Getting ready for new climate reporting mandates

The implementation of Europe’s Corporate Sustainability Reporting Directive (CSRD) will transform the regulatory landscape of corporate climate reporting globally. It will require an estimated 50,000 EU-operating companies to report on climate impact, starting in 2024,¹ and is forcing organizations to assess if their existing ESG reporting process will be sufficient to meet the new standard and other reporting mandates. CSRD is only the start: In October 2023, California enacted a pair of climate reporting laws covering all large public and private companies and the Securities and Exchange Commission is finalizing its proposed reporting rules for companies whose shares trade on US exchanges.²

At NYC Climate Week in September 2023, KPMG LLP led a panel discussion with Green Project and Workiva to look at how technology can help support compliance with these new regulations. Our panelists brought a wide array of industry experience and highlighted a number of important considerations for integrating CSRD planning into corporate control. These are some of the key findings:

Increased scope of reporting requirements under CSRD

The European Sustainability Reporting Standards (ESRS), which underlie CSRD, introduce the concept of double materiality, broadening the scope of reporting. Beyond assessing the impact of sustainability issues on their internal operations and outlook, companies are required to communicate (and in turn, understand) how their activities influence the world around them.

The importance of supply chain engagement

The Greenhouse Gas Protocol (GHG) was designed to cover “value chain” (Scope 3) emissions and hold companies accountable for the sustainability profile of organizations operating throughout their business ecosystem. This includes those they purchase from, sell to, and invest in, with the vast majority of emissions sitting throughout the supply chain of most corporates.

Under the Protocol, sustainable procurement becomes a linchpin to decarbonization. However, many companies are not prepared. They have avoided calculating supply chain impact or relied on broad industry averages to estimate performance. As we enter a new era of regulatory reporting requirements, the importance of direct supply chain engagement to source accurate, primary data cannot be overstated. With CSRD, we expect many companies to seek scalable solutions to collect, audit, and manage down emissions from their suppliers.

Need for higher quality data and flexible data management solutions

As GHG accounting and assurance requirements tighten, it is imperative to have high-quality, transparent data. Organizations will need to invest in robust data management systems to ensure the accuracy, comprehensiveness, and verifiability of their disclosed data. They will also want to work on target setting, year-over-year inventory maintenance, stakeholder permissioning, and data shareability.

Next steps to prepare for CSRD reporting

With the first CSRD report due in 2025 (based on 2024 calendar-year data), the clock is ticking for companies to prepare. The steps that companies should take include the following:

• Conducting thorough ESG double materiality assessments
• Implementing scalable data collection processes
• Establishing cross-organizational controls to engage all relevant internal stakeholders and data holders.

Early preparation is critical.