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Category: Sustainability Reporting

  • The Manufacturing Industry’s Sustainability Challenge: Reporting and Compliance in the UK and Europe

    The Manufacturing Industry’s Sustainability Challenge: Reporting and Compliance in the UK and Europe

    As of April 2025, manufacturers across the UK and Europe are navigating an increasingly intricate landscape of sustainability reporting and compliance. Evolving regulations, heightened stakeholder expectations, and the imperative for transparency are reshaping operational strategies. This comprehensive update delves into the current regulatory frameworks, challenges, and strategic opportunities for manufacturers.​

    Regulatory Landscape Overview

    United Kingdom

    Streamlined Energy and Carbon Reporting (SECR)

    SECR remains a cornerstone of the UK’s sustainability reporting, mandating large companies and LLPs to disclose energy usage, carbon emissions, and efficiency measures in their annual reports. This framework ensures transparency and accountability in energy consumption and carbon footprint.​

    UK Sustainability Disclosure Standards (SDS)

    In Q1 2025, the UK government released the UK Sustainability Reporting Standards (UK SRS), aligning with the International Sustainability Standards Board’s (ISSB) IFRS S1 and S2. These standards focus on material sustainability-related information and climate-related financial disclosures, respectively. The Financial Conduct Authority (FCA) will apply these standards to UK-listed companies, with reporting requirements commencing for accounting periods starting on or after January 1, 2026. ​

    European Union

    Corporate Sustainability Reporting Directive (CSRD)

    Effective from January 2025, the CSRD expands reporting obligations to large EU companies and certain non-EU companies operating within the EU. Companies are required to disclose sustainability information in line with the European Sustainability Reporting Standards (ESRS), covering environmental, social, and governance (ESG) factors. This directive aims to enhance transparency and comparability of sustainability data across the EU.​

    Corporate Sustainability Due Diligence Directive (CSDDD)

    Adopted in July 2024, the CSDDD mandates large companies to identify, prevent, and mitigate adverse human rights and environmental impacts within their operations and supply chains. The directive applies to EU companies with over 1,000 employees and a net worldwide turnover exceeding €450 million, as well as non-EU companies with significant EU turnover. Implementation will be phased:​

    • July 2027: Companies with over 5,000 employees and €1.5 billion turnover.
    • July 2028: Companies with over 3,000 employees and €900 million turnover.​
    • July 2029: Full application to all companies within scope.​

    Non-compliance may result in penalties up to 5% of a company’s global turnover. ​

    EU Deforestation Regulation (EUDR)

    Set to commence in December 2025, the EUDR requires companies to ensure that commodities like soy, beef, cocoa, and palm oil are not linked to deforestation. Recent amendments have eased reporting requirements, allowing annual due diligence statements instead of per-shipment reports. Countries will be classified as high, standard, or low risk, influencing the stringency of compliance procedures. ​

    Challenges for Manufacturers

    Resource Intensiveness

    Compliance with these regulations demands significant investment in time, personnel, and financial resources. For instance, the European Chemical Industry Council reports that regulatory compliance costs exceed $20 billion annually for chemical firms. ​

    Data Management Complexities

    Accurate data collection across complex supply chains is challenging, particularly for Scope 3 emissions and social impact metrics. Ensuring data integrity and consistency requires robust systems and processes.​

    Navigating Regulatory Complexity

    The overlapping and evolving nature of regulations across jurisdictions necessitates specialized knowledge and adaptability. Manufacturers must stay abreast of changes to ensure compliance and avoid potential penalties.

    Strategic Opportunities

    Driving Innovation

    Sustainability requirements can catalyze innovation in product design, materials, and processes, leading to more efficient and eco-friendly operations. Embracing sustainable practices can open new markets and customer segments.​

    Enhancing Market Differentiation

    Transparent and robust sustainability reporting can enhance brand reputation and meet the growing demand from consumers and investors for responsible business practices. Companies that lead in sustainability are often viewed more favorably in the marketplace.​

    Improving Operational Efficiency

    Detailed reporting can help identify inefficiencies, leading to cost savings and improved resource management. Sustainability initiatives often result in streamlined operations and reduced waste.​

