In 2025, the Corporate Sustainability Reporting Directive (CSRD) will require large businesses based in and/or doing business in the EU to report on their sustainability goals and progress. To help our customers navigate this landscape, Worldly is publishing a series of blogs breaking down the requirements and how businesses can begin preparing for these disclosures.
In this article, we will share recommendations on how your company can prepare to track and report on your impact improvement.
Tracking Towards Your CSRD Goals
In related blogposts, we have outlined how you can determine which sustainability topics are material for your business and begin setting goals for those topics. But once you’ve set goals, how do you actually measure and share progress towards achieving those goals?
One option is through regular monitoring and disclosure of performance. This is the approach taken by CSRD, which requires businesses to set targets and report on progress annually on their environmental and social impacts throughout their value chains. For every material sustainability issue, companies need to consider how their business model interacts with the topics and develop strategies for managing these interactions. CSRD expects that companies disclose their policies and actions to address the matter, and that they report their progress managing the matter through metrics and targets.
Reporting for sustainability statements is expected to include three time horizons:
- Short-term: The reporting period used in its financial statements;
- Medium-term: From the end of the short-term period up to five years in the future; and
- Long-term: Greater than five years after the short-term period ends.
For the many companies that will need to disclose in 2025, it will be necessary to spend 2024 collecting and analyzing the data that’ll be disclosed the next year. Although CSRD does not require companies to report all value chain information in the first three years of reporting, it does require companies to make ‘reasonable efforts’ to collect material value chain information.
We therefore recommend that companies should be proactive now: determining which sustainability metrics are material for your business and developing a plan for gathering that data in a consistent, comparable, and verifiable way.
The Importance of Primary Data
In order to establish metrics and targets, as well as to track performance as required under CSRD, you’ll need to immediately start collecting accurate, consistent, and comparable primary data that can be used as inputs.
Once materiality has been established for a given topic, CSRD expects businesses to make “reasonable efforts” to collect data from all of their value chain partners. The regulations acknowledge that collecting this data can be challenging, especially when the company reporting “does not have the ability to control the activities of its upstream or downstream value chain and its business relationships.” After making reasonable efforts, the company “shall estimate the information to be reported about its upstream and downstream value chain, by using all reasonable and supportable information, such as sector-average data and other proxies.”
Yet because value chain information is so critical, there is an expectation that companies will transition from proxies to primary data over time. Sector-average data will initially be allowed if collecting primary data proves challenging, sectoral averages will only be accepted within a three-year window — after which primary data from value chain partners will be required. This will be particularly important in Tier 2 (material production), which accounts for 53% of total apparel industry greenhouse gas emissions according to a recent analysis by the Apparel Impact Institute.
How the Higg Index Can Help
The Higg Index tools, developed by the SAC and available on Worldly, can help businesses track continuous progress of their sustainability performance.
From your greenhouse gas emissions in tiers 1, 2, and 3 to how you manage water resources, chemicals, worker well-being, your impact on local communities, and more, the Higg Facility Tools will provide you with an in-depth look at key areas the CSRD examines. These tools can collect first-hand data from your facilities on an annual basis, making them a key input into your CSRD reporting. Additionally, the data from the Higg Facility Environmental Module and Higg Facility Social & Labor Module can be verified by a third-party, so that you and your teams are confident in the data you’re gathering and publicly disclosing.
To take just one example, these tools provide distinct and significant value for disclosure of climate impacts.Through the Higg FEM, our platform offers measurement and management of Scope 3 (value chain) emissions, which often represent 80%+ of consumer goods brands’ total emissions and must be disclosed under CSRD.
We’re Here to Help
Get in touch with your customer support representative today to learn more about CSRD, get a copy of our technical white paper, and learn how Worldly can support your compliance efforts.