Sustainability reporting options for CSRD compliance

The rise of ESG (environmental, social, and governance) and sustainability reporting is reshaping the corporate landscape domestically and worldwide. In the United States, the federal government passed the Securities and Exchange Commission (SEC) climate disclosure rule in March 2024. This rule, currently pending legal battles, updates financial disclosure requirements to include information on carbon offsets, renewable energy, and more. In addition, California passed Senate Bills 253 and 261 in September, mandating emissions reporting for large businesses operating in the state.

This legislative progress can be attributed, in part, to investors clamoring for increased transparency on ESG strategy and progress. A recent study by Capital Group, an asset management firm, found that over 90% of S&P 500-listed companies now release ESG reports and 89% of investors consider ESG issues when making investment decisions. While the United States is catching up, the European Union stands out as a leader in climate legislation.

The European Union’s Corporate Sustainability Reporting Directive (CSRD), which took effect in January 2023, is set to be the most impactful sustainability action yet and will have a ripple effect on the global ESG space. Replacing the previous Non-Financial Reporting Directive (NFRD), CSRD strengthens mandatory environmental, social, and governance reporting requirements by implementing a unified set of reporting standards and codified due diligence. While the NFRD required reporting for a subset of European companies, the CSRD’s reach is much wider, implicating global firms headquartered outside the EU.

In total, the CSRD reporting requirements will apply to an estimated 50,000 firms, including global firms headquartered in the United States with large EU-based subsidiaries.

With the first mandatory CSRD reporting cycle beginning in 2025, the collection and management of 2024 data is increasingly top of mind moving into the fourth quarter of this year.

Who will be affected and when?

The below table tracks the varying reporting timeline and requirements for a variety of EU businesses.

Table reference: Plan A and Deloitte

Non-European companies can expect to be affected if they operate significant business in the EU, meaning a net turnover of over €150 million and at least one subsidiary in the EU.

With the first mandatory CSRD reporting on the horizon, software providers are responding to surging demand for CSRD data gathering solutions. Many existing providers from the ESG and carbon accounting software marketplace are already well-positioned to extend their offerings to meet the rigors of CSRD, in addition to other smaller providers entering the space.

This article will highlight four leading software options to consider for your organization’s reporting needs, in no particular order, in addition to smaller-scale honorable mentions that offer their own impressive solutions.

Leading CSRD software options

IBM Envizi

In the last few years, IBM has greatly expanded their sustainability offerings. The Envizi acquisition in January 2022 introduced an Australian ESG software company into their portfolio.

Leveraging Envizi software expertise, IBM Envizi enhanced its ESG reporting frameworks to include CSRD in May of this year. This software streamlines data collection in line with the European Sustainability Reporting Standards (ESRS) required by CSRD and provides a qualitative data collection framework for social and governance data points. Successful work with the Ikano Group’s CSRD reporting highlights their effectiveness at a large enterprise scale.

Continuing this year, IBM announced the release of the IT Sustainability Optimization Assessment in March, designed to identify opportunities for process improvement and help companies minimize their IT carbon footprint.

Greenly

Greenly, a software provider headquartered in Paris, initially specialized in carbon accounting software before expanding to support life-cycle-assessments (LCAs), decarbonization strategy, and now, CSRD reporting. They secured $52 million in Series B funding in March 2024 to enhance their offerings, including the CSRD reporting platform, which features impact assessments for the environmental ESRS standards and simulation capabilities to estimate the action plan’s impact.

Greenly has a proven track record of supporting carbon accounting for large corporations across various industries, including L’Oreal, Hello Fresh, and the Red Cross, but also provides right-sized support for small- to medium-sized businesses (SMBs). The Greenly Institute, the firm's thought leadership hub, also offers a wealth of resources related to CSRD. Whitepapers, articles, and guides break down regulatory requirements and demystify the process for customers.

Watershed

Founded only five years ago, Watershed has evolved from a small tech startup into an enterprise sustainability platform offering solutions for financial institutions, supply chain decarbonization, scope three emissions reporting, and much more. The firm partners with a number of Fortune 500 companies to manage reporting, including BlackRock, Walmart, Canva, FedEx, and Paramount.

