EU CSRD Sustainability Law Drives Demand for Reporting Technology

The new European Union Corporate Sustainability Reporting Directive is driving increased demand for reporting technology

Three Quarters of Large Companies Are Investing in New Technology
99% Are Preparing for an Increase in Requirements

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The growing need for organizations to make formal disclosures under the new European Union Corporate Sustainability Reporting Directive is driving demand for new reporting technologies and related services to assist with compliance strategies and implementation.

In addition to auditing or advisory services offered to corporations subject to the law in the European Union and around the world, the law has given rise to benchmarking services, technology, and educational services.

Three Quarters of Large Companies Investing in New Technology

A recent survey by Deloitte of executives at 300 companies with revenues of $500 million or more finds that 74% of respondents “are likely to invest in new technology or tools to enable more timely and higher-quality disclosure, a decrease from 99% in December 2022. This decrease is likely due to some companies having already made investments over the past few years. Nearly all (99%) have already enhanced (or intend to) internal mechanisms to promote preparedness for future requirements. Seventy-nine percent have already done so—a decrease of 10%, from 89% in December 2022. Regardless, the move to strengthen internal governance, systems, processes, and controls remains very high,” the report finds.

Reflecting this potential demand:

GRI, the global reporting platform, launches a service to help reporting companies comply with CSRD sustainability reporting standards. One of the most widely used global sustainability platforms, GRI reportedly has worked closely with the European Union to align its reporting standards with those of the new European Union reporting standards.
Good.Lab, a provider of sustainability reporting software, has announced a new platform to help mid-marketing companies comply with the CSRD, according to a recent report in FinTech Global.
The Palau Project offers a technology and learning platform specifically for EU CSRD.
Vodafone Business Germany and sustainability reporting specialist Envoria have launched ESG Navigator, an “all-in-one solution for collecting and analyzing ESG data. Envoria is a startup that was successfully scouted by Vodafone Germany’s UPLIFT startup initiative.”

99% Are Preparing for an Increase in Requirements

According to the Deloitte report, 99% of respondents report they were preparing for a potential increase in requirements in December 2022 and 2024, and 77% report creating new roles and responsibilities to support preparation and execution of enhanced reporting processes and controls to meet regulatory requirements in 2024. Other findings include:

Respondents indicate that strategic choices around how to prepare for evolving regulatory reporting requirements are increasingly influenced by the board of directors (52%), as well as by investor pressure (42%). While ESG rating agencies continue to influence decisions (45%), other external sources are less influential.
Brand reputation (20%) is the top business outcome respondents expect to benefit from in response to enhanced ESG reporting, according to the survey. Another 15% are looking to improve talent attraction, and 14% seek to realize pricing premiums for their products, highlighting how ESG reporting can influence external perceptions of the company. Meanwhile, half (51%) expect to realize internal benefits like improved operational efficiencies, reduced risk, or strengthened trust with stakeholders. When asked to identify the top three expected business outcomes, respondents selected reduced risk (53%), increased efficiencies and ROI (52%), and both talent attraction and retention and brand reputation and enhancement at 51%, based on the survey responses.
Among respondents, the top two challenges to high-quality ESG reporting were ESG data quality (including accuracy and completeness) and data processes and controls that are well established in financial reporting (including documentation, reviews, approvals, and sign-offs), at 76% and 52% respectively.

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