Companies are increasingly responsible for ensuring that their supply chains comply with ethical and sustainable standards. The new EU Corporate Sustainability Reporting Directive (CSRD) clearly regulates who is obliged to submit a sustainability report and what content must be published according to binding standards. While our first blog post on the new EU Sustainability Reporting dealt with the companies affected, deadlines and changes, in Part 2 we delve into the challenges companies face and explain why they definitely benefit from a sustainability report despite the significant effort that is involved in this context.
- CSRD – a challenge for companies
- Platform solutions help collect data for CSRD
- Here’s why companies benefit from a sustainability report
- Conclusion: CSRD – investment with long-term effect
1. CSRD – a challenge for companies
Not only large or listed companies with a corresponding turnover will need to deal with the new CSRD in the future. SMEs that work with obligated companies as suppliers or business partners are also indirectly affected by the EU directive and should thus prepare to provide the relevant information about their sustainability efforts. However, in order to prepare a meaningful sustainability report and disclose the necessary data for assessing sustainability performance, companies need to have access to extensive data from various sources. Collecting and consolidating this data is a challenge for many stakeholders. They may face high costs due to collection or control systems that need to be adapted or even developed. In addition, they must ensure that confidential information is reliably protected in all processes – IT security therefore plays an important role when it comes to enforcing the CSRD.
Preparing a report in accordance with the new CSR Directive requires expertise, time and human resources that may not always be immediately available. Especially since companies no longer have the option of preparing the report at their own discretion, but must comply with binding reporting norms and standards. Integrating sustainability goals firmly into the business strategy is becoming increasingly important for future corporate development and requires a holistic orientation of the entire processes along the value chain.
2. Platform solutions support data monitoring and analysis
Strategic supply chain management can help companies to meet the above-mentioned challenges. Thanks to digitized control and monitoring of processes, smart SCM ensures transparency along the supply chain and enables structured monitoring and profitable analyses of large volumes of data. This means that SCM geared toward the collection and evaluation of sustainability data can become a success-critical factor for the companies concerned.
After all, SMEs in particular, which are indirectly affected as suppliers, often lack the necessary structures as well as human and financial resources to provide the relevant information in accordance with the CSRD. They can benefit from platform solutions with connected business intelligence tools and CO2 tracking options, which support data collection and evaluation, make workflows more transparent and optimize processes.
3. Here’s why companies benefit from a sustainability report
The effort and requirements of the new CSR directive are high, yet it should not be understood as a mere reporting task. Instead, responsible parties are enabled to promote a change in thinking and anchor sustainability in a structured manner within the company. In addition to the challenges, a report in accordance with the new CSRD directive also offers numerous advantages, from which companies significantly benefit in the long term:
- More transparency: Data visualization and analysis increase the steering options and the optimization potential. The resilience of the supply chain is sustainably strengthened.
- Image: An improved sustainability ranking can possibly facilitate access to new financial capital.
- Risk management: Detailed insight into operational sustainability performance contributes to greater agility and improved responsiveness. This enables companies to reduce environmental, social and financial risks in a targeted manner.
- Optimized processes: The data collected for the CSRD form a sound basis for decisions to make work processes more efficient.
- Increasing credibility: Increased corporate transparency on sustainability performance and measures can contribute to a gain in reputation and thus strengthen trust among investors and stakeholders.
- Identifying opportunities: A thorough examination of the topic of sustainability in the supply chain sharpens the focus for innovations. This leads to securing future viability.
- Knowledge as a competitive advantage: By dealing intensively with sustainability reports, companies increase their sensitivity to the topic – with positive effects on future decisions and the entire mindset along the organization (Integrated Thinking).
Sustainability performance strengthens the positive perception of a company among investors and consumers – this can have a direct influence on investments and revenues. Whether a company is successful in the long term can no longer be judged solely on the basis of its financial situation – sustainability is increasingly closely interrelated with environmental, social and governance criteria.
4. Conclusion: CSRD – investment with long-term effect
The effort may seem high at first, but it is profitable in the long term and can significantly contribute to corporate success: Larger organizations should not understand the preparation of the sustainability report according to the new CSRD solely as a cost factor and challenging mandatory task, but much rather as an opportunity to promote a change in thinking. By integrating sustainability as a business strategy, they can benefit in the long term from an improvement in reputation and sustainability ranking, gain access to capital through new investors, reduce costs, and reduce environmental and financial risks.