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After five years of applying the Non-Financial Reporting Disclosure (DPEF in France), the 11th Tennaxia study on CSR reporting practices and reports aimed to identify developments and lessons learned from this first directive in order to understand how companies already affected and those that will soon be affected by sustainability reporting are preparing for the new obligation under the Corporate Sustainability Reporting Directive.
PANEL: Over 200 respondents 54% of companies are listed 58% of companies are French 11% are from Benelux, 7% from Italy, 4% from Portugal, 4% from Norway, 6% from other countries (Ireland, Austria, Spain, etc.) 122 questionnaires selected. In the 2022 panel, 60% of companies are already subject to the NFRD and 40% will be subject to the CSRD.
Five key points emerge from the study.
Finance departments are increasingly involved in strategy and non-financial reporting. With the need to link financial and non-financial data, 74% of companies report that their CFO is involved in ESG issues. 92% of respondents report increased pressure from banks and investors. For 66% of companies, the issues revolve around sustainable financing, and for 69%, around ESG data concerning the company.
As such, the trend will likely be toward closer collaboration, or even a merger, between the finance and CSR departments. On the one hand, CFOs will be expected to ensure rigorous processes and data, while on the other, the CSR department will provide expertise on sustainability issues.
The executive committee is increasingly involved in managing KPIs. Thirty-four percent of executive committees manage KPIs on a quarterly basis and 12% on a monthly basis, whereas in 2022, 55% of executive committees managed them on an annual basis. This change also reflects the positive impact that companies have seen from implementing a DPEF: greater involvement of management in CSR issues and better performance management.
Climate change remains the main risk identified by companies. Among the main risks identified by companies, climate change ranks first. More than 70% of these companies will have completed their climate change risk analysis by the end of the year. 52% of companies newly affected by sustainability reporting say they are preparing for it by measuring their carbon footprint for the first time.
Double materiality analysis is a major challenge that is well understood by the responding companies. 32% of companies that will apply the CSRD from 2025 have already carried out their double materiality analysis, even though the methodologies had not yet been adopted at the time of the survey. 41% of respondents whose analysis is ongoing will also be subject to the directive from 2025.
These figures may seem optimistic when compared with those from thefifth MEDEF study of 100 large companies listed on the SBF 120 index. In this report, only 14 companies publish a dual materiality analysis in line with the two criteria expected by the CSRD (impact materiality and financial materiality).
Sustainability reporting remains a complex issue to grasp. Although 82% of companies mentioned that the DPEF has helped to embed CSR more firmly within their organizations, the complexity of the guidelines and the variety of definitions remain the main obstacles since its introduction. To overcome these obstacles, 52% of companies say they want to recruit people to prepare for the CSRD. KPIs have also been a challenge for companies since the DPEF was introduced, and this is also the priority issue for companies that will be reporting for the first time.
Preparing for the CSRD for companies soon to be subject to it
While 60% of the companies in the panel report having started work on CSRD, initial findings reveal the difficulty of overlooking regulatory constraints in favor of apparent opportunities and a relative lack of knowledge about the issues to be addressed. The lack of human and financial resources in the face of the complexity and burden of the exercise is highlighted, along with the difficulty of involving governance.
"The CSRD will be a huge task for us. Even though we are not required to respond to every line of the CSRD, the difficulty will lie upstream in searching for data, establishing meaningful indicators as a priority, ensuring reliability, and monitoring over the long term... This will require the mobilization of all departments within the company."
In conclusion,
Even for companies with many years of reporting experience, aligning with the CSRD represents a significant change. Starting with the dual materiality exercise, both in terms of the methodology to be implemented and the scope of its implications.
As for mid-sized companies, the challenge is multifaceted. The first challenge is acculturation to sustainability reporting. It is important to understand that this is not an end in itself and that there are many opportunities. These include attracting customers, differentiating themselves from competitors, retaining employees, attracting talent and investors, accessing indexed financing, and ultimately ensuring the sustainability of their business model. These are all potential benefits that outweigh the "burden" that the CSRD may initially appear to represent.
The second challenge is to set up the ad hoc organization and the necessary resources. An organization in which CFOs can contribute their expertise in processes and data collection, and beyond CFOs, the involvement of other support functions and operational departments. And, of course, the involvement of senior management in steering material issues.
Human resources, with recruitment to promote CSR issues within the organization and ensure they permeate all teams. Financial resources to be supported by service providers and reporting software.
Ultimately, the CSRD represents a real change. It involves the integration of CSR issues by corporate management and consideration of their impact on the company, the environment, and society. The fear of change in companies has been the subject of extensive literature. The implementation of the CSRD would benefit from being part of a genuine change management process. The key steps are well known. Be an agent of change, determine what you are afraid of losing and anticipate, ask yourself what you can gain from it, and seek help.
To be continued!