What are we talking about and why change?
In recent years, the demand for companies to assess their various impacts on their environment has been amplified by the health crisis. Indeed, the need to report on environmental, social and governance (ESG) data has become more and more essential.
Extra-financial" reporting relates the efforts made by companies to reduce their carbon footprint, reduce energy emissions, fight against climate change, increase the efficiency of waste management, improve the health and well-being of employees, promote diversity... However, today it is not sufficiently transparent for some. Moreover, many feel that it is not financially relevant and do not trust the data presented.
These criticisms have been heard and a Corporate Sustainability Reporting Directive (CSRD) will have to correct this problem by linking financial and non-financial data.
How will CSRD impact organizations?
Previously, ESG was a concern for the sustainability or corporate communications teams. Soon, it will become part of the annual reporting process.
- CSRD will bring finance and sustainability together. ESG will merge with European Harmonized Electronic Reporting (ESEF),
- External audits of reporting will be mandatory,
- The parameters of the data to be reported will become more precise. Companies will have to comply with mandatory European sustainability reporting standards.
CSRD reporting will probably be part of the annual financial report and the main impact will surely be felt by the finance departments. Indeed, their role will be to pilot, verify and deliver reports. They will also have to respond to external audits.
Companies' communication on their health and success is mainly based on financial information. From now on, ESG data will bring more precision.
This means that Finance Departments will have to :
- Collect and analyze data from diverse and disparate sources, with non-financial data alongside financial data,
- Implement a complete process for collecting, enriching and controlling financial data with visibility into all activities,
- Rely on non-financial operational teams to ensure data consistency and create reports for investors,
- Create collaborative workflows to upload information and automate annual reporting.
When is it due?
We don't have a specific date or reporting format at this time, but right now we have the opportunity to prepare for this change.
We have the time to rethink our annual reporting processes. However, we need to get to work now to collect and analyze data from other teams, to develop our real-time management capabilities, and to integrate "reliable and certifiable" information into our ecosystem. In fact, the first draft of sustainability reporting is already under review and is expected to be produced in 2025 for fiscal year 2024.
I am convinced that companies that communicate clearly and precisely will stand out by providing a new perspective. They will facilitate the integration of new talents in search of meaning and ecology; they will reassure future investors in their choices.
