Sustainability reporting in SAP? Here's what you need to know about CSRD.

Sustainability is a term that is often used, and sometimes misused. However, it is no longer a non-committal ambition. Especially in the financial world, sustainability is becoming increasingly concrete, particularly when it comes to reporting.

What must you report? When does the obligation apply? And more importantly: how do you properly implement this within your systems?

In this blog, we take you through the essentials.

The European legislation

In 2015, 194 countries agreed in the Paris Climate Agreement to keep global warming below 2 degrees. The European Union translated this into concrete objectives: by 2030, greenhouse gas emissions must be reduced by at least 55% compared to 1990, and by 2050, Europe must be climate neutral.

To achieve these goals, the EU is developing legislation that encourages sustainable investments and requires companies to report transparently on their impact. In doing so, the EU is initially focusing on the capital market: capital must flow to sustainable enterprises. But what is a 'sustainable' enterprise? And how do you compare companies in this area?

The CSRD has been drawn up for this purpose.

What is the CSRD?

The Corporate Sustainability Reporting Directive (CSRD) requires large organizations to report transparently on ESG: Environmental, Social, and Governance. But it goes beyond a reporting obligation. It demands insight, choices, and control.

Which themes are truly relevant is determined by a double materiality analysis. It is double because you look at two sides simultaneously. On one side: what is your impact on people, the environment, and society (inside-out)? On the other hand: what does a changing, more sustainable world mean for your organization (outside-in)? That does not only affect finance. It equally impacts HR, procurement, strategy, and reputation. Sustainability is therefore not a separate domain, but an integral part of your business operations.

The final report must be verifiable and audit-proof. The auditor assesses not only the content but also the underlying processes and controls. This results in a mandatory auditor's statement for the sustainability report. And it is precisely this statement that serves as the real catalyst for many organizations. Without clear data, well-structured processes, and demonstrable internal control, an unqualified opinion is simply not achievable.

From 2027, this obligation applies to large EU companies that meet at least two of the following criteria: more than 250 employees, more than €50 million in revenue, or more than €25 million in total assets. Listed and international organizations have earlier deadlines. Smaller companies will also be affected, for example, through supply chain responsibility. Waiting is not an option. Starting on time means maintaining control — and organizing work more efficiently.

What challenges do companies face?

The biggest challenge in ESG reporting is the lack of available and reliable data. Many data points, for example, concern circularity: what portion of purchased raw materials is used circularly? This information is often not available in the supply chain or is not systematically recorded in systems.

Additionally, many organizations lack a data infrastructure that allows sustainability information to be collected at the same quality level as financial data. CSRD requires external verification. This means that auditors are setting new requirements for internal control, documentation, and traceability.

The result:

• Inconsistencies between departments

• Inaccurate estimates

• Time-consuming manual processes

• Increased audit risk

And there lies the real challenge: how do you set up your systems so that this data is structural, reliable, and verifiable?

What does this require from your SAP landscape?

ESG reporting requires integrated data on, among other things:

• CO₂ and greenhouse emissions

• Energy and water consumption

• Waste and recycling

• Supplier performance

• Employee data

• Sustainable investments

This data affects multiple business processes, and therefore also your ERP system.

With SAP Cloud for Sustainable Enterprises, organizations can integrate sustainability data into their core processes. This makes it possible to measure, analyze, and report performance in a structured and controllable manner.

Sustainability thus becomes not a separate report alongside your ERP, but an integral part of your business operations.

What can you start with now?

A good preparation starts with insight:

• Conduct a double materiality analysis to determine relevant ESG KPIs.

• Map out which sustainability data you are already recording and where there are gaps.

• Analyze which adjustments are needed in your SAP landscape to record data in a structured and controllable manner.

Start on time — it provides calm and control.

Would you like to know what ESG reporting specifically means for your SAP environment?

We are happy to think along with you about an approach that ensures compliance with legislation and enables smarter working. Contact Nick Hurkmans at nick.hurkmans@mccoy-partners.com.