Sustainability reporting transforms business operations

Companies are currently undergoing significant changes related to sustainability reporting, accounting practices, and annual reports. That’s because the EU’s Corporate Sustainability Reporting Directive (CSRD) came into force in spring 2022.

This is a transitional period in which companies are urgently adapting to upcoming changes. Elevating sustainability reporting alongside financial reporting in financial statements represents a turning point.

The change brings sustainability data collection and accuracy, the systems used, resourcing, and adequate expertise to the agendas of corporate boards. When the board approves the financial statements with their signature, their responsibility extends to the quality and accuracy of sustainability data as well. The information in the sustainability report is verified during the audit using audit assurance standards.

In this article, I have compiled issues that are currently being discussed in companies preparing for reporting. Reporting obligations will come into effect gradually, but due to supply chains and market pressure, also SMEs have started preparing for sustainability reporting.

Accuracy and correctness of data

One of the key challenges during the transition period is ensuring the accuracy of sustainability data. This is precisely why, while financial figures undergo rigorous auditing, auditing firms conduct what is known as limited assurance on sustainability data.

Especially in emission calculations, the available emission factors may be based on global averages, which may not accurately reflect a company’s emissions. Initially, this may suffice according to the GHG Protocol. However, data quality should improve over time as actors in the supply chain are also able to provide information

💡 Familiarize yourself with the use of emission factors.

From the perspective of sustainability report assurance, it is important to describe in the report:

• what emission factors (modeling year and source) have been used and why
• what has been measured and why
• what has been disregarded and why.

💡 Learn more about ensuring transparency in carbon data.

The role of the sustainability function in transition

As mentioned earlier, responsibility is increasingly shifting to the agenda of corporate boards. At the same time, sustainability reporting is becoming more intertwined with financial reporting. This trend leads sustainability functions to come under the oversight of the finance department.

In the future, the Chief Financial Officer will be at the forefront as the person responsible for corporate sustainability, taking responsibility for compliance with sustainability reporting obligations.

This means that the roles of sustainability directors and teams are also evolving. Teams that were primarily focused on data handling in the past can now focus on implementing sustainability measures and collaborating with stakeholders in the value chain.

Digital solutions to facilitate reporting

Simultaneously with these changes, there is a significant shift towards digital calculation methods and tools. Emission calculations, which were typically outsourced to external consultants in the past, are now being brought in-house and streamlined through digital platforms.

Since reporting needs to be done annually, project-based work is no longer feasible as it requires time and money. Transitioning to digital solutions increases efficiency, ensures data quality and transparency, and brings cost savings.

These changes can be seen as challenges or opportunities. What is certain is that sustainability reporting will change the daily operations of companies in many ways. With good preparation when the reporting obligation falls on one’s own shoulders, processes and practices are ready and tested. Perhaps we are already at the point where ESG issues are at the core of the strategy. Tools and data management processes are in place, and time has been freed up from reporting for concrete actions for sustainable development!