The Corporate Sustainability Reporting Directive (CSRD) is set to reshape how organisations approach transparency and accountability. However, research finds 88 percent of companies do not feel prepared to meet CSRD expectations, and 57 percent have limited knowledge of the regulations, highlighting the critical need for CSRD training.
While the Directive aims to drive meaningful progress towards sustainability goals, it also presents numerous challenges for businesses navigating this new landscape. Continue reading as we explore these challenges and share some best practices for how organisations can overcome them and achieve compliance.
A recap on the CSRD
The CSRD is an EU regulation designed to enhance and standardise sustainability reporting across businesses. It expands the scope of its predecessor, the Non-Financial Reporting Directive (NFRD), requiring more companies to disclose detailed information about their ESG impacts.
The CSRD introduces stricter reporting standards aligned with the European Sustainability Reporting Standards (ESRS), ensuring transparency and comparability of data. It applies to large companies and listed SMEs within the EU and aims to drive accountability, align business practices with sustainability goals, and support the EU’s climate ambitions. CSRD reporting will roll out in phases starting in 2025, with timelines varying based on the size and type of organisation.
Key challenges presented by the CSRD
The EU Corporate Sustainability Reporting Directive (CSRD) presents businesses with several challenges as they adapt to stricter reporting requirements. Here are some of the key challenges and practical solutions to address them:
Expanding the scope of reporting
The CSRD applies to a much broader range of companies, including listed SMEs, significantly increasing the number of businesses required to disclose sustainability data. The wide breadth of ESG topics, such as climate impact, human rights, and governance, can feel overwhelming. To tackle this challenge, organisations can start by conducting a materiality assessment to identify and prioritise the most relevant ESG issues.
Building internal capacity is also essential, whether by assigning dedicated sustainability roles or hiring experts to lead these initiatives. Leveraging recognised frameworks such as the Global Reporting Initiative (GRI) or Sustainability Accounting Standards Board (SASB) can provide structure and clarity, helping companies meet compliance requirements efficiently.
Lack of data availability and quality
Collecting, validating, and standardising sustainability data, particularly for complex areas like Scope 3 emissions or social impact metrics, is a common challenge. To overcome this, organisations can implement data management systems or ESG-specific software to centralise and track sustainability metrics effectively.
Collaboration with suppliers is equally crucial for improving transparency and ensuring accurate data collection across the value chain. Businesses should start small by focusing on key metrics and scale up their efforts as systems and processes improve over time.
Gain actionable knowledge and tools to confidently navigate CSRD requirements and enhance reporting accuracy
The complexity of compliance standards
Aligning with the ESRS, which includes detailed and sector-specific criteria, adds a layer of complexity to CSRD compliance. To address this, businesses should train internal teams on CSRD and ESRS requirements to build a solid understanding of compliance obligations. Establishing a cross-functional task force can also help integrate reporting processes into day-to-day operations, ensuring a streamlined approach to meeting these standards.
Resource constraints
Smaller companies, such as listed SMEs, often face financial and human resource constraints when implementing robust reporting practices. Partnering with external consultants or forming alliances with industry peers can provide the necessary expertise and support to manage initial reporting efforts. Participation in industry networks also enables companies to share resources and best practices, reducing the strain on limited resources.
Balancing transparency and reputational risks
Disclosing sensitive information about environmental or social impacts can expose companies to reputational risks, especially if targets are missed. Transparency is key; organisations should openly acknowledge challenges while outlining clear action plans to address gaps. Setting realistic, time-bound goals demonstrates a commitment to continuous improvement, and engaging stakeholders fosters accountability and trust.
Integrating sustainability into strategy
Sustainability reporting is often siloed, making it difficult to embed ESG considerations into core business strategies. Organisations should align sustainability goals with overarching business objectives and communicate their importance at the leadership level.
Embedding ESG metrics into decision-making processes and incentivising management to prioritise sustainability helps create a culture where sustainability is integral to strategy. Rather than viewing CSRD as a burden, businesses should embrace it as an opportunity to identify risks and uncover long-term opportunities aligned with sustainable growth.
Final thoughts
The CSRD marks a transformative step in standardising sustainability reporting, providing businesses with a framework to align with global sustainability goals and respond to growing stakeholder demands. Achieving compliance, however, will require strategic planning, investment in expertise, and the integration of ESG considerations into core business strategies.
Far from being just a regulatory requirement, the CSRD offers a unique opportunity for organisations to lead in sustainability, foster trust, and unlock long-term value. If you’re unsure how to navigate CSRD reporting requirements, our Certificate in CSRD course is here to help. This CPD-accredited online course equips you with the essential knowledge and tools to confidently start your CSRD reporting journey. With customisable tools and templates, the course empowers participants to streamline data management and enhance the efficiency of their reporting process.
