In the 8th episode of our series of podcasts dedicated to the new EU Corporate Sustainability Reporting Directive, CSRD, we look at how a GAP Assessment can help companies prepare for the new changes from 1st January 2024.
Speakers
Catherine Beare, Intertek Regional Director for Business Assurance UK and Iberia
Alessandro Ferracino, Intertek Regional Director for Business Assurance, North and South Europe
To gain additional insights about this subject, be sure to explore the other episodes of the CSRD series available on the Assurance in Action Podcast network.
Follow us on- Intertek's Assurance In Action || Twitter || LinkedIn.
In the 8th episode of our series of podcasts dedicated to the new EU Corporate Sustainability Reporting Directive, CSRD, we look at how a GAP Assessment can help companies prepare for the new changes from 1st January 2024.
Speakers
Catherine Beare, Intertek Regional Director for Business Assurance UK and Iberia
Alessandro Ferracino, Intertek Regional Director for Business Assurance, North and South Europe
To gain additional insights about this subject, be sure to explore the other episodes of the CSRD series available on the Assurance in Action Podcast network.
Follow us on- Intertek's Assurance In Action || Twitter || LinkedIn.
TRANSCRIPT
Catherine Beare Intertek
Hello and welcome to the 8th in our series of podcasts dedicated to the new EU corporate Sustainability Reporting Directive CSRD. I'm Catherine Beare, the Regional Director for Business Assurance in the UK and Iberia. I am delighted to be joined today by my colleague Alessandro Ferracino, Regional Director for Business Assurance, North and South Europe.
I wanted to pick Alessandro's brain more on this topic as his team have been the ones to create Intertek's CSRD Gap Assessment and already conducted a number of these assessments and trainings with corporates as they get ready for the new changes from the 1st of January 2024.
Alessandro has been with Intertek for 10 years now, but overall, 18 years in the business assurance industry. Before that, he spent 15 years specializing in automotive automation and railway sector and held a number of different rules around quality, health and safety, site manager, technology manager roles, etc. So, he comes with a wealth of experience in the assurance industry, and then more recently, over the last 7 to 8 years he has been growing within Intertek a number of sustainability offerings at both the local and global level. So, I’m delighted to have Alessandro with me today.
Thank you for joining me.
Alessandro, we obviously talk about CSRD weekly at the moment and constantly work on new ways to support our clients as each need is different.
But in general, we agree that all companies need to go through a systematic process of understanding how their current policies, processes and practices stand up to the CSRD requirements, to know what gaps they have to fill. So would you mind explaining for the audience first what is the intent of a gap assessment and then we can go into what you cover and what methods are used.
Alessandro Ferracino 2.21
Thanks, Catherine, for the introduction.
I'm delighted to speak of this topic because, as you say, it has become somewhat of a passion for me and the team. Gap assessments is a valuable tool to help your organization prepare for the compliance with the CSRD the Corporate Sustainability Reporting Directive or you can use also for any other sustainability report and regulation that will come up in a short time.
So here a high level of gap assessment can assist in you in getting prepared for the CSRD.
So, the first stage in a gap assessment is to understand the regulation and the requirement of the CSRD, and this is including understanding the scope and the perimeter of the reporting, which is really important.
The data collection, the disclosure format, and the timeline to compliance. We have of course provided a lot of information already for our clients through our webinars and podcasts. We also have more onsite and virtual training available in case of need.
So, then you need to assess your current sustainability reporting practice. This is the first point, so to involve reviewing your ESG data collection process, measurement methodologies, reporting practices and extent to which you're already aligned with CSRD requirements.
This is not some time exclusively mentioned in the company in the ESG world, but also generically in the management system in place. So, you already probably have something in your company that can be used to reach the CSRD compliance process. And the gap assessments we set up will help you to identify the gap between your current system ability reporting practice and the CSRD requirement.
The idea for us is to help the company to use and try to recover. All is already in place, can support the journey to the CSRD compliance.
