CSRD Challenges for Businesses and How to Overcome Them

As the #APLANETReportingSeason concludes, it’s vital for C-level executives to assess their readiness for the Corporate Sustainability Reporting Directive (CSRD). This directive demands transparent, comprehensive ESG reporting, which presents significant challenges for many businesses. Drawing insights from EFRAG’s Initial Observed Practices Study, we’ve identified the four key obstacles companies face when implementing CSRD requirements, from Double Materiality to value chain reporting.

The stakes are high: non-compliance can result in penalties, reputational damage, and a loss of investor trust. This article explores these challenges and provides practical, strategic solutions to help your business stay compliant while transforming ESG reporting into a competitive advantage.

Index

Double Materiality: Navigating Complexity for Strategic Alignment

The Challenge

The Double Materiality Assessment (DMA) requires companies to consider two perspectives: the impact of their operations on society and the environment (impact materiality) and how external factors influence their financial performance (financial materiality). Many organizations struggle to move from subjective assessments to data-driven evaluations, risking incomplete reporting and missed opportunities for strategic alignment.

The Stats

85% of companies recognize the need to integrate ESG reporting and DMA into their strategy (Source: EFRAG).
Only 70% have adopted a fully objective approach, relying instead on qualitative methods (Source: EFRAG).

The Solution

Centralizing Double Materiality data in a single platform simplifies the process by ensuring an audit-ready, structured format. Seamlessly linking DMA results to ESRS disclosures reduces errors and ensures CSRD compliance. Moreover, this approach turns DMA findings into actionable insights, allowing executives to integrate ESG risks into business objectives and track KPIs for ongoing sustainability improvements. This enables C-level executives to move beyond compliance and use sustainability data for strategic decision-making.

Data Collection: Streamlining Processes and Enhancing Accuracy

The Challenge

Collecting the vast amounts of data required for CSRD compliance is a complex task. Data must come from multiple departments, external sources, and cover various ESG metrics. Fragmented data management systems often lead to inconsistencies and inaccurate reporting, raising compliance risks and operational inefficiencies.

The Stats

65% of companies report challenges in consolidating and managing ESG data (Source: EFRAG).
60% struggle with data alignment across departments, risking non-compliance (Source: EFRAG).

The Solution

Automating ESG data collection from internal and external sources eliminates manual entry and reduces errors. Real-time synchronization ensures data is always up-to-date and aligned with sustainability actions. Systems that map ESG data points directly to ESRS standards further simplify compliance, while customizable dashboards enable clear, tailored reports for auditors and stakeholders, ensuring full transparency. This approach saves time and ensures accuracy, allowing executives to focus on strategic improvements.

Value Chain Reporting: Achieving Full Transparency

The Challenge

CSRD mandates reporting across the entire value chain, including suppliers and external partners. Many companies lack visibility into their suppliers’ sustainability practices, making it difficult to ensure data accuracy and putting them at risk of non-compliance.

The Stats

90% of companies are refining their approach to mapping and analyzing the value chain (Source: EFRAG).
45% have implemented more detailed value chain mapping, but many remain at basic levels (Source: EFRAG).

The Solution

Automating ESG data collection from suppliers ensures consistency and reduces manual efforts. Centralizing this data in one platform provides full traceability and auditability, allowing companies to track sustainability performance across the supply chain. By seamlessly integrating value chain data into ESG reports, businesses can ensure CSRD compliance and improve transparency for stakeholders. Enhanced collaboration with suppliers also leads to better data quality and accountability, ensuring a holistic view of sustainability across the value chain.

Organizational and Technological Preparedness: Future-Proofing Your Reporting Infrastructure

The Challenge

Outdated systems and limited cross-departmental collaboration prevent many companies from efficiently managing CSRD reporting. Transitioning to modern technology, including XBRL (ESEF) for digital reporting, is crucial to meeting CSRD’s stringent requirements. Without this, businesses face operational risks, including reporting errors and non-compliance.

The Stats

85% of companies recognize the need for IT transformation to meet ESG reporting demands (Source: EFRAG).
65% rely on a single-function approach to ESG reporting, which limits the necessary collaboration across departments (Source: EFRAG).

The Solution

Effective cross-departmental collaboration is key to meeting CSRD requirements. A unified platform allows teams across finance, sustainability, and legal departments to collaborate seamlessly, automating tasks and ensuring efficient workload management. Advanced technology can streamline ESG data tracking, integrate with existing systems, and automate XBRL (ESEF) report generation to meet ESRS standards. Automation reduces manual effort, ensures timely and accurate reporting, and minimizes errors. Scalable technology ensures your organization stays compliant and adaptable to future regulatory changes.

APLANET—Your Complete Solution for CSRD Compliance

The CSRD presents significant challenges, but with the right tools, these hurdles can be transformed into opportunities. From navigating Double Materiality to enhancing data collection and improving value chain transparency, APLANET offers the solutions you need. Our platform simplifies compliance, improves operational efficiency, and empowers your business to lead in sustainability reporting. Contact us today!

Prepare with Our CSRD & ESRS Practical Guide

To support your compliance journey, download our CSRD & ESRS Practical Guide. This essential resource offers actionable insights to help your company stay ahead of evolving regulatory standards. Equip your team with the tools they need to excel in sustainability.

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