    Recommended Actions for Manufacturers

    1. Conduct a Compliance Audit: Evaluate current practices against upcoming regulations to identify gaps and areas for improvement.​
    2. Invest in Data Infrastructure: Implement systems for accurate data collection and analysis to support comprehensive reporting.​
    3. Engage Stakeholders: Collaborate with suppliers, customers, and regulatory bodies to ensure alignment and transparency throughout the supply chain.​
    4. Stay Informed: Monitor regulatory developments to anticipate changes and adjust strategies accordingly.​

    Embracing sustainability reporting is not merely a compliance exercise but a strategic opportunity to drive innovation, efficiency, and market leadership. Manufacturers that proactively adapt to these evolving requirements will be well-positioned to thrive in a sustainable future.

  • Sustainability Reporting in the Financial Sector: Key Challenges and Best Practices

    Sustainability Reporting in the Financial Sector: Key Challenges and Best Practices

    Estimated Reading Time: 6 minutes

    Why Sustainability Reporting is Mission-Critical for Financial Institutions

    In the UK and across Europe, sustainability reporting in the financial sector is no longer a value-added exercise—it is an operational necessity. Driven by tightening regulations, rising stakeholder scrutiny, and the urgent need to finance the green transition, financial institutions are now on the front lines of the ESG revolution.

    Sustainability reporting acts as a mirror of institutional priorities and preparedness. It reflects how banks, asset managers, and insurers navigate climate risk, support decarbonisation, and align capital with long-term societal value. But while expectations are high, the path to high-quality ESG disclosure is anything but straightforward.

    Key Challenges Facing Financial Institutions

    Despite a clear mandate, UK and EU-based financial institutions continue to encounter significant challenges when embedding sustainability into reporting practices.

    1. Regulatory Complexity and Evolving Standards

    From the EU Sustainable Finance Disclosure Regulation (SFDR) to the UK’s TCFD-aligned disclosure requirements, institutions face a fast-evolving landscape. Navigating overlapping mandates—especially in multi-jurisdictional operations—creates reporting fatigue and compliance risks.

    Did you know? As of 2024, the UK government is transitioning toward mandatory reporting based on IFRS S1 and S2, marking a shift from voluntary to uniform climate-related disclosure.

    2. Operationalising Double Materiality

    Under the EU Corporate Sustainability Reporting Directive (CSRD), companies must assess not only how sustainability issues affect them (financial materiality) but also how they impact people and the planet (impact materiality). Implementing this “double materiality” lens requires robust systems and new KPIs—many of which are still being defined.

    3. Financed Emissions and Scope 3 Complexity

    Financial institutions bear indirect emissions through the assets they finance. However, calculating Scope 3 emissions—especially for SME clients or private assets—remains a persistent data blind spot.

    4. ESG Data Fragmentation

    Third-party ESG ratings and data providers often use divergent methodologies. This undermines comparability and can lead to conflicting assessments, frustrating both reporters and investors.

    5. Risk of Greenwashing and Regulatory Backlash

    As regulators crack down on misleading ESG claims, poorly substantiated disclosures now carry significant legal and reputational risks. The UK Financial Conduct Authority (FCA) has strengthened its stance on greenwashing, particularly under its proposed Sustainability Disclosure Requirements (SDR).

    Best Practices for ESG Disclosure in the Financial Sector

    Amid this complexity, leading institutions are redefining ESG reporting—not as a compliance burden, but as a strategic advantage.

    1. Align with ISSB and EFRAG for Global-Local Consistency

    For pan-European institutions, aligning with IFRS S1/S2 (ISSB) provides a global baseline. Meanwhile, the European Financial Reporting Advisory Group (EFRAG) standards ensure alignment with CSRD and EU taxonomy expectations.

    Tip: Develop a reporting roadmap that integrates both ISSB and CSRD-aligned standards, with clearly defined internal roles.

    2. Integrate ESG into Core Risk and Finance Functions

    Move beyond standalone sustainability reports. Leading banks are embedding climate risk into credit decision-making, stress testing, and capital allocation. ESG metrics are being treated with the same rigour as financial data.

    3. Enhance ESG Data Governance and Traceability

    Invest in digital ESG platforms that improve auditability, traceability, and comparability of sustainability metrics. Open-source initiatives like PACTA (Paris Agreement Capital Transition Assessment) can also help align portfolios with net zero.

