CSRD audit: how does the assessment and diagnosis work for a company?

The CSRD: definition, objective and key measures

The CSRD (Corporate Sustainability Reporting Directive) is a European directive that reinforces non-financial reporting obligations (or sustainability reporting), by requiring certain companies to publish reliable, detailed and comparable information on their environmental, social and governance (ESG) impacts. It replaces the Non-Financial Reporting Directive (NFRD).

The CSRD, which came into force on 1 January 2023, is being gradually implemented for different categories of companies:

→ Since 1 January 2024, all companies that meet two of the following criteria are concerned:

• > 500 employees
• > €50 million in turnover
• > €25 million in balance sheet total.

→ Since 1 January 2025, all companies that meet two of the following criteria are concerned:

• > 250 employees
• > 50 million turnover
• > €25 million in balance sheet total.

→ On 1 January 2026, all SMEs listed on the stock exchange will be affected.

The objective of this directive is to harmonise and make more reliable the way in which companies communicate on their non-financial performance, in order to allow for better transparency, better comparability between the different structures, and more informed decision-making for stakeholders (consumers, investors, business partners, etc.).

In other words, it invites companies to place their ESG issues at the heart of their strategy and reporting, as well as their economic performance.

The main obligations imposed by the CSRD are as follows:

• Publish a sustainability report according to precise European standards, the ESRS (European Sustainability Reporting Standards), which set out the topics to be covered, the indicators to be monitored and the structure of the report, with the aim of obtaining standardised and verifiable information.

• Perform a double materiality analysis, with impact materiality and financial materiality.

• Verify the data published : the sustainability report must be audited by an independent third-party body, in order to ensure the reliability and sincerity of the non-financial information.

• Integrate reporting into the company’s management report or annual report.

How does a CSRD audit work?

The CSRD audit is an assessment that allows companies to measure their level of compliance with the requirements imposed by the European directive, to identify any deviations and to identify the corrective actions to be deployed as a priority.

 

This audit is intended to examine the way in which the company collects, consolidates and publishes its data relating to sustainability (carbon emissions, governance, responsible purchasing policy, supplier relations, climate risks, diversity and inclusion, etc.).

 

This is an evaluation structured around different phases, and extends over several months:

• Scoping and information gathering

The first step is to clearly define the scope of the audit and to set up the project team that will be responsible for preparing it (CSR manager ; CFO – Administrative and Financial Director…).

This scoping phase aims to clarify:

• The objectives of the audit;
• The scope (subsidiaries, activities, departments concerned, etc.);
• The timetable to be respected;
• The stakeholders involved.

A documentary collection is then carried out, in order to gather and inventory all the available ESG data: CSR policies, existing reporting, carbon footprints, codes of conduct, risk mapping, etc.

• Double materiality analysis

Double materiality is at the heart of the CSRD compliance approach. It consists of analyzing:

• Impact materiality, which aims to assess how the company influences its environment, its employees, its customers and society: what are the CO2 emissions? generated? Working conditions in Are the supply chain respectful of human rights, health and safety of employees? How does the company manage its waste, its consumption of water and natural resources? What is its impact on local biodiversity? Do its products and services promote responsible consumption patterns?…

• Financial materiality, which assesses how sustainability issues influence the company’s economic performance and value creation. Is climate change a risk to the company’s assets? Does the difficulty in recruiting certain profiles impact its growth? Does the scarcity of certain resources threaten its economic model? Regulatory changes related to Is the ecological transition likely to increase its costs?…

To carry out this step, it is possible to organise:

• Collaborative workshops with internal teams;
• Consultations with external stakeholders;
• Qualitative interviews with the various business departments;
• …

The information gathered during these exchanges may be supplemented by quantitative analyses. The objective here is to obtain a clear mapping of the company’s priority ESG issues , which will serve as a basis for future reporting.

• Assessing compliance with ESRS standards

Once the materiality issues have been clarified, the auditor then assesses the ESG maturity on each theme required by all ESRS standards: governance, social and environment. This diagnosis highlights significant differences between what is required and what is available. The diagnosis quantifies these gaps and assesses the effort required to fill them.

A detailed diagnosis is then delivered, with all the findings organized by ESRS theme. The result is often presented in the form of a compliance table accompanied by an overall maturity score.

• Definition of the CSRD compliance action plan

Based on the diagnosis, the auditors draw up an operational roadmap that summarizes:

• Urgent actions to be carried out in the next 6 months;
• The projects to be deployed over 12 to 18 months;
• Continuous improvements to be made over time.

This action plan must be realistic, quantified and manageable, in order to ensure a gradual increase in compliance until the publication of the CSRD report.

• Implementation and monitoring

Once the action plan has been validated, the deployment of CSRD compliance actions begins: collection of reliable ESG data, training of teams, updating of procedures, consolidation of indicators, etc.

Auditors can support the company over time to ensure the consistency, traceability and verifiability of the information published.

Ultimately, the CSRD will require the verification of the sustainability report by an ITO (Independent Third Party Organization). This external audit attests to the sincerity and compliance of the reporting.

When to carry out a CSRD audit?

The CSRD audit can be conducted at different stages of compliance:

• Upstream, to establish an initial diagnosis and define a roadmap before the first publication of the CSRD report;
• Currently being deployed, in order to adjust processes, reporting tools and internal governance;
• Downstream, as a quality control of the sustainability report before its official publication or before the statutory audit by an independent body.

In general, it is advisable to initiate the audit at least 12 to 18 months before the reporting deadline in order to have time to correct discrepancies and strengthen the quality of the data.

How to succeed in your CSRD audit?

As you can see, the CSRD audit is far from being a simple regulatory constraint. Well conducted, it is A real lever for competitiveness, which can allow the company to gain credibility, notoriety and to establish itself as a player in the sustainable transition with its stakeholders.

 

However, between the lack of time, resources and hindsight, carrying out this project in-house can be particularly complex and time-consuming. To secure your CSRD audit and succeed in compliance, it is therefore strongly recommended to be accompanied by an expert external to the company.

 

At WAYDEN, we can mobilize an interim manager who is a specialist in CSR, sustainable development and the management of transformation projects to support you at each stage of this assessment. Thanks to its external view, its neutral posture, its immediate operational excellence and its ability to Supporting change and moving the lines, it will not only help you succeed in your CSRD audit, but also to sustainably integrate ESG criteria into the very heart of your practices, processes and corporate culture.

Contact us to find out more.