How to solve the CSRD data collection problem at scale

CSRD is set to redefine corporate sustainability in the EU, setting out rigorous reporting standards that not all companies are ready for. Collecting and managing the vast amounts of data required — both internally and from every partner across the value chain — is a daunting prospect.

These detailed ESG (Environment, Social, and Governance) disclosures pose a significant challenge for companies at all levels of data maturity, and businesses need to find robust solutions to consolidate data that is difficult to measure or unify.

To help tackle this, we’ll be taking a look at the CSRD challenge from a data perspective, analysing the challenges it presents along with key strategies to prepare for compliance.

The scale of the CSRD challenge

The Corporate Sustainability Reporting Directive (CSRD) legislation will significantly expand the reporting requirements of all companies doing business in the EU. Organisations will be mandated to disclose comprehensive ESG data both from internal operations and external partners, such as Scope 3 emissions.

The sheer magnitude of these requirements is a major issue. Scope 3 includes categories of emissions like purchased goods and services, business travel, commuting employees, waste disposal, and the after-POS use of certain products.

Collecting all this data without the right infrastructure is extremely time-consuming and making it usable for reporting needs is a whole other challenge. This is compounded by the fact that stakeholders both upstream and downstream will often have wildly different levels of data maturity.

To gather insights about indirect emissions from across the whole value chain, you need extensive data from multiple third-party vendors who may be using different collection methods, data platforms, and reporting standards.

Is it time to build a data lake?

For tech teams, creating a data lake to store this structured and unstructured data at scale is a natural solution to the CSRD problem. A properly set up lake allows you to streamline data integration, facilitate data analysis, and provide a solid foundation for compliant ESG or CSRD reporting.

The right data lake solution enables:

• Integration of various platforms. A well-implemented data lake will allow for smooth integrations of data from multiple streams. This interoperability is essential when trying to consolidate data from ERP, CRM, and supply chain management systems into a unified dataset.
  
• Data consolidation. With data in a unified format, a data lake allows for much easier analysis and reporting. This consolidation means that unclean data from different sources is standardised and ready for reporting use.
  
• Access to Scope 3 data. A well-designed data lake allows for the collection and storage of Scope 3 emissions data from external sources, allowing you to meet CSRD requirements more easily. The lake will need to aggregate data from multiple sources, for example: supplier databases, logistics logs, and utility bills.
  
• Front-end report creation. Some data lakes can take the admin and time out of generating reports with built-in abilities to generate insightful and compliant ESG reports. This can be bolstered with integration to other BI platforms to enable real-time dashboards while automating reporting.

It’s also important to note that the continuously changing nature of regulatory requirements means whichever data lake solution you choose needs to be flexible and continuously updated.

In-house or third-party solution?

So, data lakes seem to be the answer to a huge challenge of CSRD reporting, but building and maintaining one is an entirely different can of worms.

You’ll need to consider costs, resources, and the impact of an in-house solution, including the significant time investment and the need for specialist expertise.

Even if your in-house team has all of these in abundance, the changing nature of requirements makes CSRD reporting a continuous effort, not a one-and-done undertaking.

Handling the continuous influx of data and managing requests from multiple departments (both internal and external) can quickly overwhelm teams. Plus recruiting and retaining the specialised talent to manage the data lake presents a significant challenge in itself.

Third-party solutions, on the other hand, offer a more streamlined approach, leveraging specialist expertise without you needing to hire for it. They also use frameworks that are pre-built with ESG compliance in mind.

While these solutions are designed to scale with regulatory changes and can often be tailored to your specific industry needs, it’s important to be wary of static solutions with expensive upfront costs.

Solutions that aren’t properly maintained or continuously updated can leave you with inadequate software down the line as the reporting needs evolve. This makes providers, like 5Y, who use a subscription model a better alternative.

What to look for in a solution

With the growing role of business intelligence, there’s plenty of choice on the market for data lake solutions. However, not all of these are built with ESG in mind, so look out for the following features when shopping around:

• Integration. The solution should integrate seamlessly with your existing systems like ERP, HR, and supply chain management platforms. This reduces manual entry and the risk of errors.
• Scalability. Look for a solution that can scale as data volumes grow, regulations change, and reporting needs evolve. Additionally, a solution should accommodate increasing inputs without compromising performance.
• No proprietary software. Avoid vendor lock-in by choosing a platform that’s built on open standards like Microsoft Azure. This means you can switch vendors without disrupting the entire ecosystem or integrate new tools without being constrained by a proprietary solution.
• Self-service capabilities. While plenty of data collection can be automated, some level of self-service and manual entry will always be present. Look for self-service features like mobile and desktop apps, reducing the support burden on your tech teams. Self-service also lets users at multiple levels generate reports, analyse data, and use dashboards independently without specialist skills.
• Augmented data collection. Leading modern platforms can enhance manual collection with AI capabilities, like extracting details on Km or KVA from invoices or bills. This reduces manual effort and ensures all relevant data is automatically captured.
• Out-of-the-box reporting. General data lake solutions work well in some applications, but for CSRD a tailored solution with pre-built reporting templates streamlines processes massively. These templates can provide a huge head start in meeting compliance requirements and allow you to focus on analysis over formatting and admin.

How 5Y solves ESG data collection

5Y’s unified data platform addresses all of these points and more, tackling the CSRD data challenge at scale with a comprehensive solution that works with your existing infrastructure.

• Streamlined implementation. 5Y is designed for quick deployment, built on the Microsoft Azure architecture you can be up and running 50% faster due to complete interoperability with existing systems.
• No vendor lock-in. Since 5Y is built on open standards, you don’t need to rely on proprietary software and restrictive integrations. 5Y can be rapidly tailored to your unique needs.
• Prebuilt templates and analytics. Speed up reporting with CSRD-specific premade templates and 80% of your BI analytics ready right out of the box.
• Comprehensive data capture. The platform automatically captures ESG data from multiple streams including transactional data from core applications. 5Y can also use AI to auto-collect invoice information like energy and mileage.
• Pre-built integrations. 5Y offers pre-built integrations with both your existing tools and an extensive list of other leading business solutions. This eliminates the need for custom development and supercharges your integration process.
• Highly scalable. 5Y is always evolving and scales continuously with regulatory changes or developing reporting requirements. The solution is built from the ground up with CSRD compliance in mind combining expert input from both data analysts and sustainability experts.
• Subscription model. With no expensive upfront costs, you simply subscribe to the level of service you require and enjoy a powerful platform with constant updates and adjustments to meet business needs.

Enter the next phase of data maturity with 5Y

Companies across countless industries are in the planning stage of how they’re going to tackle the new CSRD reporting requirements.

What unites them all is the need for a robust, scalable solution that can handle the complex and evolving nature of ESG.

Take the stress out of compliance and get in touch today if you’re looking for an affordable, powerful platform that offers an all-in-one solution to data collection and ESG reporting.