In 2024, the Corporate Sustainability Reporting Directive (CSRD) becomes mandatory for the first companies, ushering in a new era of corporate reporting in which sustainability takes centre stage. Not only large companies but also SMEs must prepare for these changes, as even small enterprises come under scrutiny if they supply to CSRD-obligated partners. In this article, we delve into the essence of sustainability reporting, with specific attention to the qualitative and quantitative data points in the European Sustainability Reporting Standards (ESRS).
The CSRD requires European enterprises to report on environmental, social and governance (ESG) themes. To ensure uniformity, companies must follow the European Sustainability Reporting Standards (ESRS). While the CSRD prescribes the 'what, who, where and when', the ESRS provides detailed guidelines on 'how' to report.
The ESRS consists of twelve reporting standards, of which the first two (ESRS 1 and ESRS 2) apply to all enterprises within the CSRD scope. ESRS 1 provides insight into the general structure of the standards, while ESRS 2 sets out specific reporting requirements for sustainability themes at a general level.
A crucial aspect of ESRS reporting is the materiality assessment, in which enterprises must evaluate both the financial impact of sustainability factors on themselves and their impact on the environment and society. ESRS 2 is considered always material and enterprises must follow it, though some obligations do not apply directly in the first year.
In contrast to financial reporting, qualitative data dominates the ESRS. As much as 75% of data points require textual input, particularly in the general disclosures (ESRS 2). Here, the enterprise must provide information on the governance structure, impact-risk-and-opportunity management of sustainability objectives, and the business strategy at a general level. Also of great importance is the materiality assessment with a detailed explanation of why which materiality topics are important for the organisations and the stakeholders.
The remaining 25% of ESRS data points consist of quantitative data, including CO2 emissions, energy consumption and material use. These fall under the environmental standards (ESRS E1 to E5). Notably, ESRS also requires quantitative data for social topics such as sickness absence, training hours and diversity ratios. Furthermore, the CSRD shows interest in the financial performance of reporting enterprises.
As a business owner, understanding the nuances between qualitative and quantitative data in the CSRD and ESRS is essential for reporting effectively and thriving in the future of sustainability reporting. Do you need support with your CSRD reporting? Kroll SR offers a comprehensive service package, including full programmes for CSRD-compliant reporting, preparation of ESG reports, double materiality assessments and supplementary services such as ESG strategy advisory and report editing. Contact us for expert guidance in meeting sustainability reporting requirements and communicating your ESG impact to stakeholders.
Want to learn more? Contact Kroll SR.
