CSRD compliance: 7 questions the C-Suite need to answer

The Corporate Sustainability Reporting Directive (CSRD) is set to drastically change the ESG reporting requirements of any company doing business in the EU.

For leadership, this not only represents a challenge, but an opportunity to drive their company into the future while enhancing transparency and social responsibility.

Meeting the challenge of CSRD head-on not only requires a thorough understanding of requirements, but an embracing of new processes, tools, and perspectives.

To help you navigate this paradigm shift, we’ve compiled a helpful list of seven questions you should be asking designed to test whether your business is truly ready for the future of ESG and the reporting that has become mandatory.

1. Do you know your timelines?

It’s important to understand the timelines for CSRD compliance to effectively plan and implement your approach. The directive follows a phased implementation, starting with large public interest entities (PIEs) already subject to the Non-Financial Reporting Directive (NFRD), which will need to report in 2025 for the 2024 financial year.

These organisations, including EU-based and non-EU companies with significant operations in the EU, must comply with CSRD requirements if they meet the specified criteria. It’s important to note that multinational companies will need to report ESG data covering their entire global operations, not just their EU-based activities.

The first wave of companies required to report includes entities that:

• Have over 500 employees, and
• Meet financial thresholds of either €40 million in net turnover or €20 million in total assets.
  

From 2026 (covering the 2025 financial year), the scope will expand to all large companies, defined as those meeting two out of three criteria:

• More than 250 employees,
• Net turnover exceeding €40 million,
• Total assets of €20 million or more.

Additionally, listed small and medium-sized enterprises (SMEs) will also be required to report by 2027, with an opt-out option available until 2028.

Failing to comply with CSRD reporting requirements within the specified timelines could result in substantial fines and reputational risks to your company.

As we’ll explore throughout this article, the scope of corporate sustainability reporting is vast. Unfortunately, many companies don’t have the appropriate infrastructure, systems, and processes to efficiently prepare reports, relying on inefficient manual data collection and preparation methods.

This, combined with difficulties in obtaining accurate external data from complex supply chains where stakeholders rely on different platforms and frameworks, means it’s important to get ahead of the curve. Early action not only ensures you’ll be compliant when rules come into effect but also allows you to position your company as a leader in sustainability practices.

2. Do you know your reporting requirements?

The scope of CSRD will significantly expand the breadth of sustainability reporting in comparison to older regulations. Not only do companies need to report on their own internal data, but also on all ESG sustainability matters impacting the business or impacted by the business.

This includes comprehensive data from all stakeholders in the supply chain, making traditional methods of reporting difficult. 

It’s important to note these disclosures will need to adhere to European Sustainability Reporting Standards (ESRS), which detail specific metrics and frameworks for CSRD reporting.

Sustainability matters you’ll need to submit reports on include:

• Environmental impact. This includes greenhouse gas emissions, energy consumption, water use, and impact on the biodiversity of operations areas.
• Social responsibility. Including recruitment and labour practices, human rights policies, diversity initiatives, and wider community impact.
• Governance practices. This includes leadership structure, board diversity, anti-corruption and accountability measures, and compliance policies.
  

Different sectors will be impacted in different ways by this legislation. You can find a useful guide on what factors you’re likely to need data on based on industry using the SASB materiality map.

It’s also important to note that these reports will need to be independently verified by a third party. These third-party auditors will need to be approved at a national level by the EU member state and serve to promote transparency by acting as a guard against greenwashing or misrepresentation of data.

3. Who has ownership?

Once you understand your reporting requirements, it’s crucial to clearly define which departments and team members have responsibility for each stage of the process since reported data spans multiple departments.

While dedicated sustainability officers or CSR departments typically lead these efforts, the scope of ESG data required means involvement from procurement, finance, business intelligence, HR, and leadership.

This poses an issue as different departments may have their own processes and systems for recording data. It also means that strong communication from the outset is key, both interdepartmentally and with external suppliers on the procurement side.

