Dive Brief:
- Global companies have begun aligning their climate-risk sustainability reporting to the European Union’s Corporate Sustainability Reporting Directive, even if they’re not required to, according to a recent study from financial and ESG reporting software firm Workiva.
- The firm’s 2024 Global ESG Practitioner Survey of more than 2,000 respondents responsible for ESG reporting at their respective companies found that 81% of respondents not covered by the CSRD are still planning to comply with the European bloc’s double-materiality disclosures.
- Mandi McReynolds, Workiva’s chief sustainability officer and global vice president of ESG, said in an interview with ESG Dive that — with or without the Securities and Exchange Commission’s paused climate disclosure rule — “individuals are choosing to align to [the CSRD] because they see it as becoming the standard of acceptance by their customers.”
Dive Insight:
The CSRD officially went into effect Jan. 1, though the EU approved a two-year reporting delay for corporations based outside of the EU and those from certain sectors last week. Such exempted companies will now have until June 30, 2026 to comply with the directive.
The CSRD applies to all companies listed on the bloc’s regulated markets, including both EU and non-EU companies. The regulation also applies to U.S. companies with subsidiaries based in the EU if they meet certain defined employee and revenue thresholds. However, Workiva’s study shows companies are already looking to align their standards with the bloc’s high bar.
Eighty-six percent of North American-based respondents not covered by the CSRD said they plan to align all or part of their reporting strategies with the regulation. McReynolds said in addition to having the benefit of being one of the first major ESG regulations, the CSRD’s requirement to look at both climate change’s impact on its finances and the environment is forcing companies to “think differently.”
“What we're seeing from companies is [the CSRD is] going to become the gold standard,” McReynolds said. “So then they have to rethink the long-held reporting practices.”
McReynolds said this re-thinking for companies is happening in three main ways: evaluating how to disclose both quantitative and qualitative data; report their risk assessment strategies; and receive third-party assurance for their disclosures as required by the CSRD.
McReynolds said, whether it’s the CSRD or the SEC’s climate disclosure rule, companies are concerned about how they will gather the qualitative information required. Eighty-three percent of respondents said that collecting accurate data to comply with the directive will be an organizational challenge.
“Companies have to start to wake up and pay attention,” she said. “It's not just about your quantitative, it is about the qualitative work of disclosing your strategy and governance structures and many other elements there.”
Workiva commissioned business-to-business research firm Ascend2 to conduct the study of 2,204 professionals involved in ESG reporting at their companies in March. The study only polled members of the ESG reporting teams at companies with over 250 employees and $250 million in annual revenue, with 30% of respondents based in North America.
The respondent breakdown in the report also displays the variance in job roles involved in ESG reporting. Twenty-eight percent of respondents were on a dedicated sustainability or ESG team; 25% were in executive leadership; 20% came from operations; and 17% came from a finance or accounting team. An additional 6% reside on internal audit or risk management teams and 3% of respondents work on their company’s legal or compliance team.
Workiva also conducted a separate survey on integrated reporting earlier this year, which surveyed executives across industries. The majority of respondents polled (74%) said they believed complying with regulatory requirements would become “significantly more challenging” in the next year. Around two-thirds of respondents (67%) said they were concerned about their company’s ability to comply with new regulatory reporting requirements.
McReynolds said companies are increasingly investing in the staffing and collaboration across teams that will be necessary to comply with not only the CSRD, but whatever additional jurisdictional regulations they face. A large part of that investment in collaboration is being funneled towards technology, with 92% of companies reporting they have begun investing in technology to meet their reporting demands.
McReynolds said companies are “thinking about what are the ways that these tools and teams can come together in order to tackle global complexity,” and, since there will never be 100% alignment among global sustainability reporting regulations or frameworks, companies need to “move forward with radical change.”
“[Companies should be] ready for transformation around both the financial reporting side and the ESG reporting side and really believe in how tech and innovation, like generative AI are going to play a central role in the next five years for how we do our jobs, as well as how we can be more efficient and effective,” she said. “Because that complexity is not going to go away.”