    4. Use Scenario Analysis to Inform Strategy

    Forward-looking disclosures, especially under TCFD/IFRS S2, require scenario-based climate risk analysis. Institutions should model multiple climate trajectories (e.g., 1.5°C, 2°C) and disclose strategic implications for key sectors.

    5. Report on Real-World Outcomes, Not Just Policies

    Stakeholders want transparency on how ESG strategies are transforming the real economy. This includes reporting on:

    • Gender diversity in board appointments
    • Investment in clean energy infrastructure
    • Exposure to fossil fuels
    • Just transition support for vulnerable communities

    SALI Note: Impact-based reporting builds long-term stakeholder trust and positions institutions as ESG leaders in a post-greenwashing era.

    UK and EU Regulatory Outlook: What’s Ahead

    Financial institutions must stay ahead of rapidly evolving disclosure rules. Here’s what to watch:

    RegulationDescriptionApplicability
    IFRS S1/S2 (UK Sustainability Reporting Standards)Global baseline standards for sustainability and climate disclosures, developed by the ISSB.The UK government is finalizing the endorsement of IFRS S1 and S2, with the aim to publish UK Sustainability Reporting Standards (UK SRS) in Q1 2025. Subject to consultation, mandatory reporting is expected to commence for periods beginning on or after January 1, 2026.
    TCFD (Task Force on Climate-related Financial Disclosures)Framework for disclosing climate-related financial risks and opportunities.Mandatory for premium-listed companies in the UK since 2022. With the upcoming adoption of IFRS S2, which builds upon TCFD recommendations, existing TCFD disclosures will align with future UK SRS requirements.
    SFDR (Sustainable Finance Disclosure Regulation)EU regulation requiring financial market participants to disclose sustainability risks and impacts.In force since 2021, with phased implementation. Full application of Level 2 requirements began in January 2023.
    CSRD (Corporate Sustainability Reporting Directive)Expands and strengthens sustainability reporting requirements across the EU.Effective from January 1, 2024, for large public-interest companies. In February 2025, the European Commission proposed amendments to limit applicability to firms with over 1,000 employees, potentially reducing the number of companies required to report. These changes are pending approval by the European Parliament and member states.
    UK SDR (Sustainability Disclosure Requirements)UK framework for sustainability-related disclosures, including investment labeling and marketing rules.The Financial Conduct Authority (FCA) delayed the implementation of naming and marketing rules to April 2, 2025, to allow firms more time to comply. The SDR includes anti-greenwashing rules and introduces four investment labels to help consumers understand the sustainability objectives of investment products.

    Conclusion: ESG Reporting as Strategic Resilience

    In the UK and Europe, ESG reporting is becoming a strategic tool to drive credibility, investment confidence, and long-term value. Financial institutions that take a forward-looking approach—anchored in robust data, regulatory awareness, and stakeholder engagement—are best positioned to thrive in the transition to a low-carbon, socially responsible economy.

    How SALI Can Support You

    SALI helps institutions benchmark readiness against leading standards. Book a demo to learn how – sali-ai.com

    Subscribe to the SALI Newsletter for monthly insights on disclosure trends, ISSB updates, and policy shifts in Europe.

  • EU’s Corporate Sustainability Due Diligence Directive (CSDDD): What You Need to Know

    EU’s Corporate Sustainability Due Diligence Directive (CSDDD): What You Need to Know

    As global sustainability expectations evolve, the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD) is setting a new benchmark for corporate accountability. This landmark legislation goes beyond traditional ESG disclosures—requiring companies to actively prevent, mitigate, and account for human rights and environmental harm throughout their value chains.

    Whether you operate in the EU or partner with EU-based companies, understanding the CSDDD is essential to future-proofing your business and aligning with global sustainability norms.

    What Is the Corporate Sustainability Due Diligence Directive (CSDDD)?

    The Corporate Sustainability Due Diligence Directive, or CSDDD, is a legislative proposal by the European Commission designed to ensure companies take responsibility for the impact of their operations, including subsidiaries and supply chains.

    Core Objectives:

    • Protect human rights: Safeguard labor rights, prevent child labor, forced labor, and discrimination.
    • Preserve the environment: Prevent deforestation, biodiversity loss, pollution, and climate damage.
    • Embed sustainability into governance: Require companies to integrate due diligence into their policies, risk management, and oversight structures.

