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Written by Benjamin Morand
On September 26, 2024, Positive Company and PKF invited you to a webinar on the Corporate Sustainability Reporting Directive (CSRD) and welcomed DMS and Ebra companies to share their experiences on the preparation and implementation of the new regulation. This article provides a comprehensive summary of the various points discussed during that morning.
The CSRD marks a turning point in the way European companies must approach sustainability. It is part of the Green Deal and aims to make Europe the first carbon-neutral continent by 2050. This regulatory change also seeks to ensure the sustainability of the European economic fabric by making companies more resilient and competitive in the long term.
1.
What does the CSRD change compared to the Non-Financial Performance Declaration?
The CSRD brings several major innovations and relies on five main new features :
· Increased comparability of companies : Companies must provide standardized information allowing for a better comparison between them, facilitating the assessment of their impact on the environment.
· A principle of double materiality : The analysis of companies is now done from two angles. On one hand, "financial materiality" considers the impacts of environmental and social issues on the company. On the other hand, "impact materiality" evaluates how the company affects its environment through its activities, both upstream and downstream.
· An expansion of the scope of application : The CSRD now concerns more companies, including both listed and unlisted ones, with an expanded scope including consolidated accounts and certain information related to the value chain.
· Mandatory audit : The reports produced must be audited to ensure the reliability of the information.
· A mandated format : The sustainability report must comply with common reporting standards, the European Sustainability Reporting Standards (ESRS), and be transparent. Companies are required to communicate their information without an obligation for immediate action, prioritizing transparency above all.
Note that the CSRD is an obligation of communication
and not of action! It does not require the company to act, but rather to be
transparent about the measures taken or underway.
2. Focus on the double materiality matrix: what does the exercise consist of?
In addition to the already known financial materiality, one of the great innovations of the CSRD is the introduction of impact materiality. This pushes companies to analyze not only the impact of their environment on them, but also how their activities affect the environment and society.
Formalizing its double materiality matrix is a complex exercise that requires following a precise process, which Positive Company summarizes for you below:
- Formalize your value chain to identify stakeholders and critical activities.
- Identify your IRO (Impacts Risks and Opportunities) using benchmarks such as the Global Risk Report or SASB standards.
- Classify the IRO according to the severity and probability criteria imposed by the CSRD.
- Consult stakeholders to refine this classification.
- Consolidate the results and integrate them into the gap analysis for better transparency.
3. How to prepare for the CSRD? The 7 key steps.
To help companies comply with the CSRD, Positive Company and PKF recommend following 7 key steps :
- Determine your eligibility and frame the project : this involves identifying whether your company is affected by the directive and defining an action plan.
- Train and raise awareness among teams : that is to ensure the upskilling of employees and involve all management (CODIR, COMEX).
- Formalize the value chain and the double materiality matrix : namely identify the stakeholders and map the direct and indirect impacts of the company.
- Analyze gaps and prioritize : this means comparing the requirements of the CSRD with the current situation of the company to identify gaps.
- Deploy a roadmap : implement corrective measures to bridge the identified gaps.
- Write the report : therefore produce the necessary indicators and write the report in compliance with ESRS standards.
- Have it audited : have the report audited before publication.
Testimonials from DMS Imaging
DMS est une PME spécialisée dans le diagnostic médical, avec 120 collaborateurs et un chiffre d'affaires de 50 millions d'euros. Bien qu'elle ne soit pas soumise à la DPEF, l'entreprise devra se conformer à la CSRD d'ici 2026 et a choisi de commencer dès maintenant à se préparer.
Valérie Pugnaloni, Group Chief Financial Officer & Executive Board Member at DMS, explains to us that the project management is ensured by the CFO and the RAF, in a context where awareness of the CSRD is heterogeneous among the teams. Some employees, such as those in HR and the supply chain, are already aware of the issues, while others require more in-depth awareness, a key element according to her.
In order to achieve a double materiality matrix and comply with the CSRD, the company has given itself 18 months to prepare for this new obligation. For Valérie, it is important to see the CSRD as an opportunity to structure and improve their processes in the long term. Given their size, DMS did not necessarily have the internal resources available to carry out the detailed work of dissecting the CSRD and the EFRAG guidelines, and external support seemed essential to gain efficiency. The two days of training conducted in advance by Positive Company notably helped to streamline efforts and quickly launch into the project.
The approach proved to be very pragmatic, optimizing both the teams' time and also facilitating project management. One of the key success factors according to Valérie was the cross-functional method that involved several departments of the company. The tool used by Positive Company also turned out to be easy to handle. Valérie now feels ready to repeat the exercise in the following years, particularly thanks to the clarity provided by the support on key concepts such as IROs and gross risks.
Testimony of the EBRA group
Ebra, a press group producing 800,000 copies per day, is advanced in its CSRD approach partly thanks to the pressure exerted by their shareholder, well ahead on ESG topics. The management of the project is ensured by the CSR and the industrial management as the paper consumption and transportation have a significant carbon impact in their activity.
The project required strong mobilization from the COMEX and CODIR, and involved 400 employees. The approach required a lot of education and adaptation to make concepts like carbon impact accessible to everyone. The group also integrated an external benchmark to compare itself to its peers.
The timeline extends over 12 months, with 6 months dedicated to data collection and normalization, in view of the publication of the sustainability report. The data must be ready by January 2025 to finalize the report in March. The company has also planned a pre-audit to ensure its compliance.
The EBRA group chose to be supported by Positive Company® to lend credibility to their project. This approach has helped to simplify the deliverables, particularly the documents related to EFRAG, and to structure communication with their shareholder.
4. To conclude: 10 tips for effectively deploying the CSRD within your company
- Raise awareness to engage management
- Train oneself to internalize the skill
- Be cross-functional: bring together cross-functional roles, etc.
- Use benchmarks and industry analyses
- Go meet internal and external expertise
- Formalize one's CDV
- Define its IRO rating scales: quantify them if possible and specify them (when, where)
- Exclude irrelevant data points and use transitional provisions (1200 data points in total. Keep only the relevant ones)
- Prioritize the information to produce for the first report
- Enhance existing resources by appropriating the content of standards: standards are not always pedagogical or intelligible, so allow time for appropriation of expectations
In conclusion, the CSRD, although demanding, represents an opportunity for companies to structure their sustainability approach, to strengthen their competitiveness, and to meet the growing expectations of stakeholders. With a methodical approach, suitable tools, and targeted support, it is possible to meet this challenge while capitalizing on CSR commitments.
To learn more, watch the replay of our workshop: