Three Rs for successful implementation - Part 2: Resources
As discussed in the first part, implementing the Corporate Sustainability Reporting Directive (CSRD) requires engagement and in most organizations also new processes and practices. In this part we dive into the topic required to enable the above – resources. For simplification we’ll leave the two constant factors, money, and time, out of the equation and focus only on two areas: systems and people.
Every organization starts its CSRD implementation journey from the same point, the current situation. A company-specific double materiality assessment and the rules set by the European Sustainability Reporting Standards (ESRS) form the foundation for the new sustainability report. As a second step a gap analysis is needed to reflect the difference between the existing report and the new requirements.
The gap analysis reveals development areas, which should be further examined with the most practical questions. Where do we get the missing data? How do we collect it? Who is responsible for it? The CFOs should be included in this discussion, since financial professionals already work with large amounts of information and have systems and processes in place for data gathering, processing, and reporting. Most organizations have a concern-wide reporting structure in place, which includes necessary subsidiaries also from the CSRD’s perspective.
In addition to the regularly used cross-company communication channels, finance departments’ have different reporting systems in place, some of which could be used for sustainability reporting as well. Not to name any specific ones here, but many financial reporting system providers have already integrated ESG to their offering. For some organizations keeping the ESG data separate makes the most sense, and some manage to still run everything (even financial consolidation) in Excel. The optimal solution for sustainability data gathering and processing may vary between organizations, but the need for some kind of linkage with financial reporting does not anymore. At the latest the compulsory audit included in CSRD requires efficient collaboration between finance and sustainability departments. Ensuring sufficient validation, control, and documentation from early on eases the workload later, and the wheel does not need to be fully reinvented.
The previously mentioned gap analysis should also include people. The ongoing change is already showing in the recruitment section as several companies are looking for ESG Controllers or other data-driven new hires to achieve their CSRD compliance. However, in this hurry to fulfil the new requirements the CFOs and other decision-makers should take a step back and consider the long-term plan for sustainability reporting. Presumably the early implementation phase of CSRD with different analysis and process establishment is the period when additional resources are needed the most. Another solution for a permanent hire could be for example Interim ESG Controller, who can support the development and build a solid foundation for the existing team to take over.
Another factor to consider for long-term is collaboration, which only increases with the new legislation. In addition to the extensive reporting, CSRD also requires strategic work in terms of targets and KPIs, risk management and stakeholder engagement. Sustainability will slowly integrate not only to the finance departments, but throughout the whole organization. Therefore, the consideration of new resources, both systems and people, requires genuine cross-departmental collaboration.
Written by
Aura Koikkalainen
ESG & Financial Consultant
+358 405730723
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