    In short, CSDDD shifts sustainability from “voluntary reporting” to legally binding due diligence.

    Who Does the CSDDD Apply To?

    As of 2024, the CSDDD will apply to companies based on their size and turnover, both within and outside the EU.

    In-scope companies include:

    EU Companies:

    • Group 1: ≥ 1,000 employees and ≥ €450 million turnover worldwide.
    • Group 2 (High-risk sectors): Lower thresholds apply for sectors like textiles, agriculture, and mining.

    Non-EU Companies:

    • Operating in the EU with a net turnover ≥ €450 million within the EU, regardless of whether they have a legal presence there.

    This means even companies outside Europe need to comply if they do business in the EU or are part of an EU company’s value chain.

    What Are the CSDDD Requirements?

    Companies under the CSDDD will be required to:

    1. Conduct Due Diligence Across the Value Chain

    • Map out and assess human rights and environmental risks across own operations, subsidiaries, and supply chains.
    • Engage with stakeholders, including workers, communities, and civil society.

    2. Integrate Due Diligence into Company Policies

    • Develop a due diligence policy that identifies and addresses risks.
    • Regularly update risk assessments and impact evaluations.

    3. Prevent and Mitigate Adverse Impacts

    • Take appropriate measures to prevent potential harm or mitigate ongoing damage.
    • Terminate relationships with suppliers that fail to comply after remediation efforts.

    4. Establish a Grievance Mechanism

    • Provide accessible channels for affected parties to report issues.
    • Collaborate with trade unions, NGOs, and workers’ representatives.

    5. Monitor, Track, and Communicate Progress

    • Regularly monitor the effectiveness of due diligence actions.
    • Publicly disclose due diligence practices and outcomes (closely aligned with CSRD reporting obligations).

    6. Link Executive Pay to Sustainability

    • Larger companies will need to align directors’ variable remuneration with climate transition plans and sustainability goals.

    What Happens If Companies Don’t Comply?

    The CSDDD includes real legal consequences:

    • Fines and Sanctions: Member States can impose proportionate penalties, including substantial fines based on turnover.
    • Civil Liability: Companies may be held legally liable if they fail to prevent harm and victims suffer loss as a result.

    In effect, this brings legal accountability to ESG practices, not just reputational risks.

    How Is the CSDDD Different from Other Regulations?

    RegulationFocusBinding?Value Chain Scope
    CSRDDisclosure/reportingYesLimited to operations & upstream
    CSDDDDue diligence/actionsYesFull value chain, incl. downstream
    GRI/UNGPsVoluntary frameworksNoFull value chain (guiding principles)

    Unlike CSRD, which focuses on reporting, CSDDD is about action and accountability. It operationalizes the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises into binding EU law.

    Implications for Businesses: What You Should Do Now

    Whether or not you fall directly under the directive, the ripple effects will reach most global supply chains. Here’s how to prepare:

    Assess Your Exposure

    • Are you directly covered under CSDDD?
    • Do you supply or partner with EU companies that are?

    Map Your Value Chain Risks

    • Identify high-risk areas for labor exploitation, environmental degradation, or governance issues.
    • Prioritize sectors like textiles, agriculture, extractives, and electronics.

    Strengthen Governance and Oversight

    • Appoint sustainability leads at board or C-suite level.
    • Embed due diligence in enterprise risk management (ERM) systems.

    Engage Suppliers and Partners

    • Set clear ESG expectations and integrate them into contracts.
    • Provide capacity-building or onboarding support for smaller suppliers.

    Align with Reporting Standards

    • Coordinate CSDDD activities with CSRD, GRI, ISSB, and ESRS frameworks to streamline sustainability reporting and reduce duplication.

    Final Thoughts: Why CSDDD Is a Turning Point

    The CSDDD marks a paradigm shift in corporate sustainability—from passive reporting to proactive responsibility. It is a powerful step toward a just transition, corporate accountability, and global sustainability standards.

    Companies that embrace the directive early will not only reduce legal and reputational risks—they’ll build resilience, trust, and long-term value in a purpose-driven economy.

    In the age of global transparency, ethical business is no longer an option—it’s an obligation.