In January 2024, Watershed secured an additional $100 million to fund its CSRD reporting software, which was launched in April 2024. This new software includes granular progress tracking, which follows data across multiple subsidiaries to meet all reporting timelines, and automated data formatting to match CSRD requirements upon export. In addition to the new software, Watershed offers supplemental resources specific to CSRD to help clients navigate the complexities of regulatory compliance.

Workiva

Workiva, a well-known player in finance and accounting teams, provides robust solutions for accounting, risk and compliance, and ESG. Known for its high-quality software and strong success stories across various industries, Workiva has made significant strides in the sustainability sector in 2024.

In June, Workiva acquired Sustain.Life, a startup specializing in carbon accounting, and subsequently launched "Workiva Carbon" for ESG compliance and reporting. This new offering, which tracks greenhouse gas emissions, fuses Sustain.Life’s accounting framework with Workiva’s ESG software expertise, to refine Workiva’s carbon accounting software.

Workiva added tailored solutions for the CSRD to their offerings, which previously supported the SEC’s climate disclosure rules and California’s recent climate reporting requirements. The software features high connectivity for data collection, integrated double materiality and gap analysis, and enhanced carbon calculations, supported by the recent Workiva Carbon, making it a comprehensive tool for modern ESG reporting needs with the added benefit of likely being a known software for most public companies.

Honorable mentions

UL Solutions, UL 360

UL Solutions, a longstanding testing company, released their CSRD solution software in June 2024 as part of UL 360, the company’s ESG solution. UL360 has successfully supported major clients in their ESG reporting, including Nestle, Ciel Textile, and Dankse Bank.

Novata

Novata, a sustainability software service designed for the private sector, launched new sustainability tools in September 2024, including a tailored CSRD solution. Novata primarily serves small- to mid-sized finance and investment firms, such as Cheyne Capital, Hamilton Lane, and Bonaccord Capital Partners.

KEY ESG

KEY ESG, a small-scale ESG software company, released their CSRD solution in June and simultaneously began their weekly webinar series. KEY ESG has supported a range of small- to mid-sized clients across industries with ESG reporting including Pollen Street Capital, Galilio Global Education, and MAAS Aviation.

Vendor selection considerations

Like any big technology decision, selecting the right software for your organization depends on a variety of factors unique to your data and strategy. When conducting a vendor selection, consider the following:

1. What use cases and features your organization needs. Determine the specific use cases and features the new technology must provide. Consider aspects such as data integration, real-time analytics, user-friendliness, and scalability. For example, if your organization needs to track supply chain emissions, ensure the software can handle complex data sets and provide detailed insights.

2. Where your data currently lives. Understanding your current data sources, architecture, and ease of access to key ESG data is essential for selecting a software that fits your needs. Improving sustainability starts with good data.

3. Identify data collection opportunities. Conduct a double materiality assessment to determine which topics under each ESRS pillar are material to your organization. Focus should be placed on sustainability issues that are important both from a financial perspective and from an environmental and social perspective.

4. What business imperatives or pressures is your organization facing regarding ESG. Assess the internal and external pressures driving your ESG initiatives. This could include regulatory compliance, investor demands, market competition, or corporate sustainability goals. Understanding these pressures will help you choose software that aligns with your strategic objectives and addresses key challenges.

5. Identify co-benefits for ESG reporting. Evaluate the potential benefits of ESG reporting beyond compliance. Effective ESG reporting can enhance your organization's reputation, attract investors, improve risk management, and drive operational efficiencies. Consider how software can help you unlock these values by providing actionable insights and facilitating transparent communication with stakeholders.

These points are a starting place and not a comprehensive guide. During a full vendor selection process, Credera offers a unique blend of expertise in data, strategy, and program leadership to help identify the full suite of considerations for CSRD software needs.

How Credera can help

As the global landscape of ESG reporting becomes increasingly complex and stringent, staying informed is crucial. ESG reporting is here to stay, but you don't have to navigate it alone. Leveraging software platforms can help accelerate your business’s reporting standards, and Credera is here to support you in those decisions. We have a proven track record of being solution agnostic, meaning we’re adaptable with our approaches, while staying up to date and connected to technology providers.

If you are interested in learning more about how your organization may be affected by CSRD or other ESG standards, contact Credera today. Our experts ensure you find the best software to maximize return, achieve your sustainability targets, and fulfill your reporting requirements.

• Sustainability
• Data & Analytics
• Data Strategy
• Environmental sustainability