already have a draft but will realign once there is clarity on CSRD.” 

Robert Adamczyk, ESG Advisor at the European Bank for Reconstruction and Development (EBRD) discussed these initial steps with ECG. The first check, says Adamczyk, would be to check whether the existing ESG reports have been signed off by auditors. And who would these be? “External auditors,” he says.

Under the guidance of the European Financial Reporting Advisory Group (EFRAG): The European Sustainability Reporting Standards (ESRS) require that the sustainability statement includes sustainability information related to material impacts, risks and opportunities (IROs) identified through a materiality assessment (MA) process that applies the principles of double materiality.

So what is Double Materiality? EFRAG states that: Double materiality covers both impact and financial materiality. Impact materiality pertains to the material information about the undertaking’s impacts on people or environment related to a sustainability matter; financial materiality pertains to the material information about risks and opportunities related to a sustainability matter.

Understanding the concept of materiality is crucial.

“The very first step is to carry out a Materiality Assessment as everything else flows from that requirement. What they need to report on is based on the results of this Assessment. If their previous reports have not included this step then I’m afraid that they will not meet the requirements of the CSRD,” says Foley.

And so what about once the ESG report has been completed under what you, and those in your company feel meets the CSRD requirements. Who checks this?

“The requirement for Independent Assurance allows the company to select their own Assurer. Section 54 of the CSRD will give you an idea of the bodies which can provide this service and how they will be regulated,” explains Foley.

Begin the process of your ESG compliance now, it’s simply a gauge to assure that the future of the planet and its people are protected; and by completing the tedious data gathering and verification of your company targets and processes, you will actually be certain you are adhering to sustainable goals, and you are doing your bit for tomorrow’s world.

“Yes, we have started work on preparation and publication of our ESG report for 2022 and 2023. We would like to do it in accordance with CSRD and ESRS. It’s a real challenge,” says Michał Kujawski, Communication Manager, Adampol S.A and responsible now for the ESG report.

When asked what the consequences are for those that do not meet CSRD requirements, EBRD’s Adamczyk said “The same as mis-representing financial data. So, internally assign someone to be responsible and carry out a preliminary assessment, and then retain an advisor.”

Key takeaways from the webinar are that 90% of the data is probably already there, currently in different reports and in different areas of expertise in your company. The EU ESG mandate – the CSRD –  aims  to pull all this together, where a company can have ownership of the data, and where the data is part of a pathway to embed sustainability into the corporate mindset. You are planning an actionable pathway to sustainable goals. Use your ‘green-wishing’ – your wishful thinking of how your company could enhance itself in the future – with achievable annual goals, given weightings such that you can measure the changes and develop viable data for your ESG report.

We at ECG would like to thank all those that participated in the webinar, as an expert, a speaker or as a listener. Going forward we would like to invite all ECG members to put forward the person responsible for your ESG reporting strategy so we can direct future communications on this subject to them and help address key issues in CSRD compliance.