CSRD: Integrating sustainability reporting with core business strategy
Unlocking business value and long-term resilience
Organizations are increasingly focusing on creating value by addressing sustainability issues, driven by pressure from consumers, investors and regulators for transparency and purpose-driven operations. Integrated thinking involves embedding sustainability into core business management and decision-making, overseen by boards to ensure long-term success.
Organizations who practice integrated thinking set ambitious targets and embed consideration of people, planet and prosperity in all elements of the business, including their every day decision making. They are also willing to rethink their business models to better respond to new opportunities, all of which can turn risk into competitive advantage.
An essential component of integrated thinking is transparency and reporting. As it relates to sustainability reporting, this area is rapidly evolving from voluntary to mandatory and shifting from separate reporting to cohesive reporting integrated to “mainstream corporate reporting”.
Below, we outline key strategies for integrating sustainability reporting with core business strategy.
Although the immediate compliance burden of sustainability reporting is top of mind, it also provides a baseline of new insight that can instigate a series of steps to drive business value and transformation.
- Sustainability reporting is unearthing a plethora of new insights on business action and performance. This is creating a new level of business transparency in the market and in doing so elevating expectations of business performance from stakeholders.
- While the scale of the immediate compliance burden may obscure long term thinking - businesses face a clear risk of inaction if they fail to use the insights from the newly gathered sustainability data to make pragmatic, long-term strategic decisions.
- Forward looking companies will use this as business intelligence to guide a series of pragmatic steps to drive performance improvements and redefine strategy and unlock new commercial avenues.
Sustainability reporting drives a strategic shift to a holistic, value-chain-wide view. This demands a dual focus: understanding the company's external impacts while identifying how sustainability factors create internal financial risks and opportunities.
- Double materiality is promoting a two-way view of business impacts that can reframe strategic thinking.
- Gaining access to the required information / data requires new ways of operating – gaining trust and collaborating with partners across the value chain, as well as digital transformation and analytics.
- Understanding the extent of the value chain and the mutual dependencies within it enables companies to anticipate and address emerging risks, building resilience and trust in the process.
Effective climate disclosure is broadening how businesses perceive their climate impacts and encourages them to rethink how they respond to climate impacts on their business.
- Robust disclosure on climate transition plans hinges on a dual understanding of the company's environmental impacts and its own resilience to transition risks. This two-way perspective is now an essential leadership tool for navigating the transition and driving long-term value.
- This broader perspective enables organizations to anticipate how the climate transition may shape business operations, and to heighten resilience.
- Using these new insights many companies are already finding new opportunities - entering new markets and developing new more sustainable products for the future.
Circular economy reporting frameworks drive businesses to look beyond mere consumption and critically map the entire product lifecycle. This broader perspective on material flows is the first step in unlocking new efficiencies and creating sustainable value.
- By changing how resources are measured – from financial to physical terms – businesses are encouraged to more critically consider movement of different products across their lifetime and across their value chain.
- Assessments on resource flows can help identify supply risks and operational efficiencies, but also opportunities for circularity to drive innovations.
- While circular economy principles are often associated with manufacturing, companies in all sectors must consider where they can influence resource use and drive circular practices within their value chain
Evolving social standards are pushing businesses to take greater accountability for workers across their value chains. Forward-thinking leaders are using this shift as a strategic opportunity to improve worker wellbeing, mitigate social risks, and drive long-term business value.
- The evolution from voluntary initiatives to mandatory social disclosure is creating a global performance baseline, compelling companies to translate well-intentioned principles into consistent, verifiable action.
- Supply chain performance can no longer be assessed solely by metrics such as cost, quality and speed; factors like fair wages, worker safety, diversity and inclusion must also be evaluated.
- Managing social performance as a cross-functional responsibility is essential. Strategically, robust reporting provides a framework to strengthen relationships and create a common language for collaborating with value chain partners to drive meaningful change.
