Many organizations have already designed their company on the basis of Corporate Social Responsibility principles, often intrinsically motivated to do the right things. With the arrival of the CSRD guidelines and their effects, the idealistic and somewhat non-committal nature of CSR is giving way to a new reality.
The arrival of the Corporate Sustainability Reporting Directive (CSRD) requires large European companies to report on their environmental and social efforts starting from 2024/2025. This raises questions for many entrepreneurs and companies in the SME segment about their share and contribution to this development. SME entrepreneurs are starting to feel the effects of the mandatory ESG reporting of the larger companies more and more. It can already happen that a customer asks about the CO2 impact of the product that is supplied, or that a bank sets sustainability requirements for more favorable conditions for an investment.
We encounter the ‘why?’ question about environmental and social responsibilities less and less often, it is mainly the ‘how?’ question that is becoming more prominent. And especially how you, as an SME, should deal with the (emerging) legislation. What do we pick up first, what knowledge do I need, does my information provision provide for the questions around ESG reporting, are the frameworks clear in which this must take place, etc… The larger companies that are already subject to CSRD are assisted by the ESG experts of the Big-4 accounting firms or consultancy agencies where the necessary expertise is available on this subject, but how does this work for SMEs?
It is time for a step-by-step plan that describes the best way for the company to tackle CSRD; from overview to insight. Transforming a business and changing the mindset towards environmental and social responsibility can be a challenging and complex process, but there are some basic steps that can get you started. And by already gaining insight into how current business activities contribute to ESG impact, such a roadmap will help to ultimately make the company more resilient and future-proof.
A first step is to appoint a sustainability officer. It is important that this is someone who is well acquainted with the organization, knows his way around the organization and has the right motivation to work on the foundation of a sustainability plan. This person does not have to be an ESG specialist, but rather is a director or coordinator of the ESG program who gets started with acquiring knowledge, following training in the field of ESG, and starts from this beginning with building a step-by-step plan.
In order to make such a step-by-step plan concrete for the SME segment, we think that the accountant has an important role to play. Sustainability is a theme that is increasingly being taken up by the accountant as an advisory service, and by helping to outline frameworks and guidelines, the various ESG metrics are translated into practical goals. In addition to the fact that the accountant is very useful in the practical approach, at some point Assurance will also have to take place about the results achieved.
The second step in the process is to determine the impact based on what is already known. Simply by using the existing financial and non-financial data within the company. By linking this data to our Greenaumatic Bridge integration product, the financial and non-financial sustainability impact is quickly made visible and measurable. With the analysis and reporting provided based on ESG metrics, a number of conclusions can be drawn fairly quickly. This can be a conclusion about CO2 emissions, but can also be just as well on staff absenteeism, employee turnover, waste processing, or other metrics. This saves time and resources, and immediately forms an excellent basis for setting a number of concrete objectives (KPIs).
Based on the insights obtained from the reporting tool, the various ESG goals can be determined in step 3. Goals that contribute to improving the impact. Our advice? Create clear KPIs and ensure that these decisions are anchored in the daily management and operation. In our reports, we already give several initiatives that can be considered. And above all, don’t be tempted to run too fast in the beginning; step by step. By coordinating the findings of each step with the stakeholders, you create transparency, receive feedback and secure support for the decisions taken.
An additional advantage of starting ESG reporting timely is that the production- and supply chain are made more sustainable in the long term. This way, strategic collaborations can be achieved and companies are able to detect potential problems at an early stage. This ensures that the supply chain continues to function smoothly once the CSRD guidelines come into force.
The statement “Companies must go beyond superficial change and fundamentally change their operations to prioritize sustainability and social responsibility” highlights the importance of not just superficial change, but a holistic approach to ESG principles. Greenaumatic originated from this principle and we use our knowledge and expertise to assist both SMEs and accountants in the steps necessary to achieve this goal.
Sustainability is a theme that must be supported by the entire organization, and not “imposed” from the top. This should be noticeable throughout all layers of the organization.
If you want to know more about ESG and CSRD, and how you can turn the various pieces of the puzzle into a practical start of your ESG transition, contact us, we are happy to help you on your way!
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