3 essential steps to prepare for CSRD and CS3D compliance

As sustainability regulations evolve, companies must adapt to ensure compliance with the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D). These two directives present both challenges and opportunities for businesses aiming to stay ahead in the sustainability race. 

This blog outlines three strategic actions you can take today to prepare for CSRD compliance and unlock new opportunities through the CS3D. By aligning governance, processes, and reporting structures with these regulations, you can position your business for success in the growing sustainability landscape. A critical element of this adaptation is ensuring that your contracts, particularly those with suppliers and partners, align with your climate transition goals. Climate contracts are a key component in your strategy for both regulatory compliance and long-term sustainability.

Align board decisions with transition plans

Under both the CSRD and CS3D, companies need to have climate transition plans. CS3D takes this a step further by requiring companies to put their plans into effect. This means that boards need the right information to take concrete steps and actions to deliver impact.

Major projects and transactions use long-term, high-value contracts to deliver results. Before entering into those contracts, potentially binding your company to carbon-heavy terms, the board needs to consider the climate impact of those deals. Failure to do this means inhibiting your ability to deliver the transition plan because of the deals you are signing now.

You can include in your standard board papers a requirement that the board explains how any significant contract is aligned with the company’s transition plan. If it doesn’t align and the board wants to approve it anyway, the board should explain why it made that decision, and how it will deliver the transition plan without tackling the carbon in this particular deal. This ensures that climate risk and impact is a clear part of the board’s decision-making process. For other ways to ensure that your board is able to implement your company’s transition plan, see our transition plan guide.

Create a sustainability claims committee

One of the biggest ESG issues today is greenwashing. A company is greenwashing when it makes false or misleading claims about how it is protecting the environment when it’s not.

Greenwashing risks exist not only in your marketing claims but also in your public reports. The rise in ESG reporting requirements means companies face higher greenwashing risks than before.

You can create and empower a sustainability claims committee with the right people from the C-suite, legal, marketing and ESG teams. They can review claims made in products, advertising, and public reports. This shows that your company is serious about ensuring that the claims it makes are true.

Engage your auditors from the outset

More and more companies must now publish independently validated ESG reports. Gathering enough of the right, high-quality, and acceptable data is a big challenge. Many complain that there’s not enough reliable data, and others say there’s too much data. Some say there are too many regulations, others say there’s not enough clarity in the regulations.

Because regulations are new and more are coming, companies and auditors alike are still navigating many of these issues. You can involve your auditors early in the process. This will allow you to take them on your journey and you can help each other understand what’s material to the business and what data points you’ll need to support your reports.

Setting up solid governance structures and processes will help companies prepare for CSRD, CS3D and any other ESG reporting requirements they need to comply with. Getting this right puts companies in a position where they can meet their ESG targets, publish truthful and verifiable reports, and deliver their climate ambitions.