Enda Colfer from Anthesis Group explains how your business should best prepare for the evolving sustainability reporting landscape as part of Europe’s Green Deal.
The sustainability reporting landscape is rapidly changing.
As the discussion on mandatory reporting intensifies, many businesses in Ireland may be feeling overwhelmed with what is coming their way in 2024.
“It is important that Irish businesses, whether in scope or not, begin thinking of the ways that they can best prepare for what is just down the road”
Here is a breakdown of the key elements that Irish businesses should be aware of and ways they can start to prepare as we embark on the new era of sustainability reporting.
Breakdown of Green Deal regulations
This ever-evolving landscape stems from the EU and its Green Deal. The Corporate Sustainability Reporting Directive (CSRD) was first adopted back in November 2022 to introduce more detailed reporting requirements for companies.
The CSRD sets the legal framework and reporting obligations for businesses in Europe. It aims to standardize sustainability reporting, making it more uniform and facilitating comparison between companies. Although daunting, this regulation is a landmark one and brings with it many benefits that will positively impact our journey to carbon neutrality.
It seeks to ensure that your business’ sustainability information is of high quality and enables stakeholders such as investors and consumers to make informed decisions. Overall, it will help businesses in Ireland and abroad to identify and address sustainability impacts, risks and opportunities, while also improving the management of their ESG concerns.
Interlinked with this legal framework is the European Sustainability Reporting Standards, (ESRS). The ESRS provides the roadmap for businesses to ensure CSRD compliance. It provides a structured framework for reporting and covers a range of environmental, social and governance aspects of a business. It outlines how and what information, including ESG metrics companies need to report.
The framework comprises two cross cutting standards called ESRS 1 and 2 and ten topical standards that cover areas across environmental, social and governance factors. The ESRS is designed to ensure that sustainability reporting is accurate, consistent and comparable across the EU. Currently it aligns with existing reporting frameworks such as the Global Reporting Initiative (GRI) with the expectation that more frameworks will align in the future.
Come 2024, large Irish companies – those who meet specific criteria of a €20 m balance sheet, €40m turnover and 250 employees – are in scope of the CSRD.
It is important that Irish businesses, whether in scope or not, begin thinking of the ways that they can best prepare for what is just down the road.
What Irish business should be thinking of ahead of CSRD
A big component of complying with the CSRD is completing a double materiality assessment to identify the sustainability matters that are material to their company.
The concept of “double materiality” refers to how information disclosed by a company can be material both in terms of its implications for the company’s financial value, as well as the company’s impact on the world at large. It ensures companies consider how their decisions will affect their bottom line but also how they will affect society and the environment.
Double materiality is important as it can help companies identify and manage risks, identify opportunities and build trust with stakeholders.
Carrying out a double materiality assessment as soon as possible is one of the greatest ways that a business can prepare for the demands of the CSRD and ESRS requirements. As well as helping the company become compliant when needed, it provides a competitive advantage for the business and makes the company more desirable to investors and other stakeholders.
Another important thing to consider, particularly from a small business or SME standpoint, is the value chains that your business may be part of.
Ireland is made up of over 300,000 SMEs who provide high quality products and services to large corporations across the globe. More than likely these larger businesses will be in scope in the near future and will be reaching out to their own value chains to help inform their own CSRD reporting, increasing the pressure for smaller businesses to align themselves with the directive sooner than expected.
Being aware of your own place in a company’s value chain and what you have to offer is imperative to prepare for their demands in the near future. Addressing your own materiality as soon as possible will help your business stay ahead of the game.
Support is there if needed
This journey can present many challenges and obstacles for businesses who may be starting this journey for the first time. Businesses may feel alone, at a loss for where to start or confused by the large amounts of overwhelming information out there. It is important to remember that the CSRD will affect every business in different ways and there is plenty of support out there to guide you through what may be the unknown for many.
Businesses might be worried about the financial burden this may inflict on their operations. Within Ireland there is significant funding available through the Green Transition Fund for businesses to assist them on this journey.
If you are looking to make a start with your CSRD journey, Ireland has a healthy and thriving landscape of sustainability experts who are ready to lend a helping hand to assure that you reap the benefits that the CSRD will present. The Anthesis website has a Regulations Hub which outlines all the regulations discussed as well as others such as SFDR, TCFD, and CBAM.
CSRD is only the start of this evolving reporting landscape. Other regulations such as the Corporate Sustainability Due Diligence Standard and others are in the works and will be coming down the pipeline in 2024.
What is important to remember is that these regulations will raise the bar and will provide the opportunity for businesses to strive and show their true potential to become leaders as they transition towards greener business models and heighten their sustainable performance.