28 July 2023

15 years of sustainability reporting experience buys you... 30% ESRS compliance

Simon Braaksma, senior director at Royal Philips, has revealed the Dutch company is compliant with 30% of the data points it will need to report on under CSRD/ESRS, despite the company having over 15 years' experience in sustainability reporting.

"That in itself reinforces the point that there's a lot of work to be done," Braaksma said at a Datamaran webinar yesterday (27 July).

In 2022, Royal Philips performed a double materiality assessment in line with the ESRS and found it would have to report on 950 datapoints, he explained. A gap analysis revealed that current reporting would only cover 30% of those data points, while it was 'somewhat compliant' with 19% of them and non-compliant with the remaining 51%.

He added that the "stakes are pretty high" for the company to improve in this regard as non-compliance with the Directive is a criminal offence and a board liability. He recommended for other companies to do a gap analysis to understand their current level of compliance and identify the areas that need the most improvements.

Roxana Steliana Cata, ESG consultant at Dell, reiterated this call for urgency, arguing that companies "need to start now" to get up to speed in the short timeframe and diminish any liability or audit risks that could emerge when their reports are published.

'Starting' involves a scoping assessment and taking steps to fully understand the details and legal implications of the legislation. At Dell, this involved "lots of conversations with legal counsel" to clear up all of the "grey areas" in the directive, she explained.

She added that companies also need to conduct a materiality assessment, before the reporting process begins, to determine what topics and specific metrics will be relevant to report on.

Braaksma agreed that companies can "get their acts together" by assessing what disclosure requirements and datapoints are material to report on. He noted that the materiality assessment is challenging but highlighted that EFRAG is set to release implementation guidance in the coming weeks which will focus on helping organisations with assessing double materiality.

Cata, Braaksma and Brianne Sood, sustainability risk principal at Boeing, all highlighted the need for companies to establish robust governance and oversight over the reporting process and ensure there is a broad range of professional expertise in the team that is responsible for preparing the report in order to meet the demanding requirements of the CSRD.

And what if companies don't have the data to report?

Braaksma explained that companies could still be compliant with the standards by disclosing the fact that they don't have that information. However, this will have some implications, he said. While listed companies may face penalties from supervisory authorities, non-listed companies might face financing issues as a result.

He added: "If you're a major oil company, and you cannot say anything about your Scope 3 emissions, how credible is that? If you advertise how important the climate is for you and that you are committed to science-based targets but you don't have any clue on your Scope 3 emissions, that will not enhance your credibility."