How to prepare your sustainability reporting according to CSRD

CSRD (Corporate Sustainability Reporting Directive) is the EU's new framework for sustainability reporting. It requires companies to report on how their operations impact and are impacted by the external environment in a sustainability context. Complying with these requirements takes resources, but the benefits are clear. Through reporting, companies can identify hidden risks and business opportunities. It also helps banks, investors, and customers make informed decisions about which companies to collaborate with.

What does the principle of double materiality mean?

CSRD uses a principle of double materiality. This means that companies need to analyze how their operations impact society and the environment (inside-out) and how external sustainability factors affect their business (outside-in). This is crucial to getting a complete picture of the company’s impact and risks, and it forms the basis for what needs to be reported.

How does CSRD improve sustainability communication?

Sustainability reporting has often been viewed as marketing in the past, but with CSRD, it becomes more fact-based. It’s not just about highlighting positive news but also about showing credibility. Companies that can combine hard facts with clear communication to their customers and stakeholders will be successful.

What new demands does CSRD place on management?

CSRD makes sustainability reporting a direct reflection of a company’s strategy. Management must assess how increased transparency and reporting could affect the company’s reputation. For instance, what happens if a company hasn’t set goals to reduce its climate impact? How will investors and customers react?

How are profitability and sustainability connected?

Profitability and sustainability are connected through trust. If a company is seen as irresponsible regarding environmental and social issues, its reputation and trust could be damaged, affecting profitability. Trust-related risks, however, can be identified and managed through effective sustainability work, for which CSRD provides clear guidance.

How can management be engaged in sustainability work?

CSRD requires companies to assess and report sustainability risks. To engage management, one can highlight that sustainability risks impact both the company’s reputation and long-term profitability. For example, management must determine whether working conditions in the company’s value chain are a significant issue and how failing to address such risks could negatively affect the company.

Will more companies invest in sustainability work due to CSRD?

Yes, the changes brought by CSRD are likely to drive more companies to improve their sustainability efforts. Knowledge of sustainability will increase, and with it, new opportunities for sustainable business development. Reporting will become more fact- and science-based than storytelling. This means companies must be transparent about their challenges and successes, creating credibility.

How will CSRD affect sustainability communication?

CSRD reduces the risk of greenwashing and greenhushing by structuring how companies report non-financial information. It makes it harder for companies to hide problems or exaggerate their sustainability efforts. This transparency gives stakeholders better insight into how companies truly work with sustainability.

What data do companies need to collect under CSRD?

The data required depends on the company’s analysis of what is material to their sustainability work. Examples of data include carbon emissions, resource flows related to the circular economy, and working conditions in the value chain.

What must a sustainability report contain according to CSRD?

The report must include information about the company’s governance, how sustainability is integrated into the business model, and how the company handles sustainability-related impacts. The aim is to increase transparency and provide insight into the company’s ability to contribute to the transition to a sustainable economy.

Do companies need to hire a consultant to meet CSRD requirements?

No, hiring a consultant is not a requirement. However, companies must ensure they meet the CSRD requirements while managing the potential risks associated with reporting.

How does a CSRD-compliant sustainability report differ from previous reports?

In the past, sustainability reports often focused on highlighting positive news. With CSRD, it is more about credibility and transparency. Companies must report both successes and challenges, based on hard facts and science, creating a more realistic and transparent sustainability effort.

What support does IVL offer companies preparing for CSRD reporting?

IVL has broad and deep expertise in various sustainability-related issues. We provide advice and support in interpreting and implementing legislation, conducting analyses, and developing strategy and goals. IVL’s solid competence in all environmental areas, such as climate, biodiversity, or circular business models, makes us a good partner for understanding a company’s impact and opportunities for development and innovation in depth.