First-wave CSRD reporting is teaching us valuable lessons about how companies approach reporting obligations. One important facet of the CSRD is its focus on business models and strategy. Companies must report on material topics and sub-topics, as well as explain how the company is adapting to meet these issues through strategic planning. In my experience, companies are struggling with this link. It isn’t uncommon to see companies discuss material topics and explain how important they are, only to fall silent when asked about how these material issues impact strategy. This observation is supported by a recent KPMG analysis which found:
“Many sustainability statements included the required disclosures, but the link to the company’s overall business strategy was unclear. There was also significant repetition in the statements and an apparent tension between providing sufficient information in each section vs cross-referencing. Overall, it appeared that the compliance exercise had often overwhelmed how a company effectively communicates its story and its strategy.”
With this being the first year of CSRD reporting, gaps in disclosures are to be expected. However, companies should think more holistically about their reporting. If your report says that an issue is material to your business but you can’t explain how managing that issue fits into your broader strategy, then either the issue is not material, or its management is being neglected. In the second year of reporting, I expect that we’ll see deeper strategy analysis in many reports, but for now, it is an area needing improvement.
Our members can learn more about CSRD reporting here.
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