CSRD omnibus: An opportunity to focus on what really matters
The Corporate Sustainability Reporting Directive (CSRD) was introduced to enhance transparency and accountability on environmental, social and governance (ESG) issues, but its extensive requirements come with a significant price tag.
One US multinational estimated a “one-off capex injection of $50mn-$60mn will be needed over the next three to five years for full compliance”. Although this may be a high estimate, it’s clear that fulfilling CSRD obligations demands substantial investment in data capture technology, training, development, assurance and implementation.
In response to concerns about this burden, the European Parliament introduced the omnibus simplification package which included a ‘stop the clock’ provision and a threshold increase regarding CSRD.
Reducing the burden frees up significant resources that can be refocused on practical and meaningful ESG efforts. For companies who have already begun their CSRD compliance journey, there is still significant value in the work performed.
The outcome of a double materiality assessment can be, and should be, leveraged in strategic decision-making and planning. In fact, the shift away from ESG as a regulatory tool means the focus is now on deliverable impact in these areas.
CSRD and sustainability: What to focus on now
Leveraging the work you have already started
The current landscape can appear confusing. Companies who are affected by the omnibus (wave 2 and 3) can find it challenging to know what to do now. For companies who have already begun their CSRD journey, you have three choices:
1. adopt CSRD early;
2. implement initiatives over the new timeframes; or
3. abandon and re-start later.
We encourage you to continue moving forward and not to kick the can down the road. Completing your double materiality assessment and engaging with stakeholders across your value chain will give you valuable insight that will help you identify both risks and opportunities for your business.
Shifting the mindset towards risk reduction and opportunity creation, and away from ESG as a compliance activity, will not only help you to prepare for future reporting but also give you enhanced perspectives that could shape the future of your business.
From our experience supporting clients with CSRD, we’ve identified the top three areas that were initially overlooked in the rush to comply.
Stakeholder engagement
The longer implementation timeline provides an opportunity to strengthen ties with stakeholders, both within your organisation and across your value chain. Stakeholders are integral to understanding the sustainability impacts, risks and opportunities across your business and value chain.
A proper understanding of the different perspectives on issues improves engagement and collaboration on tackling sustainability matters. Sustainability by its very nature is systemic and requires system change. This will in time become self-policing, such as supplier due diligence, and businesses who engage with their value chain will be rewarded. The opposite is also true.
The strength of stakeholder relationships is valuable commercially too. Engagement shouldn’t be limited to sustainability. It should be considered as part of your wider value chain initiatives reducing upstream and downstream risk.
ESG strategy
Without the immediate burden of compliance, companies can now prioritise developing actionable and practical ESG strategies. Embedding practices that help achieve long-term sustainability rather than short-term compliance. Taking a proactive approach to ESG integration, rather than waiting to, will allow for increased flexibility.
The principles of CSRD form a strong basis when developing an ESG strategy. The outputs should be leveraged commercially, linking sustainability risks through to the commercial reality. The dots should be joined between the sustainability targets and actions and the financial or operational outcome desired.
Building robust data systems
Sustainability data sits at the core of strategy, reporting and decision-making. Too often, we saw rushed data collection through informal channels with weak controls – an inherent challenge given the original reporting requirements of CSRD.
The delay in the implementation of CSRD provides an opportunity to build strong sustainability data systems that can be designed, implemented and optimised before the first reporting period and assurance requirements.
A refined data system will undoubtedly lead to more accurate data, which can be used to inform, and pivot, strategy. The added benefit is that it will be fully functional by the time you do need to report under the CSRD regulations.
The CSRD omnibus offers a unique opportunity for companies to redirect resources from compliance-heavy activities to more impactful ESG initiatives. This shift in focus allows companies to transform ESG from a compliance obligation into a strategic advantage.
How Moore Kingston Smith can help
At Moore Kingston Smith, we are helping clients navigate the evolving sustainability landscape, focusing on actionable steps towards effective integration of sustainable business practices and regulatory compliance.
Contact a member of the team for more information on how we can support your business with the CSRD omnibus and sustainability.