    Book a demo: sali-ai.com

  • Understanding Double Materiality: Why It’s Critical for Sustainability Reporting

    Understanding Double Materiality: Why It’s Critical for Sustainability Reporting

    In today’s business landscape, sustainability is no longer optional—it’s a strategic imperative. But as organizations navigate complex environmental, social, and governance (ESG) expectations, the concept of double materiality has emerged as a game-changer in sustainability reporting.

    If your organization is looking to future-proof its operations, strengthen stakeholder trust, or comply with evolving global standards like the Corporate Sustainability Reporting Directive (CSRD) or EU Taxonomy, understanding double materiality is not just beneficial—it’s essential.

    What Is Double Materiality?

    Double materiality expands the traditional financial materiality lens to include environmental and social impacts. While financial materiality focuses on how sustainability issues affect a company’s bottom line, double materiality adds a second dimension: how the company’s operations impact people, the planet, and society at large.

    This dual lens enables more holistic, transparent, and actionable sustainability disclosures—supporting both internal decision-making and external accountability.

    In simple terms:

    • Financial materiality = How ESG issues affect the company’s value.
    • Environmental & social materiality = How the company affects the world around it.

    Why Is Double Materiality Important?

    1. Aligns with Global Reporting Standards

    Double materiality is a foundational principle in several major sustainability disclosure frameworks, including:

    • EU CSRD (mandatory for over 50,000 companies in the EU)
    • Global Reporting Initiative (GRI)
    • EFRAG’s ESRS (European Sustainability Reporting Standards)

    These standards require companies to evaluate both outside-in (financial risks and opportunities) and inside-out (impact-driven risks and opportunities) perspectives.

    2. Enables Better Risk Management

    By recognizing both financial and non-financial risks, companies gain a broader view of potential vulnerabilities—from climate-related asset depreciation to reputational damage from human rights violations. Double materiality helps leadership anticipate and address these threats before they escalate.

    3. Builds Stakeholder Trust and Reputation

    Stakeholders—from investors to customers, regulators, and employees—are demanding transparency. Organizations that report through the lens of double materiality demonstrate a commitment to integrity, sustainability, and long-term value creation.

    4. Drives Impactful Decision-Making

    When integrated into corporate strategy, double materiality informs smarter choices—whether it’s selecting suppliers with better environmental records, investing in cleaner technologies, or advocating for inclusive workplace policies.

    Examples of Double Materiality in Action

    Let’s break it down with a few scenarios:

    Example 1: Climate Change

    • Financial materiality: Climate regulations could increase operating costs or create stranded assets.
    • Impact materiality: The company’s GHG emissions contribute to global warming.

    Example 2: Social Justice

    • Financial materiality: Poor labor practices could lead to lawsuits or consumer boycotts.
    • Impact materiality: The company’s supply chain directly affects workers’ rights and livelihoods.

    Example 3: Water Use

    • Financial materiality: Water scarcity could disrupt production processes.
    • Impact materiality: Excessive water withdrawal could harm local communities and ecosystems.

    How to Implement Double Materiality Assessments

    Implementing a robust double materiality approach involves the following steps:

    1. Stakeholder Engagement

    Involve a wide range of internal and external stakeholders—employees, investors, NGOs, community representatives—to understand material concerns.

    2. Issue Identification and Prioritization

    Use a structured approach (e.g., ESG impact mapping, heat maps, sector-specific guidelines) to identify issues that are both financially material and socially impactful.

    3. Materiality Matrix

    Plot issues on a double-axis materiality matrix:

    • X-axis: Impact on stakeholders/environment/society
    • Y-axis: Financial impact on the company

    This helps visually prioritize which topics to report on and take action around.

    4. Integrate into Strategy and Reporting

    Ensure double materiality findings are embedded in sustainability strategies, risk management, and reporting cycles. Reference GRI, ESRS, or ISSB frameworks for best-practice disclosures.

    Challenges and Misconceptions

    ❌ Myth: Double materiality is only for large companies

    ✅ Reality: While mandates like the CSRD apply to larger firms, any company aiming for sustainability leadership should embrace it.

    ❌ Myth: It’s just a reporting exercise

    ✅ Reality: Double materiality is a strategic tool that informs decision-making, reputation management, and stakeholder engagement.