It’s a good idea to set up an ESG lead to coordinate the process and ensure accountability. However, to avoid needing to hire several people to manage data and organise reporting workflows, it’s also essential to set them up with the right tools. A data platform like 5Y means they can track ESG metrics in real time and make adjustments in an agile way.

4. Do you have access to the data you need?

Accessing the required data for ESG reporting can be difficult; your team will likely need to manage fragmented insights from internal and external sources and tackle non-compatible frameworks or reporting methods.

Different departments and business functions will often use their own data platforms and reporting methods. Even if this data is held centrally by business intelligence it often won’t be in a useful format for specific ESG reporting purposes.

There’s also the issue of external data. Remember, you’ll need comprehensive information from external partners throughout the full supply chain. With everybody using different reporting or recording methods, this can get messy quickly. That’s before the challenge of having to manually chase and obtain this data, which can spiral and start to eat into valuable time for ESG leads or procurement.

Even when your team has figured out data consolidation, you’re still likely to face a lot of manual data entry, leading to inaccurate or incomplete silos of data. With the complex nature of CSRD reporting, the required information needs inputting, cleaning, and presenting in a unified way.

For these reasons, it’s important that whatever platform you use is fully interoperable with ERP, HR, and supply chain management systems. It’s also a good idea to ensure it’s user-friendly and can be used by stakeholders at all levels while leveraging automation to reduce admin and improve accuracy.

5. What’s the impact on your resources?

Complying with CSRD legislation can place significant strain on your resources, especially if you need to establish new teams, invest in multiple new technologies, or hire expensive sustainability and/or compliance consultants.

With how comprehensive the new requirements are, the inefficient collection and preparation of reports is likely to significantly impact workloads and put strain on existing teams. What’s more, the nature of CSRD means that preparing a report isn’t a one-and-done yearly task. It requires continuous improvement.

With these unavoidable overheads in mind, it’s absolutely crucial to establish a reporting process that is as cost-effective as possible with a data platform that streamlines the process.

6. Can you automate reporting?

The main way to save time and reduce costs when staying compliant with CSRD legislation is to automate your sustainability reporting.

Manual collection leads to fragmented data spread across multiple systems, creating silos that make compiling a report time-consuming, costly, and inaccurate. This takes vital team members away from more strategic revenue-generating activities.

Automation mitigates these challenges by streamlining the entire reporting process. It automatically collects data and displays detailed dashboards for real-time analysis.

Some solutions are also created specifically with ESG in mind, allowing you to pull reports straight from the software in the right format to remain compliant. In this way, solutions like 5Y completely transform the reporting process by automatically cleansing and standardising data.

7. Can you evidence improvement(s) from your last report?

Continuous improvement is a core tenant of CSRD. So not only will you need to report on key metrics, but you’ll need to show that you’re taking action to address any problem areas.

This might mean including evidence you’ve changed recruitment practices to address hiring diversity or are working with greener suppliers, for example.

Understanding which areas to focus on will require input from stakeholders at all levels, including staff, partners, shareholders, and the wider community.

Then tracking progress towards these targets requires a robust monitoring system along with input from experts on how strategies can be refined to deliver the best results.

This is another reason why using a dedicated reporting solution is preferred as you’ll be able to compile comparative reports to clearly evidence year-on-year improvement.

CSRD: Get ahead of the curve

Preparing for compliance with the new CSRD regulations will require a lot of time. However, with the right system in place, you can prepare ahead of the curve, stay efficient, and ensure minimal impact on business operations.

5Y is a comprehensive solution for ESG and CSRD reporting that works with your existing software and is designed from the ground up to help you save time with automation.

With 80% of your BI analytics ready out of the box, 5Y can be implemented twice as fast as competing solutions while halving data engineering costs.

Get in touch to discover how 5Y can empower your organisation to remain compliant, help you avoid costly fees, and unlock true data-driven ESG decision-making.