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10 First-Step Actions on CSRD for Irish Companies

Sustainability regulation is developing rapidly at European level, with the European Commission announcing its adoption of the European Sustainability Reporting Standards (ESRS) in Delegated Regulation on 31 July.

You can find a detailed analysis of the ESRS by our Deloitte EMEA Sustainability Regulatory Hub here.

Many companies are now considering the transformational changes required within their businesses to meet the additional sustainability regulatory reporting requirements, with the Corporate Sustainability Reporting Directive (CSRD) coming into effect from January 2024.

Based on market insights, here are the key CSRD reporting and assurance readiness steps that leaders should look to action over the coming months. 

Companies who wish to be a leader in sustainability need to consider how ESG-related matters impact all areas within the business from a strategic lens, not just focusing on meeting ESRS compliance requirements. Companies who focus solely on sustainability from a compliance ‘tick box’ perspective run the risk of missing the opportunity to future-proof a resilient business.

Companies should leverage insights from financial information processes, controls and reporting to inform their preparation to report on non-financial information – it is vital that sustainability reporting is at a standard that is sufficiently robust to meet the mandatory limited assurance requirements under CSRD. A key focus of regulators at present is the integration between the front and back half of annual reports, so developing a similar robust approach for non-financial information and financial information is a good starting point.

Rolling out tailored ESG technical training for existing employees within all departments is an important element in ensuring sustainability is embedded within all areas of the business. Most companies we are supporting are taking a two-pronged approach by leveraging external expertise to execute more complex implementation steps, alongside investing in internal resources. We are seeing finance teams play an increasing role in sustainability reporting within companies, rather than sustainability teams working in a silo.

The first step on a company’s CSRD readiness journey is to understand the scope, timelines and appropriate level of reporting, e.g., consolidated, or standalone reporting. Whether a company is in scope depends on their legal status and whether the legal status is specified as in scope by the European Accounting Directive.
Scope and timelines should be considered together and, for complex reporting structures, companies should seek legal advice on the matter.

A robust double materiality assessment is a mandatory requirement under CSRD in order to assess which standards are mandatory under the environmental, social and governance ESRS’. A double materiality assessment evaluates a company’s impact and financial materiality on wider society and the environment (inside-out), along with the impact and financial materiality of society and the environment on the company (outside-in). Stakeholder engagement is key to identifying material topics that are material to your business and value chain.

A high-quality double materiality assessment will help determine the material ESRS your company will be required to report under. From our experience with clients, there are two main approaches in the market for carrying out an ESRS compliant gap analysis; (1) carry out an ESRS gap analysis in parallel to your double materiality assessment, focusing on ESRS 2 and ESRS E1 in phase 1 and the remaining ESRS determined to be material in phase 2 or (2) carry out an ESRS gap analysis after a robust double materiality assessment has been concluded. Performing a gap analysis will help your company formulate key actions and develop a prioritised roadmap towards full sustainability statement compliance.

A key element of CSRD is the mandatory requirement to obtain limited assurance. From an Irish perspective, the Department of Enterprise, Trade and Employment have flagged that companies under the scope of the CSRD are permitted to allow a statutory auditor, or an audit firm other than the one carrying out the statutory audit of the financial statements, to carry out the assurance of the sustainability reporting. Early engagement on pre-assurance readiness is an important step.

Collecting and managing data for environmental, social and governance metrics can be complex in nature, particularly in relation to scope 3 emissions along your value chain, biodiversity, and social metrics. Companies are at varying stages of maturity on this and transitioning from an Excel-based ESG reporting system to more automated tech-enabled data collection, analysis and reporting solutions should be a focus in order to embed robust controls and processes for non-financial information.

Companies reporting under CSRD also fall into scope of EU Taxonomy reporting. Alignment with other ESG regulatory reporting requirements will be an important consideration, particularly for non-EU groups. Companies also need to be mindful of potential future jurisdiction-specific regulatory reporting requirements, such as the SEC proposed climate-rule, TNFD, CFD, and ISSB’s IFRS S1 and S2. The sustainability reporting regulatory landscape is moving at pace and it’s important that companies keep up to date with the latest developments.

We know that navigating sustainable transformation can be challenging, but you don’t have to do it alone. Our multidisciplinary experts can support you to demystify the regulatory landscape, develop a clear roadmap and drive change across your business.

For more information, contact our Sustainability Team below.

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