Written by Gabriella Olivia & Aghna Naufal
Designed by Rizkya Ramadhani
As the business grows and environmental conditions are increasingly degraded, the need for sustainability is becoming one of the most important things for all business actors. The global economy could suffer a loss of $44 trillion by 2050, so companies must realize this urgency of adopting sustainable practices (World Economic Forum, 2021). One of the regulations for managing corporate sustainability practices is the Corporate Sustainability Reporting Directive (CSRD). It is a European Union (EU) law that requires EU businesses, including eligible EU subsidiaries of non-EU companies, to disclose their environmental and social impacts and how their environmental, social, and governance actions affect their business. CSRD was issued to replace the Non-Financial Reporting Directive (NFRD) because it could expand the scope of reporting requirements to cover more companies, ensuring greater transparency and comparability of environmental, social, and governance (ESG) data. This will be implemented gradually between 2024 and 2028 and started on January 1, 2024. The main objective of CSRD is to reduce climate risk and increase sustainability practices related to the European Union’s business activities by evaluating its sustainability performance.
CSRD aims to improve the disclosure process and provide a simpler and more consistent way. The disclosure requirements in CSRD consist of three concepts. First is double materiality, which includes the impact of company activities on the environment and sustainability issues on finance. The second is specific disclosure of sustainability policies and assessment, target metrics and transition plans, supply chain, and sustainability risks. The last is Third Party Audit, which is an audit process carried out by an accredited certification body or agency at the request of a specific client to ensure compliance with specific standards, regulations, or predetermined requirements.
CSRD has several influences on the company’s financial opportunities and transactions. It helps companies to enhance their brand reputation by showing their commitment to sustainable business. It also allows companies to plan and allocate resources more efficiently by providing information regarding sustainability and data-gathering processes. Besides that, CSRD will help companies obtain funding because most stakeholders are considering detailed sustainability disclosures. Also, the company’s performance can be increased because sustainability reporting builds stakeholder trust, and it indirectly improves operational activities alongside the entity’s financial performance.
In order to implement CSRD reporting, the emerging technology here is used to help companies deliver high-quality and reliable ESG reporting. For example, Microsoft Cloud for Sustainability is one of the technologies that help organizations collect and manage more data regarding sustainability regulatory reporting data. One of the products, Microsoft Sustainability Manager, helps business actors gain continuous visibility into the organization’s emissions activities and water data, report the impact and progress in near real-time, and access the intelligence required to collaborate with others.
There are some features in Microsoft Sustainability Manager that enhance ESG reporting. First, customers are provided with templates that will help organizations begin collecting the data they need for European Sustainability Standards (ESRS) reporting and will evolve as the new standard is adopted. The Microsoft Sustainability Manager also helps collect quantitative emissions, water, and waste data aligned to preliminary ESRS regulations and track progress against Science Based Targets initiative (SBTi) designations. Second, to ensure a complete accounting of their emissions impact, organizations must collect and manage data for all emissions categories across their operations and supply chains. Third, users can categorize disposal methods for waste data and integrate undigitized sources, like utility invoices and lab reports, into the system.
Otherwise, the ability to measure and manage sustainability issues depends on an organization’s ability to bring together complex and disconnected data and services and perform in-depth analysis of sustainability, operational, and financial data. In this case, the Microsoft Cloud for Sustainability can increase carbon efficiency by 72% to 98% compared to conventional data centers. Although the exact revenue for these sustainability platforms hasn’t been disclosed precisely, Microsoft’s cloud revenue grew by 22% to reach $111.6 billion in fiscal year 2023 due to these adoption platforms (Microsoft, 2023).
The presence of CSRD represents the EU’s commitment to sustainability and encourages the business’s role in preserving the environment through high-quality sustainability reporting. Besides that, CSRD provides several benefits to organizations in terms of financial opportunities and transactions through the increase of brand reputation, financing, and market value. Moreover, rapid technological development can help organizations implement CSRD reporting, for example, by using Microsoft Cloud for Sustainability. As business practitioners, we must elevate ESG Reporting to evaluate our performance’s transparency so that we can strive for today’s and future needs.
References
Apa yang dimaksud dengan CSRD? (2024, March 20). IBM. Retrieved October 30, 2024, from https://www.ibm.com/id-id/topics/csrd
Farberger, J. (2024, June 4). Why CSRD is a game changer for sustainability reporting. EY. Retrieved October 30, 2024, from https://www.ey.com/en_se/consulting/why-csrd-is-a-game-changer-for-sustainability-reporting
Freitas, S. (2023, June 27). CSRD – A simple step-by-step guide. Deloitte. Retrieved October 30, 2024, from https://www.deloitte.com/uk/en/services/audit-assurance/blogs/2023/csrd-simple-step-by-step-guide.html
Kareem, S. M. (2024, June 5). Leverage AI to simplify CSRD reporting. Microsoft. Retrieved October 30, 2024, from https://www.microsoft.com/en-us/industry/blog/sustainability/2024/06/05/leverage-ai-to-simplify-csrd-reporting/
Microsoft. (2023, October 16). Microsoft 2023 Annual Report. Microsoft. Retrieved October 30, 2024, from https://www.microsoft.com/investor/reports/ar23/index.html
World Economic Forum. (2021). The Global Risks Report 2021.
