CSRD Advisory: Compulsory vs. Free Skate

Delivering the Compulsory & mastering the Free Skate – How CSRD Advisors must balance Efficiency with Value-add

With the advent of the Corporate Sustainability Reporting Directive (CSRD), Sustainability Advisors face a multitude of challenges in consulting for European mid-cap companies, who are preparing for the first reporting cycle to kick off with 2025 data. In the following, we suggest solutions how to best address these challenges.

Here's the challenges advisors and their client companies are faced with:‍

Distilling the complexities of CSRD and ESRS: The multitude of regulations and standards related to the CSRD and the European Sustainability Reporting Standards (ESRS) require detailed and ongoing attention. Advisors must stay updated and structure the relevant requirements clearly. Here's a link in case you'd like to take a look for yourself.
 
Training new team members and clients on CSRD topics: CSRD is a new and complex area for any company. Advisors face the task of regularly and effectively training not only their own teams but also their clients to establish a shared understanding of CSRD requirements and goals.
 
Simplifying communication with stakeholders: Sustainability reports affect a wide range of stakeholders – from investors to customers and internal departments. Clear and consistent communication is crucial for building trust and embedding a sustainable corporate strategy.
 
Aggregating and centralizing all relevant data: Centralizing and making data accessible is essential to ensure comprehensive and transparent reporting. However, data sources are often decentralized and challenging to harmonize, adding complexity to the process.
 
Against this backdrop, it is crucial for advisors to master the balance between the "Compulsory" obligations and the "Free Skate" art of adding value to their clients.

CSRD Consulting - balancing the "Compulsory" vs. the "Free Skate"

Below graphic highlights essential compulsory requirements on the left and the value-adding focal points on the right:

The obligatory "Compulsory" tasks in CSRD reporting are often data- and process-driven. Not to take away the punch line, but on all these compulsory points, software solutions can provide immense value by automating routine tasks and preventing errors.

Efficient Reporting: How to streamline the reporting process to drive efficiency?
While some advisors decide to build tools themselves, others tend to use expert digital solutions that can organise the entire process. Even if companies have the data readily available, there are new processes in the CSRD, like the double materiality assessment, that need to be managed. These new processes make it obvious that functionalities like collaboration and visualisation are essential in driving efficiency. With increasing regulatory complexity, advisors need to decide where to best invest their time, buy or build.

Automated Compliance: How to adhere to regulatory requirements with a minimum of effort? 
Well, keeping abreast of regulatory updates is expected of any consultant as, ultimately, the client expects to significantly reduce the risk of non-compliance. But for the advisor, digging through regulatory updates is an administrative burden. Essential updates communicated effectively, added to the process, implemented to forget - no reminders needed? Again, do it yourself or let expert solutions work for you.

Data Integrity and Accuracy: How can advisors best achieve data quality?
For advisors, data accuracy is essential to delivering reliable sustainability reports. Ensuring data quality, however, can become a labor-intensive task if done manually. Advisors can attempt to build simple validation processes themselves, but this often leaves room for error and requires ongoing oversight. Alternatively, specialized software solutions offer automated validation and tagging to maintain high data quality, freeing advisors from the repetitive task of manual corrections.

Audit: How can a company's supervisory board attest to the compliance of the sustainability report with EU regulations?
For financial reports, the supervisory board can rely on the statutory audit, which is conducted with reasonable assurance. But with sustainability reporting being a new area, the CSRD advisor will need to recommend an internal control system (ICS) and should, at a minimum, facilitate an external audit with limited assurance. Here, software solutions provide immense value in supporting the effectiveness of the internal control system and any audit activity. With change logs, source links and validation rules, the software ensures traceability of data, creating a transparent and auditable data structure. The new machine-readable iXBRL format requirement finally makes "manual" sustainable reporting obsolete.

Now to the "Free Skate" side of the equation. Here's where the advisor can really shine and create value-add in the best interest of the client. To the extent that software efficiently manages the obligatory tasks, advisors then have more time and capacity to focus on their art. This is where value through expertise comes into play: Consulting is customised to the company’s needs and goes beyond mere reporting and compliance. CSRD advisors will not only analyze, but also identify genuine value drivers for the company and develop strategic sustainability goals. Special focus is placed on data interpretation and analysis. As with financial reports, in the future, sustainability reports will be equally scrutinised and need to be designed to validate the company's value proposition. CSRD advisors are best equipped to make respective recommendations and support the company’s long-term sustainability strategy.

Expert Guidance: CSRD advisors bring deep knowledge of the specific industry and company processes, acting as trusted guide based on their experience.

Customized Strategy: Advisors add value by developing tailored sustainability strategies. This is not just about analyzing the status quo but also identifying potential for long-term value creation.

Insightful Analysis: Sustainability data is often complex and multi-layered. CSRD advisors provide valuable insights by interpreting data and highlighting strategic implications to support well-informed decisions.

Value-add: Do we need to say more?

In Conclusion: Using efficient software solutions for the "Compulsory" to have enough time for the "Free Skate" is the best balance to maximise efficiency for the client. Compulsory obligations thus become the solid foundation upon which the art – strategic value creation – can be built.

Learn more about how intelligent software lays the groundwork for successful CSRD consulting and supports advisors in mastering the art of adding value.