How to prepare for CSRD's ESRS Environmental standards

Corporate Sustainability Reporting Directive (CSRD): the next steps to be taken to meet the requirements of this new European directive by 2025.

CSRD is a new European directive that came into force on January 1, 2024. To understand what it consists of you can find our detailed article on the blog.

Below, we look at the next steps we need to take to comply with this new European directive.

• Keep abreast of regulatory developments
• Drawing up a roadmap: identifying and prioritizing information
• Collect, measure and anticipate impacts to build your strategy in line with CSRD expectations
• In-depth transformation of existing company processes

Keep abreast of changes in CSRD regulations

First and foremost, it's very important to understand what the CSRD is and what its requirements are. To begin with, you need to know whether you are covered by this directive. There are many resources available for this purpose. To avoid getting lost in this mass of information, we recommend that you carefully follow what the European Financial Reporting Advisory Group (EFRAG) has to say. This group provides companies with documentation to help them prepare for the CSRD:

• An implementation guide to prepare for the double-materiality analysis produced by EFRAG: implementation guide
• ESRS (European Sustainable Reporting Standards) indicators: ESRS indicators
• A methodological guide from EFRAG to help you read the above table: ESRS indicators reading guide

You can also find out more about existing methods: PEF (Product Environmental Footprint) and OEF (Organisation Environmental Footprint).

In the remainder of this article, we'll take you through the key stages in preparing for CSRD.

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Drawing up your roadmap: identifying and prioritizing information

Introduction to CSRD and ESRS Standards

For the European companies concerned, adapting to the Corporate Sustainability Reporting Directive (CSRD) is crucial. This requires upstream familiarization with European sustainability reporting standards, known by the acronym ESRS (European Sustainability Reporting Standards). These standards specify the information that companies must collect and disclose, making it imperative for the companies concerned to understand their requirements.

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All ESRS standards are based on disclosure requirements, both qualitative and quantitative. These disclosure requirements, which the European Commission calls Disclosure Requirements (DR), contain all the data points representing the qualitative and quantitative information to be collected and reported.

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Dual Materiality Analysis

The CSRD also introduces a major new requirement: the double materiality analysis.

This analysis is fundamental to identifying and prioritizing relevant information for reporting. It consists of evaluating the impacts between the company and its environment:

• Impact materiality: How do the company's activities affect the environment, society and governance (ESG)?
• Financial materiality: How do environmental and social changes impact the company financially in the short, medium and long term?

To carry out this analysis, we recommend using the methodology published by EFRAG, which proposes an analysis grid for assessing the degree of materiality of the various issues, whether related to impact or financial materiality.

The effective implementation of CSRD requires the formation of a dedicated team within the company. This team will be responsible for developing and monitoring a detailed action plan which includes:

• The definition of the granularity of the information required, particularly from suppliers.
• Preparation of data collection systems and reporting processes.
• Anticipating the adjustments needed to comply with CSRD implementation deadlines

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Collect, measure and anticipate impacts to build your strategy in line with CSRD expectations

The initial diagnosis and double materiality analysis will enable you to identify the gaps between the company's current practices and the requirements of the ESRS standards. This diagnosis should enable you to identify:

• Indicators already in place that meet CSRD standards ✅
• Indicators that require adjustments to comply with requirements 🔀
• Missing indicators that need to be collected, measured and monitored 🔧

Once you've identified the data points associated with the ESRS standards you need to prepare for reporting, you'll be able to embark on the data collection phase, measuring and monitoring your impact.

Collecting data

To begin with, you'll need to organize the collection of data from your suppliers.

Here are a few steps you can take to ensure efficient and reliable data collection:

• Theharmonization of indicators across the company, particularly in large groups with numerous activities.
• Aligning indicators and collecting data on upstream and downstream value chains, and cross-analyzing them with internal data.
• Soliciting third parties, either directly (suppliers and customers) or indirectly (via dataproviders, for example), to collect, estimate (estimated emissions factors, direct company data), aggregate and certify data.

Data collection is a priority, and once it's properly organized, structured and managed, you'll find it easier to comply with all the different regulations that are coming down the pike, such as the PLR, Environmental Display, CSDDD and so on.

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Focus on ESRS E1: climate change

Of the 12 ESRS reporting standards presented above, ESRS E1 on climate change contains the most publication requirements (9 in total).

Some examples of the publication requirements requested in ESRS E1:

• Share your absolute emissions in scopes 1, 2 and 3
• Determine whether an environmental impact reduction strategy has been put in place (and whether it is aligned with the Paris Agreement).
• Analyze the impact of your activities on the environment.
• Estimate the current and future impact of climate change on your organization's operations.
• Provide details of any internal initiatives taken to reduce or mitigate negative climate impact.
• Set reduction targets consistent with the Paris Agreement objectives.
• Draw up an action plan describing how to achieve these objectives.

This ESRS E1 standard mainly requires transparency regarding the company's decarbonization trajectory.

Here are the key steps for developing your decarbonization trajectory:

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Drawing up a GHG emissions balance sheet

To do this, you'll have to draw up a carbon balance for scope 1, 2 and 3 emissions, based on data collected and established methods.

For the textile sector (but also for the furniture sector), it is important to know that most of the environmental impact is associated with scope 3 (around 90%), thus focusing attention on theimpact of products.

External measurement tools can support you in the process of collecting, processing and measuring your impacts:

• Carbon footprint actors to find out about your emissions in their entirety.
• Impact measurement platforms to precisely measure the impact of your products with a high level of granularity.

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Identify decarbonization levers,

The next step is to identify various levers, both direct and indirect, to achieve your decarbonization objectives.

You'll need to do this for each significant source of emissions (energy and material efficiency, reduction in consumption, switch to non-fossil fuels, use of low-carbon energies, discontinuation or replacement of products or industrial processes).

As the majority of your impact is determined at the product design stage, the role of CSR and business teams (Product, Purchasing and Design) is crucial in your strategy to reduce your carbon footprint.

By analyzing the impact results of your products, you can then identify eco-design levers that you can share with your business teams to build your impact reduction strategy in line with your set objectives, and your internal constraints (style, cost, etc.).

To help you steer this strategy and effectively involve your teams in the project, you can call on platforms such as Waro, which enables you to analyze the impact of your products through life-cycle analysis and build eco-design scenarios to assess and steer the contribution of the various internal and external levers of action to your decarbonization strategy.

Create your steering reports

To track the evolution of your various data points and prepare for future reporting, it's essential that you can create an effective internal control system.

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In-depth transformation of existing company processes

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It is important to start thinking this year about the company processes that will need to be modified in order to move towards automation by standardizing collection, harmonizing processing and consolidating CSRD reporting.

As a result, it is imperative to automate reporting and transform your company's operating model in depth. Indeed, thanks to the solution you put in place in the first year, the company will be able to comply with the immediate obligations of the CSRD. However, it is essential to think about more lasting transformations from the outset, as this exercise is bound to be repeated every year in an ever-changing economic, technological, human and regulatory environment.

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The challenges ahead :

• Limit the multiplication of processes and tools that can quickly impact your costs and/or complicate your organization.
• Master the flow of information to generate, collect, process and harmonize data spread across the organization.
• Engage stakeholders, share data with teams and ensure they understand and effectively use non-financial indicators to make sustainable decisions.
• Manage CSR performance: this is a major opportunity to make progress in this area and turn it into a strategic differentiator!

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