    ❌ Myth: Financial and impact materiality rarely overlap

    ✅ Reality: In today’s interconnected world, they increasingly do—especially around climate, biodiversity, supply chains, and human capital.

    Final Thoughts: Why It Matters More Than Ever

    Double materiality is not just a buzzword—it’s a critical framework for building future-ready businesses. It bridges the gap between purpose and profit, enabling companies to recognize that sustainability risks and opportunities are business risks and opportunities.

    As expectations rise from regulators, investors, and civil society, adopting a double materiality approach is no longer a “nice-to-have”—it’s a necessity.

    If your organization is serious about sustainability, now’s the time to ask:

    Are we just reporting data, or are we truly accounting for our impact?

    Get started here: sali-ai.com

  • The Role of Materiality in ESG Reporting: How to Identify What Matters

    The Role of Materiality in ESG Reporting: How to Identify What Matters

    As the demand for transparency and accountability grows, Environmental, Social, and Governance (ESG) reporting has become a critical part of corporate strategy. However, not all sustainability issues carry the same weight. This is where materiality comes into play — helping businesses identify, prioritize, and report on the issues that matter most to stakeholders and long-term success. In this article, we explain the role of materiality in ESG reporting and how your organization can effectively identify what matters.

    What is Materiality in ESG Reporting?

    Materiality in ESG reporting refers to the process of determining which environmental, social, and governance issues have the most significant impact on a company’s financial performance, stakeholders, and long-term viability.

    There are two main types of materiality:

    1. Financial Materiality: Focuses on issues that could affect a company’s financial health and shareholder value.
    2. Impact Materiality: Considers the company’s impact on society and the environment, regardless of financial implications.

    The latest frameworks, such as the European Sustainability Reporting Standards (ESRS), adopt a “double materiality” approach that combines both financial and impact materiality.

    Why Materiality Matters in ESG Reporting

    1. Focus and Clarity: Materiality assessments help businesses concentrate resources on the most relevant ESG issues.
    2. Enhanced Stakeholder Trust: Transparency in selecting and reporting material issues builds credibility with investors, customers, and regulators.
    3. Regulatory Compliance: Frameworks like the CSRD, GRI, and IFRS Sustainability Disclosure Standards require clear identification of material topics.
    4. Strategic Decision-Making: Materiality helps integrate ESG priorities into business strategy and risk management.

    Steps to Conduct a Materiality Assessment

    1. Define Objectives and Scope

    Start by clarifying why you’re conducting the assessment. Are you preparing for regulatory reporting, enhancing stakeholder communications, or shaping long-term strategy?

    2. Engage Stakeholders

    Collect insights from key stakeholders — including investors, employees, customers, regulators, and community representatives — through surveys, interviews, or workshops.

    3. Identify Potential ESG Issues

    Develop a comprehensive list of ESG topics relevant to your industry, operations, and geographic presence. Leverage sector-specific guidance and resources from GRI, SASB, and ESRS.

    4. Prioritize Issues

    Analyze the importance of each issue from two perspectives: its impact on stakeholders and its influence on business success. Tools like SALI’s AI-driven materiality mapping platform can simplify this process.

    5. Validate and Approve

    Review and validate findings with senior management and board members to ensure alignment with corporate strategy.

    6. Communicate and Report

    Integrate the results of your materiality assessment into ESG reports, sustainability disclosures, and corporate strategy documents.

    Best Practices for Materiality in ESG Reporting

    • Update regularly: Conduct assessments every 1-2 years or when significant changes occur in the business or external environment.
    • Ensure transparency: Disclose the methodology used for materiality assessments in your ESG reports.
    • Align with standards: Follow internationally recognized frameworks like GRI, ESRS, and IFRS to meet stakeholder and regulatory expectations.

    The Role of Technology in Materiality Assessments

    Platforms like SALI (Sustainability Assessment, Reporting, and Learning Intelligence) use AI and advanced analytics to:

    • Map material topics against industry benchmarks.
    • Visualize double materiality matrices.
    • Track evolving stakeholder expectations.
    • Generate reports tailored to multiple reporting frameworks.

    Conclusion

    In a rapidly changing business environment, materiality is the foundation of effective ESG reporting. Identifying and focusing on what matters most empowers companies to make informed decisions, manage risks, and demonstrate accountability.

