Getting ahead of ESG reporting requirements

In the European Union, Environmental, Social and Governance (ESG) reporting is a regulatory requirement for businesses operating in Europe. The Corporate Sustainability Reporting Directive (CSRD) is set to expand ESG reporting requirements, impacting tens of thousands of companies. This shift is part of a broader effort, read: the European Green Deal, to enhance corporate transparency and accountability.

For many organizations, aligning with these requirements can feel overwhelming. This blog, in line with our whitepaper, explores the key stages of preparing for ESG reporting, the role of data and the critical deadlines every company should be aware of.

AUTHOR – Acumen

Preparation: Understanding the need for ESG reporting

Before diving into the technical requirements of ESG reporting, companies must first recognize its strategic importance. ESG is no longer optional, it’s becoming essential for accessing capital, maintaining reputational standing, and ensuring long-term viability in a world increasingly focused on sustainable practices. The first step is to understand the core components of ESG and how they apply to your organization.

• Assessing current practices: It’s crucial to evaluate where your company stands on ESG issues. Are there existing sustainability practices that can be leveraged, or are you starting from scratch? Understanding this will shape the approach and tools you need to adopt.

• Identifying key ESG metrics: Depending on your industry and size, different metrics will matter more to investors, regulators, and other stakeholders. Identifying and prioritizing the right data points is vital to make your reporting accurate and impactful. Key metrics can be greenhouse gas emissions, energy consumption, water usage, employee diversity and inclusion, health and safety, board diversity, risk management and many more.

• Leveraging technology: ESG reporting requires significant data collection and analysis. Utilizing data integration and governance frameworks can help streamline the process, ensuring that the data is not only accurate but also actionable.

Managing data: Building a robust infrastructure

Once a company has established why ESG is critical to its operations, the next step is implementing a strong data infrastructure to support ESG reporting. Many companies struggle here, as ESG reporting often involves pulling data from a wide range of sources, including operations, HR, supply chains and financial departments.

• Data collection and management: ESG data is extensive and must be managed efficiently. Companies need to create a strategy for collecting, storing and organizing data. Ensuring data integrity and consistency across departments is crucial for a cohesive report.

• Data visualization and reporting: Once the data is collected, it must be communicated effectively. Data visualization tools and dashboards can help companies clearly present their ESG performance to stakeholders.

• Scenario planning and forecasting: Beyond historical data, it’s essential to incorporate forecasting models into your ESG strategy. Predictive analytics can help companies prepare for future regulatory changes and stakeholder demands, making your reporting future-proof.

By identifying key ESG metrics early, your business can not only stay ahead of regulations but also unlock strategic opportunities for growth and innovation.

ESG reporting timeline:
The most important deadlines

The timeline for ESG reporting is approaching fast, especially for companies in the European Union under the new CSRD guidelines. Depending on the size and structure of your organization, the deadlines for compliance may vary. Here’s a breakdown of the critical dates:

• 2024: Large public-interest entities (PIEs) with over 500 employees, who already reported under the Non-Financial Reporting Directive (NFRD), must comply with the new CSRD guidelines. These companies need to start reporting alongside their financial disclosures as of fiscal year 2024.

• 2025: Larger companies that meet two of the following criteria: having over 250 employees, a net turnover exceeding €50 million or total assets surpassing €25 million, must start ESG reporting in line with CSRD standards. This wave will capture many businesses previously not obligated to provide such comprehensive data.

• 2026: Smaller entities, such as listed small and medium-sized enterprises (SMEs), will have to report under CSRD starting from the fiscal year 2026. Although they have a bit more time, it is essential for SMEs to start their ESG journey now to ensure full readiness when the deadline approaches.

Why this timeline matters: With these deadlines on the horizon, companies that haven’t yet started aligning with ESG standards face significant challenges. Starting early provides the chance to develop comprehensive data systems, integrate ESG into strategic planning and avoid the rush that could lead to poor reporting quality or regulatory penalties. Furthermore, as the regulatory environment becomes stricter, companies that are ahead of the curve will enjoy an advantage, positioning themselves as leaders in sustainability.

Conclusion: A long-term vision for ESG success ESG reporting is not just about meeting regulatory requirement, it’s about embedding sustainability into the core of your business strategy. With upcoming deadlines looming, now is the time for companies to build their reporting infrastructure, gather reliable data, and ensure they’re compliant with the evolving landscape. Those who embrace this opportunity to integrate ESG will not only comply with regulations but also unlock new growth avenues, access better financing, and build a stronger reputation in the marketplace. By aligning your company’s ESG strategy with these regulatory timelines and prioritizing data quality, transparency and integration, you set the foundation for a sustainable future, both for your company and the communities and environments it affects.