The EU’s Corporate Sustainability Reporting Directive (CSRD) has kickstarted an overhaul of reporting practices for many companies. But rather than simply viewing this legislation from a compliance perspective, the most forward-thinking organisations are using it as a basis for future-proofing their sustainability strategies and approach to reporting.

Unlocking the strategic potential of the CSRD

In the new reporting landscape, transparency is fast becoming the norm. While, once upon a time, publishing a sustainability report might have set you apart as a frontrunner, now all your competitors will be reporting on environmental, social and governance topics. Ambitious companies therefore need to go beyond basic box-ticking to stand out.

One way to achieve this is to take a long-term view when considering your material topics. In the initial roll-out of the CSRD, companies will be free to choose the optional disclosure categories in which they report. And while some may be tempted to select the minimum number of categories to reduce their workload – five or six generally being considered the “sweet spot” – taking a more holistic, forward-looking approach will pay dividends in the long run.

For example, if your company is starting to work with more third parties, it makes sense to carry out more rigorous checks on the working conditions of these partners and suppliers. This will help ensure compliance with category S3 of the European Sustainability Reporting Standards (ESRS): Workers in the value chain. And by proactively reporting on this topic before you’re legally required to do so, your company can differentiate itself by demonstrating its commitment to responsible business practices.

Tony’s raises the bar

This was the case for the Dutch chocolate brand Tony’s Chocolonely, known for its uncompromising approach to supply chain standards. When it revealed in its 2021/2022 annual report that at least 1,700 child labourers were involved in the production of its chocolate, many were shocked. However, by exposing what it was doing wrong, the company made competitors with a less proactive approach to transparency look far less upstanding in comparison.

And as reporting standards advance, vagueness or omissions will become much more visible. So, adopting a “Tony’s” mindset will be more beneficial than ever. And the CSRD is the perfect catalyst to help you get there. Think of the ESRS reporting framework as a stress test for your disclosure strategy – challenging you to explore the different areas where your company has an impact and how you could report on them more transparently.

A worthwhile investment

This process takes time and effort. But it’s far more efficient to learn about your company’s weak spots now than to be caught out by them in the future. Take, for instance, ESRS category E4: Biodiversity and ecosystems. While not currently considered a material topic for many companies in terms of CSRD alone, nature-related impacts are set to come under increasing scrutiny in the coming years – particularly as new frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD) come into force. And even if you don’t have the in-house expertise to measure these impacts, now is the time to look for partners who can help.

Need a hand creating a CSRD-compliant corporate report? From the double materiality assessment to the final draft, Narrative Labs is here to support your reporting journey. Contact us today for a free consultation or check out our reporting work here.