The promise and reality of CSRD reporting

Preparing to report under the EU’s Corporate Sustainability Reporting Directive (CSRD) is leading companies to give more weight to sustainability in business decisions. Around three-quarters of companies preparing to file under the directive, including those headquartered outside the EU, say they are factoring sustainability into decision-making to a greater extent, or that they plan to do so. Companies also see multiple business benefits flowing from the CSRD, including better environmental performance, improved engagement with stakeholders and risk mitigation.

The results of PwC's first Global CSRD Survey will provide encouragement to advocates of the new reporting system who believed that increased transparency in sustainability would lead to changes in business practices. However, companies are also reporting several challenges in implementing CSRD, such as limited access to data, insufficient workforce capacity, and the requirement for new technology investments.

The CSRD, underpinned by 12 European Sustainability Reporting Standards (ESRS), requires companies to make detailed disclosures about sustainability performance and to consider the implications of sustainability for their business across a wide range of topics, including climate change, business conduct, resource use, pollution, and biodiversity. About 50,000 companies globally will be affected. (See About the CSRD, below, for more detail.)

Overview of the European Sustainability Reporting Standards

As we’ve argued elsewhere, the directive is not only a major new reporting obligation but also an opportunity for leaders to understand in greater depth how sustainability will challenge today’s business models and create opportunities for growth and reinvention. The survey suggests that companies are starting to appreciate this upside potential. In addition to the indirect benefits noted above, about one-third of survey participants expect CSRD implementation to lead directly to revenue growth and cost savings. Significantly, those further along in their implementation journey are more optimistic about the business benefits across all dimensions (see chart).

Although many companies produce annual sustainability reports—and report against other sustainability frameworks—the processes that support these disclosures typically need to be extended and strengthened to meet the demands of the CSRD. The directive asks companies to report not only on the sustainability of their own operations but also on the entire value chain, and across a wider range of topics than most have considered until now. In addition, the need for investor-grade reporting requires processes that are repeatable, well-documented and assurable by independent auditors or other third-party assurance providers. 

Given the extensive scope and complexity of the CSRD, it is important to assess how companies are advancing in their implementation efforts. While respondents to our survey demonstrate a high level of confidence, their responses also shed light on potential obstacles. These include limited completion rates for certain initial activities, insufficient involvement of senior stakeholders in some companies, and a relatively low adoption rate of technologies that facilitate streamlined and effective ongoing reporting.

As noted, an overwhelming majority of survey respondents are at least somewhat confident they will be ready to report under the CSRD by the required date. Among those expecting to file in FY2025, only 3% say they are not confident (see chart).

Dig a little deeper, however, and confidence differs greatly not only among companies but also among topics laid out in the reporting standards. Respondents report high confidence on topics that are generally included in existing disclosures (e.g., workforce, business conduct and climate change) but are far less confident in their ability to meet reporting requirements on less familiar topics such as biodiversity, circularity, pollution and workers in the value chain (see chart).

In addition, only a minority of companies have completed up-front scoping activities, even among those reporting in FY2025 (see chart below). The survey results suggest that making progress with scoping breeds confidence. For example, among the most confident companies, more than one-third have finished confirming reporting options and exceptions, completing double materiality assessments, and completing disclosure gap analyses. Those at the start of their journey are less confident. 

Crucially, these up-front scoping activities determine whether the company will report at the consolidated group level or at the level of an individual entity, and therefore also determine what data is needed, on which topics, from which sources and on what timeline to satisfy their reporting obligations. Only then can teams create concrete work plans. In our experience, companies find the CSRD less daunting once they understand in detail how the reporting standards impact them. Among survey respondents, 75% say they plan to comply with the CSRD at the consolidated group level.

Double materiality assessment of IROs is the mechanism through which companies determine which aspects of sustainability are material to their business and to stakeholders and, therefore, need to be included in their CSRD reports. We asked respondents how many IROs they were evaluating, before and after applying a materiality threshold. The percentage of companies evaluating more than 100 halved after applying materiality, while the percentage of companies evaluating fewer than 20 doubled (see chart below).

