CSRD reporting is top of mind for all companies across the globe these days. Many companies are working on conducting a gap analysis and their double materiality assessments to understand what the most material issues are to report on. Once completed, the next critical step in CSRD compliance is data collection.
This blog outlines the best practices for data collection, which is an essential step in ensuring accurate and compliant CSRD reporting. We’ll cover key steps to help your organization build a strong data management system, implement quality controls, and prepare for third-party audits.
The Challenge of Data Collection
Data collection involves collecting, managing and reporting on financial-grade data across your organization. CSRD does not just rely on quantitative data, requiring organizations to report on a blend of data across their/ company.
What’s considered material for one company may not be for another, making CSRD reporting unique to each organization. According to a PwC survey, two-thirds of companies feel confident in being ready to report under the CSRD, but more than half (59%) cite data quality and availability as a key challenge and obstacle.
By adopting the steps we outline below, your organization can establish a solid foundation for data collection and management. Doing so will ensure a smoother, more successful CSRD reporting process.
1. Create A Single Source of Truth with One Data Management System
Sustainability data often lives in siloes across an organization, due to so many teams being involved in ESG efforts. It is critical that organizations create a central repository and management tool for the data to flow into. Doing so they can ensure the data is complete and captured across departments. This approach eliminates the need for disparate manual sources where version control can become trickier. It is also essential that this data management system has strong security and storage controls to prevent unwarranted access or data tampering.
2. Implement Quality Controls to Ensure Data Is Reliable
The sustainability data captured within the tool must verified and validated at the point of entry. Inaccurate or incomplete data can result in reporting errors further down the line. Organizations should look for a tool that includes automated verification checks and notifications when outliers or inconsistencies are detected. By catching and correcting inaccuracies early, companies can ensure they have reliable data to track progress and identify areas for improvement.
3. Leveraging a Reporting Framework
Accessing a reporting framework for CSRD data collection can be integral to managing and communicating sustainability performance within the guidelines of the directive. The European Sustainability Reporting Standards (ESRS), developed by the European Financial Reporting Group (EFRAG), provide support to cover and outline the key information needed to be reported within the CSRD.
ESRS is mandatory for CSRD. However, companies can enhance their sustainability reporting by aligning with other frameworks such as GRI, SASB, or TCFD. This allows them to address specific areas or meet broader international stakeholder expectations. It also gives them more control over their sustainability narrative.
4. Prepare for External Third-party Audits Ahead of Time
A key requirement of CSRD is third-party verification, which involves an independent external review of an organization’s sustainability reporting.
Companies must engage with an auditor and prepare the necessary documentation for verification, which includes a data trail, and the sources of the information presented. To avoid additional challenges when it comes time for the external audit, organizations should maintain a strong data trail throughout their data collection strategy, making it easy to trace back the sources of the data.
It’s important to note that CSRD will initially mandate a limited level of assurance, similar to a review engagement. However, as stipulated by future regulatory timelines, it will transition to a reasonable assurance level over time.
How Cority Can Support
With CSRD timelines coming up around the corner, organizations should look to integrate and stand up a data collection and management process as soon as possible. Cority’s Sustainability Performance Management solution makes it simple for companies around the world to seamlessly start and scale their data management processes with access enterprise-grade reporting tools that integrate seamlessly within existing software systems.
Companies can build confidence in their data quality through Cority’s automated validation and quality check tools, maintaining a secure, auditable data trail throughout the reporting period. Additionally, Cority’s in-house ESG & Sustainability advisory team support with preparing for external third-party audits, ensuring your internal teams feel confident and equipped with the necessary information.
Kickstart your CSRD reporting strategy today. Talk to our experts.