    Need help identifying material ESG issues for your organization? SALI’s AI-powered solutions can guide your materiality assessment process and reporting. Contact us here to learn more.

  • ESRS vs. GRI vs. IFRS: Which Sustainability Reporting Standard Should You Follow?

    ESRS vs. GRI vs. IFRS: Which Sustainability Reporting Standard Should You Follow?

    As sustainability becomes central to business strategy and investor decisions, companies face a critical question: Which sustainability reporting standard should we follow? Among the most prominent frameworks are the European Sustainability Reporting Standards (ESRS), the Global Reporting Initiative (GRI), and the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards. Each serves unique purposes and audiences, making it crucial for businesses to understand their differences and choose the best fit.

    What is ESRS?

    The European Sustainability Reporting Standards (ESRS) are developed by the European Financial Reporting Advisory Group (EFRAG) under the EU’s Corporate Sustainability Reporting Directive (CSRD). The ESRS provides a mandatory and comprehensive framework for reporting environmental, social, and governance (ESG) metrics. Key features of ESRS include:

    • Double materiality: Reporting both the company’s impact on the environment/society and how sustainability issues affect the company.
    • Mandatory assurance: Reports must be audited.
    • Alignment with EU regulations: Tailored for businesses operating in or trading with the European Union.

    What is GRI?

    The Global Reporting Initiative (GRI) is the most widely used voluntary sustainability reporting standard globally. Established in 1997, GRI focuses on impact materiality — the company’s impact on the environment and society — and is popular among multinational corporations. Key highlights of GRI include:

    • Impact-driven disclosure: Emphasizes environmental, social, and economic impacts.
    • Sector-specific standards: Customizable reporting guidelines for different industries.
    • Voluntary but globally recognized: Used by companies aiming to communicate transparency to a broad audience.

    What is IFRS Sustainability Disclosure Standards?

    The IFRS Sustainability Disclosure Standards, developed by the International Sustainability Standards Board (ISSB), focus on providing sustainability-related financial disclosures to investors. IFRS standards are investor-centric and designed for global comparability. Key elements include:

    • Financial materiality: Focus on how sustainability risks and opportunities affect enterprise value.
    • Consistency and integration with financial reporting: Ideal for investors and financial market participants.
    • Global alignment: Designed to work alongside other frameworks and recognized worldwide.

    ESRS vs. GRI vs. IFRS: Key Differences

    CriteriaESRSGRIIFRS Sustainability Standards
    ApplicabilityMandatory for EU large companies under CSRDVoluntary, used globallyVoluntary, investor-focused, gaining momentum
    Materiality ApproachDouble materialityImpact materialityFinancial materiality
    FocusEU regulatory compliance, comprehensive ESGTransparency on environmental and social impactInvestor-focused, financial relevance
    Audit RequirementMandatory assuranceNot mandatoryStrong emphasis on reliability and integration
    AudienceRegulators, investors, stakeholders in the EUGlobal stakeholders, public accountabilityInvestors, financial market participants

    How to Choose the Right Sustainability Standard

    1. Location and Regulatory Requirements: If you operate in the EU or plan to do business there, ESRS compliance is non-negotiable.
    2. Audience and Objectives:
      • Want to communicate impact transparently? GRI is ideal.
      • Need to focus on financial implications of ESG risks and opportunities? IFRS Sustainability Standards are a better fit.
      • Require broad, comprehensive ESG reporting with regulatory assurance? Go with ESRS.
    3. Industry Practice: Some industries have established norms, with certain sectors leaning heavily on GRI or aligning with IFRS frameworks.
    4. Company Size and Structure: Large, publicly traded firms with EU ties should prioritize ESRS. Smaller companies or those focusing on corporate social responsibility might find GRI more practical.
    5. Integration with Financial Reporting: Companies looking to integrate ESG disclosures directly into financial reporting for investor use may lean toward IFRS.

    The Role of Technology in Multi-Framework Reporting

    For companies navigating multiple frameworks, digital solutions and AI platforms like SALI (Sustainability Assessment, Reporting, and Learning Intelligence) are game-changers. SALI helps organizations:

    • Map and align disclosures across ESRS, GRI, and IFRS.
    • Automate data collection and reporting processes.
    • Conduct materiality assessments.
    • Generate customizable reports for different audiences.