When we have identified the gaps you can prioritize your action item based on the severity of the gaps and the resource requirement to address that. Some gaps may require immediate action while others can be phased in the other in overtime.
Many CSRD requirements will necessitate improvement in data collection and management.
The assessment can help you to determine which framework is more suitable for your organization and how to align your reporting with it.
Evaluate whether your existing data management and reporting tools are sufficient to meet the CSRD requirement, or if you need to invest in a new software or other solution in technology and other way to collect the data.
Another important point is to identify the skill, the training and education that your team can need to understand the new reporting requirement and how to implement them effectively in your management system.
The gap assessment can identify the training you need and help you to develop relevant training programmes.
In summary, the intent of the gap assessments is to have a structured approach to ensure your organization to prepare for the CSRD compliance.
Working with sustainability reporting expert and process expert and this is important to be able to read the need of your specific industry, make effective the gap assessment result including the specific language and this is helping save time and resource in the long run to ensure that you are in compliance with the new Sustainability Reporting Regulation.
Catherine Beare Intertek 6:14
Thank you, Alessandro.
So, when you and the team go on site and virtually to conduct these gap assessments, can you talk us through you know how this process goes?
I think this will really help our audience to understand better what is involved in this process.
Alessandro Ferracino Intertek 6:35
Sure. I can try to go step by step because we spend a lot of time preparing the assessment. We need to ensure that both you and we are prepared with the information that we need. We have to be sure we identify the correct people that we have to speak with and the timeline we take. As you know the legislation is very young and there are some changes still in programs, so we work daily with our tool to remain updated on the last progress of the legislation.
So, the first step is looking at the scope of the assessment, so we need to analyze to include the multiple departments across your organization or multiple locations in case that you plan to have a consolidated reporting scenario.
This is because the ESG responsibility offering is scattered across many different areas of business operations and potentially across different countries or sites. Depending on your current reporting process you may need to include departments such finance, HR, procurement, operation quality, anyone involving the risk management.
I need really to have a clear picture of the perimeter to approach the GAP assessment consistently. When we have agreed the scope and who needs to be involved, we start to conduct a comprehensive review of your existing ESG reporting process.
This step requires a deep dive into your existing reporting framework, data sourcing and management system, because sometimes some data can be part of another management system like ESG, the kind of ESG data you currently collect, how this is verified and who is in the process. If available, we also need to evaluate any external ESG communication and disclosure practices.
Then start with training because what we have to do is to be sure that all the people involved at the different levels of management are really well trained and aware of the requirement need.
So, we plan the different session, we customize the approach with a different level of the management process owner, middle management, and top management.
What we expect is that we will provide dedicated training, but we expect that the following training for the entire population of the company will be part of the responsibility of the internal deployment from the management.
Then we move to the materiality analysis process. Materiality analysis is really the heart of the entire sustainability process.
If the risk analysis, which will identify the disclosure that company must report to them, requirement of the reporting, in compliance with the European Sustainability Reporting Standard.
Mainly two activities. The first one is to determine the context by defining what has been called stakeholder engagement, and the second step is to define and submit analyze the relevant result of the specific survey to identify the materiality result. To make the materiality analysis concrete and effective, it is necessary that the tools prepared for the survey be consistent with the principle and the strategy of the organization.
To this end, the preparation of the same must derive from a thorough sharing of content with corporate management. So we go through a long interview with the corporate management, and we can identify the way we have to submit the survey, which will be is that the basic for the materiality analysis.
The next step is the analysis of the CSRD compliance requirement to the quantitative study and the interpretation of the indicators, the KPI. What we will do is to support the identification of the indicator that needs to be to reporting in the sustainability report.
This is based on the result of the materiality analysis, but it's an important phase because it's needed to make a correct interpretation to prevent superstructures that are not useful to the business management.
The identifier will be derived from the reference standard, but data definition support will enable to arrange the systematic data. There are a lot of potential regulatory changes that will come in the first months of application and so we need to create a framework enough flexible to react to any change.
