This year has been a pivotal year for ESG regulations. Companies are gearing up for heightened reporting obligations as deadlines for the Corporate Sustainability Reporting Directive (CSRD) draw near. July marked the enforcement of the Corporate Sustainability Due Diligence Directive (CSDDD), while several US states, including California, Washington, and New York, have introduced new regulations to enhance transparency in corporate sustainability disclosures. Amid these developments, companies and investors alike are navigating a landscape of evolving compliance requirements.
For many, this level of reporting represents uncharted territory that is complex to navigate. Understanding which regulations apply to your company is just the beginning — establishing robust processes to meet reporting deadlines is equally crucial. As organizations prepare for compliance, here are four essential considerations:
1. Compliance takes time
Navigating ESG regulations involves identifying applicable rules and collecting relevant data. Once these foundations are laid, the meticulous task of data collection, assurance, and report preparation begins. Some regulations, such as the CSRD, mandate third-party assurance of data, adding to the reporting timeline. Starting early is key to ensuring a smooth process and meeting deadlines effectively.
2. Embrace interoperability to ease reporting burdens
Depending on a company’s location and size, it may face reporting requirements from various jurisdictions. However, the interoperability between some regulations can help streamline compliance efforts and reduce duplication of efforts. For instance, multiple regulations, including CSRD, the Sustainable Finance Disclosure Regulation (SFDR), and California’s Climate Accountability Package, require companies to report on carbon data. Additionally, there is some level of interconnection between the ESRS and the IFRS S1 and S2 standards.
3. ESG data offers strategic insights
Beyond compliance, ESG metrics offer valuable insights that can bolster a company’s competitive edge. By analyzing this data comprehensively, organizations can benchmark their performance against peers or industry standards, identify potential risks, and uncover opportunities for long-term financial growth. Viewing compliance as part of a broader strategic initiative enables companies to maximize the value of their data investments.
4. Engage partners for success
While navigating regulatory landscapes can be daunting, companies need not tackle these challenges alone. Engaging with technology solutions can help streamline data management, simplifying the process of requesting data and analyzing reported metrics. Expertise from experienced partners, be they in-house or external, can also provide guidance on compliance requirements and help with staying updated on evolving regulations.
ESG Regulatory Compliance with Novata
Regulatory compliance may be complex, but it also presents opportunities for organizational growth and resilience. By starting early, leveraging existing data, embracing strategic insights, and seeking appropriate partnerships, companies can not only meet regulatory obligations but also thrive in an increasingly sustainable business environment. Novata provides a secure ESG data management solution and expert advisory practice to help companies address the challenges and uncertainties of regulatory compliance. Our technology platform is purpose-built to streamline data collection, document management, and reporting for disclosures, including CSRD and SFDR. With deep expertise, our advisory team provides clear, actionable guidance to help demystify regulatory requirements and help companies meet legal obligations. Learn more about Novata’s regulatory solutions.
