4 January 2024
Soon, more companies must start reporting on their strategies and policies concerning sustainability, often called ESG. ESG stands for Environment, Social and Governance. These reports are in some regards a lot like the yearly financial reports, which is why we view it as a form of accountancy.
At the moment, the most important EU required ESG rapport is the CSRD (Corporate Sustainability Reporting Directive). The CSRD has three main goals:
A survey among 150 managers shows that 1/3 do not know when they are obliged to report. If you check the figure below, you won’t be part of that group.
Of course, you don’t have to wait until the reports become mandatory. You can already start learning on how to report in line with the CSRD. This will likely reward you with advantages like gaining trust from financiers and maximising your competitive advantage. But it will also protect your company’s reputation, your brand image, and it builds trust with customers.
Another important reason can be that whilst you are not yet required to report, others in your value chain might be. They can then request ESG related data from you. One of the positive consequences is the growth of collaboration in your value chain. If you give insight into your sustainability reports, the collaboration between companies or organisations in your value chain will increase.
The content of a CSRD is determined by the so-called ‘double materiality’. This stands for the impact on and the impact from the company. The impact ‘on’ can for example be about the influence of climate change on the company’s business model. This is what we call financial materiality. The impact ‘from’ a company can, for example, be the effect of emissions from production processes on the air quality of local residents. This is what we call impact materiality.
The materiality assessment is often the starting point of the report. It decides on what will be included and is different for every company. It will be an addition to the mandatory reporting points and looks at both actual and potential risks, as well as both positive and negative risks. The impact on people and the environment in the short, medium, and long term is also examined.
Often, the main bottleneck when making a CSRD-report are the so-called scope 3 emissions. These are the emissions for which your company is not directly responsible, but another company in the value chain of your product is. However, you are required to report on it and the data must be requested at your partnering companies. If they are, for whatever reason, unable to hand over this information, there are publicly available API’s which will provide an estimate.
When the CSRD-report is finished and checked by an external accountant, it is made available to the financial stakeholders like shareholders, banks, and creditors. On the other hand, there are many stakeholders which are focused on the impact the company has on the environment. Examples include employees, local residents, and interest groups focused on the environment and human rights.
We would like to help you acquire and document data, and make the reports. We apply two basic principles, namely that we always rely on underlying standards and that we use existing components. These components are available as SAAS-solution in the secured Microsoft Azure Cloud (you can find information about our chosen standards below). To be concrete, this is a Fabric solution where the tables are a translation of the ESRS data model. We can then translate this model to messages that comply with the PACT standard when there’s an exchange with third parties. Because Fabric already makes it possible to easily analyze data as standard and also brings AI solutions within reach, you will gain a lot more insight into your ESG data with our platform. This also means that you can intervene more easily. After all, the following still applies: “You can't manage what you can't measure”.
EFRAG. Describes through ESRS (European Sustainability Reporting Standards) what a CSRD report should look like. Ultimately, this will lead to an XBRL Taxonomy. A metadata format in which these reports must be drawn up.
Pathfinder Framework. We have chosen PACT's Pathfinder Framework for the exchange of data. A standard that is widely supported, is well documented and very open. The Framework ensures that emissions are recorded at product level and that companies all use the same calculations.
Since our founding in 2017, we have been a company that is deeply involved in data regarding sustainability. We have already helped various customers with similar applications. For all Unica customers, we are now providing the EBS (Energy Registration and Monitoring System) reports, and we are currently expanding this to our Fabric platform so that the work is largely taken over by AI. But you can also see it in the internal company operations/culture and in reducing our ecological footprint by all employees. That is not something that is asked of us, it is something we do, as Heroes. Just as well, we know that there are sectors where all this is much more difficult to achieve. So, from us no pointing finger, but an extended hand.
Hi, I'm Ronald. Drop me an email on ronald.vermeire@heroes.nl for more information.