The fifth stage is not done by us, we only stimulate the company to make the collection of the data and monitoring of the indicator. They need to make some calculations also and this data collection is mainly based on the interpretation of the indicator that we agree, and this is totally the responsibility of the organization.
We just support them to set up the management tools for the ESG in the in the best way we can.
What we can do at this point, we are in the final point of the process is that now we have a clear understanding of the current ESG reporting practice and the CSRD requirement, you can now identify the gaps and these include the data that are not easy to collect and in some cases we need to set up something to collect the data. When the data is has been identified, the next steps is to prioritize the action for improvement based on the risk based on the result of the data and developing an action plan will help yours technically address the gap and improve the compliance over time.
Many standards and solutions are available in the market. And our experts can help to identify the best solution that matches easily, can integrate and fulfill the gap implementing standard and other solution.
This is a complete process, Catherine, that we try to explain and mention.
Catherine Beare 13:16
So, it really is, you know, such a thorough process, Alessandro, that not only you know is educating the client and the full way through, but it also leaves them really sure where they stand against CSRD readiness.
I mean and it's very comprehensive when you speak about that.
Now for the final stage in the process, can you take us through how we can then help in supporting around I guess the way that they report the draft on the sustainability reporting?
Alessandro Ferracino Intertek 13:52
Yes, this is another important point because as we mentioned, communication of the sustainability report is really crucial.
So when the gap has been identified and the action plan also, then we can help the company with support for the reporting and we need to make the information available to the stakeholder internal, external. So the organization cannot disregard a final internal drafting of the document, which is fully consistent with the communication and management of the organization itself.
The proposed support will therefore be directed to the definition of the articulated structure of the reporting components, identifying the basis on which the organization itself can then customize its communication. We all know that the intent of the CSRD was not to be one off, but the start of an improvement journey for all of its compliance parts.
It's important to create a culture of transparency and accountability and continuous learning within the organization. So, we need to ensure that periodically review your progress and update your action plan as required.
Catherine Beare Intertek 15:12
Thanks Alessandro.
I know Alessandro's team have had a lot of fantastic feedback from the customers you've worked with Alessandro, and it has been interesting, as you say, to continually update nearly on a daily well, certainly weekly basis.
So, do you have any final words of wisdom to our listeners today, Alessandro?
Alessandro Ferracino Intertek 15:38
Yes - We are all learning every day in the world of the ESG. This is why me and the team, as you know, are never bored!
Many new clients, many different industries pose new challenges for us to respond to.
The legislation is new and still on progress and change compliance with the CSRD is a big task but an opportunity for companies to improve their ESG strategy and not only ESG – a very wide scope.
A good gap analysis is a critical starting point for the journey, and this will help the transaction to transaction to the full CSRD compliance.
This is a great opportunity to share what we are doing and the proposal we have in place now.
Catherine Beare Intertek 16:32
Thank you, Alessandro.
Thank you so much for your time today and again, as mentioned, it's Alessandro's team that is leading the development of this within Intertek and I'm delighted to work alongside them on some of these fantastic new innovations they're bringing.
So just as a reminder of how Intertek can help on CSRD. So, there are four ways,
1: To understand your current CSRD readiness. We can help you to undertake a gap analysis which you've just heard about from Alessandro to ensure you have a clear view of your organisations current readiness and will work with you to define clear action plans to address any gaps and prepare for your first submission
2: Through training to ensure everyone understands what's required to prepare for your submission.
This can be delivered to a range of different teams and functions across your organization and will be bespoke to best fit your requirements.
3: We can also provide auditing solutions and in some markets, we will also hopefully be able to act as the auditor of your CSR Directive reports.
So as one single provider supporting you from your early preparations through to audit of submission, and finally, we have also partnered with ESG Playbook, a leading SaaS reporting and solution provider bringing in one tool all required data collection, aggregation and tracking and reporting for ESG needs.
For more information, please do go and visit our website on www.intertek.com/assurance/EU-CSRD.
So that concludes today's podcast.
Thank you for listening.
Watch out for further CSRD episodes to help with your journey to compliance.