The introduction of the Corporate Sustainability Reporting Directive (CSRD) has spurred a range of responses from early adopters, particularly around the practice of double materiality assessment (DMA). Recent studies from the University of Cologne, We Mean Business Coalition, PwC, and EFRAG offer valuable insights into how these early movers are navigating the new requirements. Here’s a summary of the key findings:
Objective vs. Subjective Approaches
A major shift observed is the move from subjective, judgment-based materiality assessments to more objective, evidence-based methods. Companies are increasingly relying on internal data, expert insights, and structured processes such as interviews and workshops, as opposed to generic surveys.
Quantifying Impacts, Risks and Opportunities
While there’s a clear intent to quantify impacts and risks, few companies have successfully done so. Only 4% of firms used a quantitative approach for impact assessment, and 8% did so for financial perspectives.
Source: CSRD Materiality Analysis-Early Adopter Insights
Value Chain Complexity
Integrating value chain information remains challenging. The PwC Global CSRD Survey highlights that 57% of respondents see value chain complexity as a major obstacle. Only 25% of firms classified IROs along their value chains, as required by ESRS.
Key Topics and Reporting
Climate change and workforce issues are universally recognized as material topics. Confidence in reporting on these is high, with 94% and 96% of firms, respectively, feeling capable of meeting the requirements. However, some companies struggle with understanding information materiality, leading to excessive reporting of non-essential data.
Source: CSRD Materiality Analysis- Early Adopter Insights
Entity-Specific Matters
Cybersecurity is a prominent entity-specific issue, alongside data protection and product safety. Over half of the early adopters identified cybersecurity as a key concern.
Cross-Functional Effort
CSRD implementation is notably cross-functional. Beyond Sustainability and Finance departments, Risk Management, HR, and Internal Controls are often involved. This reflects the broad scope of effective ESG reporting.
Source: PwC’s Global CSRD Survey 2024 The promise and reality of CSRD reporting
IT and Data Challenges
A significant hurdle is data quality and availability. Despite efforts to improve ESG data controls, 74% of companies still rely on spreadsheets for reporting. A majority (85%) recognize the need for IT transformation to better handle CSRD requirements.
Find out more about how these early adopters’ insights apply to the complex and evolving landscape of CSRD reporting: https://www.csrdsoftware.com/post/csrd-early-adopter-meta-analysis
