Corporate Social Responsibility and Disclosure (CSRD) is an upcoming change in the European Union (EU) that will require corporations to provide more information about their sustainability practices and supply chain management. This change is expected to impact many companies, particularly those with complex and global supply chains.
One of the key requirements of the CSRD is the collection and disclosure of data related to environmental, social, and governance (ESG) factors. This means that companies will need to collect data from their entire supply chain, including suppliers, subcontractors, and other partners. This is expected to be a significant challenge for many companies, as they may not have the necessary systems or processes in place to collect this data effectively.
To comply with the CSRD, companies will need to collect data on a wide range of ESG factors, including carbon emissions, water usage, human rights, and labor practices. This data will need to be verified by a third-party auditor and disclosed publicly in an annual sustainability report.
For many companies, this will require a significant investment in data collection and management systems. They will need to ensure that they have the necessary tools and processes in place to collect accurate and complete data from their supply chain partners. This will require a high level of collaboration and coordination between different departments within the company, as well as with external partners.
The CSRD is also expected to increase the level of scrutiny that companies face from investors, regulators, and other stakeholders. This means that companies will need to be more transparent about their sustainability practices and supply chain management, and will need to demonstrate a commitment to improving their ESG performance over time.
The upcoming changes are going to have a significant impact on the IT systems and enterprise architecture of companies. This is because collecting and reporting on ESG data from across the entire supply chain requires a highly sophisticated and integrated system.
The first major challenge for companies will be to establish a centralized data repository for their ESG data. This will require the integration of data from multiple sources, including internal systems, supplier portals, and third-party data providers. To ensure data accuracy and completeness, companies will also need to implement data quality controls, such as data validation rules, data cleansing processes, and data enrichment techniques.
Another major challenge for companies will be to establish a robust governance framework for their ESG data. This will involve defining data ownership and accountability, establishing data access controls, and implementing data security measures to protect sensitive information. Companies will also need to ensure that their ESG data is aligned with the reporting standards and guidelines set by the CSRD, such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB).
In conclusion, the upcoming CSRD change is going to concern corporations, particularly those with complex and global supply chains. Collecting the required data from the supply chain partners is going to be a challenging task, but it is essential to comply with the new regulation and meet the increasing demands of stakeholders. Companies need to prepare themselves by investing in data collection and management systems and building strong relationships with their supply chain partners. By doing so, they can demonstrate their commitment to sustainability and position themselves for long-term success.