The diverse range of responses highlights the considerable variation in the number of topics that companies choose to report on, which is expected and appropriate given the company's size, business model, and complexity of its value chain. Furthermore, assessments of impacts, risks, and opportunities are inherently subjective, even with the presence of comprehensive reporting standards. However, we anticipate that in the coming years, there will be a certain level of convergence among similar companies as they gain more experience working with the standards and as best practices continue to emerge.

Regardless of the scope they ultimately decide upon, companies say that data availability and quality are the biggest obstacles to implementation (see chart below). The breadth and depth of CSRD reporting presents a massive challenge as teams work to collect, verify and consolidate many new types of data. Much of this information does not exist today in companies’ enterprise resource planning (ERP) and other central source systems. It must be tracked down manually from spreadsheets and original documents (e.g., invoices) that are distributed across the enterprise. This is a recipe for inefficient and error-prone processes, unless companies pay close attention to the fundamentals of data strategy—how sustainability data is defined, sourced, governed and processed. 

The CSRD's requirement to examine the entire value chain introduces an additional challenge related to data. Companies are now required to utilize data from suppliers, customers, and third-party data providers, which may be unfamiliar territory for many. They must also evaluate the reliability of this data. Furthermore, the initial task of comprehending and defining the value chain specifically for CSRD purposes is a time-consuming endeavor. Consequently, it is not surprising that survey participants identified value chain complexity as the second most significant barrier to implementation.

In our experience, a major cross-functional effort under the sponsorship of senior leaders is needed to address the CSRD’s broad scope and complexity. Survey respondents report on average that eight business functions and departments either are currently involved or will be involved in their implementation effort, typically including sustainability, finance, operations, procurement, technology and legal.

Given the requirement for assurance under the CSRD, an assurance provider should be involved from an early stage. Most companies appear to have understood this. Almost 80% of respondents say they have engaged an assurance provider, either their financial auditor (49%), a different audit firm (14%) or another third-party assurance provider (16%).

Executive committees or boards are currently involved in CSRD implementation at more than 70% of companies, and this proportion rises to almost 80% for those planning to report in FY2025 (see chart below). Although this is encouraging, we urge teams who have not yet engaged with these senior stakeholders to do so as soon as possible, especially at companies aiming to report in 2025. Without strong governance—driven from the top, and including clarity on roles and responsibilities across business functions—there is a danger that implementation efforts will stall.

Among executive committee members, chief financial officers (CFOs) and chief information officers (CIOs) should play central roles supporting chief sustainability officers (CSOs), who in many cases have been leading sustainability reporting efforts thus far. CFOs, as custodians of existing financial reporting processes, ‘know what good looks like’ when it comes to investor-grade disclosures. In our experience, CSOs who engage the finance function can focus more effectively on their areas of distinctive expertise: helping the company realise sustainability-led opportunities and mitigate risks. 

While the majority of respondents intend to engage the technology function, fewer than 60% have taken this step thus far. Based on our experience, involving technology colleagues early on is beneficial as it allows them to begin contemplating how to integrate emerging requirements into plans for new or upgraded systems. While not every company may be prepared to undertake a significant investment program, focused technology investments that build upon existing cloud and ERP infrastructure are ultimately necessary to ensure streamlined and sustainable reporting. This will enable the integration of sustainability data into decision-making processes throughout the entire organization.

Without such investments, organisations will need to continue to rely substantially on manual processes. Asked about their use of technology tools, more than 90% of survey respondents say they are using, or planning to use, spreadsheets for sustainability reporting, a far higher percentage than are leveraging technology such as sustainability data lakes, disclosure management solutions and carbon calculation tools (see chart below).

In the coming years, we anticipate a significant shift in these findings as more companies make investments in solutions that enable streamlined and consistent reporting, while also integrating sustainability data into their decision-making processes. Additionally, we expect a substantial increase in the number of respondents utilizing AI tools for sustainability reporting.