    Conclusion

    In the evolving world of sustainability reporting, there’s no one-size-fits-all answer. Choosing between ESRS, GRI, and IFRS standards depends on your company’s regulatory obligations, goals, audience, and strategic direction. Often, companies will use a combination of these standards to meet the expectations of regulators, investors, and the public.

    Not sure which standard to adopt? SALI’s AI-powered tools and expert guidance can help your business comply with global sustainability frameworks and stay ahead. Contact us today to learn more.

  • How to Prepare for CSRD: A Step-by-Step Guide for Companies

    How to Prepare for CSRD: A Step-by-Step Guide for Companies

    The Corporate Sustainability Reporting Directive (CSRD) is transforming how businesses report on environmental, social, and governance (ESG) factors. With mandatory sustainability reporting requirements rolling out across the European Union from 2025, companies must start preparing now to ensure compliance and leverage ESG reporting as a tool for value creation.

    In this article, we provide a comprehensive, step-by-step guide to help your company prepare for CSRD compliance.

    What is CSRD?

    The CSRD, adopted by the European Commission, expands on the Non-Financial Reporting Directive (NFRD) and applies to:

    • All large EU companies meeting two out of three criteria: over 250 employees, €40 million turnover, or €20 million total assets.
    • Listed SMEs (with some exemptions until 2028).
    • Non-EU companies with significant operations in the EU.

    The CSRD introduces more detailed reporting requirements, structured around the European Sustainability Reporting Standards (ESRS), and embraces the concept of double materiality.

    Step 1: Understand Applicability and Deadlines

    Determine whether your company falls under CSRD obligations. Reporting timelines vary:

    • 2025 (for FY 2024 data): Large public-interest companies already subject to NFRD.
    • 2026 (for FY 2025 data): Other large EU companies.
    • 2027 (for FY 2026 data): Listed SMEs.
    • 2029 (for FY 2028 data): Non-EU companies meeting thresholds.

    Step 2: Build Internal Awareness and Governance

    Establish internal structures to manage sustainability reporting:

    • Appoint ESG leads and form cross-functional teams.
    • Educate senior leadership and board members on CSRD obligations and strategic implications.
    • Integrate ESG governance into risk management and business strategy.

    Step 3: Conduct a Double Materiality Assessment

    CSRD requires companies to disclose both financial materiality and impact materiality. Start by:

    • Identifying ESG topics relevant to your business.
    • Engaging with stakeholders.
    • Mapping priorities using frameworks like GRI, SASB, and ESRS.

    Step 4: Gap Analysis

    Perform a gap analysis of your current reporting and data collection practices against CSRD requirements:

    • Review ESG data availability, quality, and governance.
    • Identify missing disclosures.
    • Leverage tools like SALI’s AI-powered sustainability assessment platform for automated gap analysis.

    Step 5: Strengthen Data Management Systems

    High-quality, auditable data is central to CSRD compliance:

    • Establish robust ESG data collection processes.
    • Set up data controls and audit mechanisms.
    • Integrate ESG data management with financial reporting processes.

    Step 6: Align with ESRS Reporting Requirements

    Familiarize yourself with ESRS standards:

    • Understand required disclosures across governance, strategy, risk management, and metrics.
    • Tailor reporting to sector-specific standards.
    • Create draft templates using ESRS guidance.

    Step 7: Third-Party Assurance

    CSRD mandates limited assurance by an independent auditor:

    • Engage early with your assurance provider.
    • Conduct internal audits to identify data integrity issues.
    • Prepare for assurance readiness assessments.

    Step 8: Report and Communicate

    Prepare your sustainability report for publication:

    • Ensure alignment with CSRD and ESRS guidelines.
    • Publish the report within your annual management report.
    • Communicate key findings to stakeholders and investors.

    Conclusion

    The CSRD represents a significant shift in sustainability reporting, bringing both compliance challenges and strategic opportunities. By starting early and following a structured approach, companies can not only meet regulatory requirements but also enhance stakeholder trust and long-term business resilience.

    Looking for expert support on CSRD readiness? SALI’s AI-powered platform and consulting team can help guide your compliance journey. Contact us here for tailored guidance.