Deloitte study: European companies place value chain analysis and risk assessment along the supply chains at the top of the tools used during the first reporting exercise under CSRD

European companies place value chain analysis and risk assessment along supply chains at the top of the tools used in the first mandatory reporting exercise under the Corporate Sustainability Reporting Directive (CSRD), as they were mentioned in eight of ten reports analyzed by Deloitte in the study “Beyond compliance: Observations on practices following Wave 1 of CSRD reporting”. On the other hand, most companies participating in the report had difficulties in identifying and structuring viable information on sustainability topics, both within the organization and in the relationship with suppliers and indirect collaborators, which indicates the need to create structured and transparent dialogue frameworks (stakeholder engagement policies), the study also shows.

From the perspective of sustainability priorities identified in companies’ reports, it appears that organizations in the fast-moving consumer goods (FMCG) industry focus on increasing transparency along supply chains and on assimilating circular economy models; of the 62 analyzed organizations in the sector, over 90% mentioned a policy in this regard — generally at group level, including principles related to recyclability, waste hierarchy, etc. —, while 79% have also published deadlines for the adoption of various types of measures. Companies in the energy and industrials sector are addressing Scope 3 emissions as a priority, with 30 of the 55 organizations analyzed setting net-zero targets in coming years. In addition, energy companies are prioritizing the development of transition plans, with roadmaps for integrating renewable into their portfolios and electrifying operations. Financial services organizations are actively integrating sustainability criteria into their lending practices and investment decisions. Seven out of ten banks surveyed have set emissions targets for five or more sectors, with real estate and electricity generation being mentioned every time. Moreover, all banks surveyed (20 out of 20) and almost all insurers (11 out of 12) use the Partnership for Carbon Accounting Financials (PCAF) as a methodological basis for calculating financed emissions.

“The experience of companies that reported in the first wave of CSRD provides a valuable reference framework, governed by three core principles — structure, transparency and collaboration. A solid annual report is only a milestone, while true performance is, in fact, about creating a repeatable and every-year less burdensome process, especially in a time where the sustainability regulatory framework is still mobile. From this perspective, the report emphasizes the central role of dual materiality analysis as a permanent tool for tracking areas of opportunity and risk, as well as analyzing and strengthening relationships with various categories of stakeholders along the value chains. These tools go far beyond compliance; they create vision and premises for growth, support strategic decisions and foster trust,” stated Ovidiu Popescu, Partner, Deloitte Romania, Leader of the energy and sustainability practices for Deloitte South-Eastern Europe.

The report also shows that, based on the experience of CSRD’s first wave, the degree of digitalization of sustainability reporting is expected to increase in the coming years, with most organizations surveyed mentioning the need for technical solutions to support data collection and consolidation. While some are investing in new solutions, most are working to convert parts of the existing IT architecture for these purposes. The study also shows that an important step in automating the reporting processes is content’s digital tagging, which allows for machine reading and is expected to become mandatory with the adoption of the eXtensible Business Reporting Language (XBRL) Taxonomy by the European Commission.

“The key to an effective reporting process lies in the ability to view and analyze the business as an ecosystem with multiple and diverse stakeholders, beyond organizational boundaries. Unlike financial reporting, sustainability reporting does not follow a typical model that can be replicated from one company to another, but requires similar discipline in the data collection and analysis processes and solid collaboration mechanisms. On the other hand, the finality of the process is not just an audit opinion, but a set of performance arguments and sustainable development directions, convincing for both the auditor, but most importantly for clients, partners, financiers and potential investors", said Corina Dimitriu, Audit Partner, Deloitte Romania, and ESG Assurance Leader.

The study “Beyond compliance: Observations on practices following Wave 1 of CSRD reporting” was based on the analysis of 200 reports from companies in Wave 1 of CSRD from France, Germany, the Netherlands, Denmark, Spain, as well as from Finland, Italy, Austria, Belgium, the United Kingdom, Luxembourg, Poland, Sweden, Lithuania, Norway, Switzerland, Portugal, Estonia and Ireland. The industries represented are FMCG (31%), energy and industrials (28%), financial services (18%), technology, media and telecommunications (15%), and healthcare (8%).

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