The CSRD is part of a broad effort by policymakers—not only in Europe, but also in the United States, Australia, China and other countries and territories—to steer economies towards a sustainable, low-carbon future. Besides new reporting requirements and other sustainability policies (for example, the EU Carbon Border Adjustment Mechanism and Australia’s Safeguard Mechanism), governments have established major spending programmes. Fiscal initiatives such as the US$370 billion US Inflation Reduction Act and the European Commission’s US$270 billion Green Deal Industrial Plan aim to stoke demand for low-carbon goods and services, and to encourage investment in the industries that supply them. 

Undoubtedly, integrating sustainability into business strategies and planning presents significant opportunities for value creation. This is where the efforts of Corporate Social Responsibility and Disclosure (CSRD) reporting come into play. The process of collecting sustainability data and preparing disclosures can equip executives with valuable information to make informed business decisions. Our survey affirms that an increasing number of businesses are recognizing this potential, although some still adhere to a compliance-only mindset.

In our experience, three actions can enable CSRD readiness as well as deeper integration of sustainability with strategy:

• Move now to understand your scope, while recognising the progress you’ve made already. The CSRD and the accompanying ESRS may be new, but plenty of companies have been disclosing sustainability information for years, under regulatory mandates or voluntary standards. To do that, they have performed activities (such as stakeholder engagement and materiality analysis) and set up processes (such as data collection) that can be leveraged for the CSRD. At the same time, companies that have not completed up-front CSRD scoping should consider accelerating this effort. Only then will they fully understand the challenge they are facing—and be able to make concrete plans. Interacting with industry peers and partners will illuminate how others are approaching less-familiar aspects of the new reporting standards, such as double materiality.
• Set up your data processes and systems for the long haul. In our survey, relatively few respondents say their companies currently keep sustainability information in central systems. Although we didn’t ask about the use of central systems in other business domains, we’ve seen that they’re commonly applied in areas such as finance, customers, products and human capital—areas where reliable information has long been seen as essential for decision-making and for external reporting. Savvy executives recognise that sustainability information, too, must be available, accurate and audit-ready: not just on a one-time basis, but annually. They are making investments in data and systems comparable to the ones they use in financial reporting.
• Get your top executives involved. As noted, cross-functional collaboration on CSRD readiness is already the norm. Leading enterprises make sure that collaboration happens at the highest level, organising the CFO, the CIO and the CSO into a power trio responsible for CSRD implementation. Supported by their respective teams, CFOs bring knowledge of how the company manages information and makes decisions, CIOs direct the installation of enabling data systems and software, and CSOs provide expertise in sustainability topics and CSRD-specific procedures such as double materiality assessment. The combination of these skills is essential not only to meeting compliance requirements but also to embedding sustainability into discussions about the company’s operations and business model. 

It is important to recognize that reporting under the Corporate Social Responsibility and Disclosure (CSRD) and European Single Electronic Reporting Format (ESRS) is a journey that involves all stakeholders, including regulators. In the initial years, reports may vary significantly among similar companies as stakeholders work towards a shared understanding of best practices. At this stage, the key focus should be on senior leaders actively engaging with the CSRD's requirements and intent, as well as the opportunities it presents for value creation.

About the survey

In April and May 2024, PwC surveyed 547 executives and senior professionals across more than 30 countries and territories. About one-third of respondents hold C-suite roles, and the remainder are senior professionals across business functions including sustainability, finance and risk. Sixty percent of companies represented are headquartered within the European Union. More than half have annual revenues of over US$1 billion. Sectors represented included manufacturing (25%); financial services (21%); technology, media and telecommunications (18%); consumer and retail (14%); energy, utilities and resources (13%); and healthcare (7%). Across all respondents, 57% say they will file under the CSRD for the first time in the 2025 financial year, based on FY2024 data.