Managing data for CSRD compliance: What US businesses need to know

Over 3,000 US companies with significant operations in the European Union (EU) will soon be required to comply with the Corporate Sustainability Reporting Directive (CSRD), a sweeping regulation designed to enhance corporate transparency on environmental, social, and governance (ESG) issues. Understanding the reporting timelines, the steps in the disclosure process, and the importance of accurate data management is crucial if you work for a US business that’s subject to the CSRD. It’s not just about meeting the disclosure deadline on time – doing so, and getting it right, will help you to transform your business, as well as avoiding some very real and present risks. 

In a recent webinar, Julien Denormandie, Chief Impact Officer at Sweep and a former French government minister, and Laura Xu, Senior Product Manager at Arcadia, provided expert insights into how US companies can successfully navigate CSRD compliance. Drawing on their deep knowledge of sustainability reporting and technology solutions, they discussed practical steps businesses can take to stay ahead of these regulations, and the strategic advantages of early compliance.

This blog post summarizes the key takeaways from their conversation, and tips for managing the complex data requirements that the CSRD demands.

What does CSRD mean for US businesses?

The CSRD is a European Union regulation, which aims to improve the quality and comparability of sustainability reporting, while driving the transition to a low-carbon economy. It carries some demanding disclosure requirements, and it’s not something that any business can afford to ignore. If your business is subject to the CSRD but does not comply, it is open to financial penalties, market access restrictions, legal action, and reputational damage.
It also offers you the opportunity to seize control of your organization’s sustainability data and use it as a tool to transform your business: by optimizing your operations, making cost savings, and improving the quality of your supply chains.

For US companies, the CSRD will apply to EU-based subsidiaries by 2026 and US parent companies with significant EU operations by 2029. US companies meeting specific criteria, such as having more than 250 employees in the EU or exceeding €150 million in turnover, will be required to comply. Even for those not directly subject to the CSRD, businesses may still feel the ripple effects through their EU partners or customers who will demand CSRD-aligned data from their supply chain. It’s crucial that you check early whether, and on which timeline, your company will be required to comply with the CSRD. 

In a major difference from most existing US climate regulations, the CSRD covers Scope 3 emissions. This means that US suppliers to European companies may also be asked to provide sustainability data to them, well before official compliance deadlines. US based sustainability managers should therefore anticipate these requirements and take proactive steps to gather and manage this information.

Managing data for CSRD compliance

One of the most significant challenges of CSRD compliance is data management. The directive requires companies to track around 1,200 different data points covering environmental, social, and governance metrics. Data must be accurate, auditable, and reported in a standardized format (XBRL), similar to financial reporting.

Key data challenges of the CSRD:

• Granularity and transparency: Sustainability data must be highly granular and traceable across the entire value chain, including Scope 1, 2, and 3 emissions.
• Auditability: Every data point submitted for CSRD reporting must be validated and tracked, as auditors will need to verify all reported information. This adds a layer of complexity, requiring companies to maintain detailed records and a robust data trail.
• Cross-department collaboration: CSRD compliance is not just the responsibility of the sustainability team. It requires coordination between the IT, Finance, and CSR departments to ensure data is collected, verified, and reported properly.

To manage these requirements, companies will need robust data platforms that can automate data collection, processing, and reporting. Sweep and Arcadia’s platforms are tailored to streamline this process by offering end-to-end solutions for gathering and reporting sustainability data.

Practical steps for US businesses:

1. Invest in a data management platform: Automating data collection, tracking, and reporting is essential for compliance. Tools like Sweep help manage the approximately 1,200 CSRD data points and ensure they are auditable. Find the best platform for your business with our dedicated guide.
2. Involve multiple departments: Sustainability, IT, and Finance teams must work together to meet the CSRD’s complex requirements.
3. Prepare for Scope 3 reporting: Engage suppliers early to ensure they understand CSRD data requirements, even if your business isn’t directly subject to the regulation yet.

Arcadia: simplifying your utility data collection

Arcadia is a data platform that connects businesses to global utility data, making it easier to collect, normalize, and transform energy data into reporting-ready formats. Their tools help streamline the data collection process, particularly for carbon-related metrics, which are essential for compliance with evolving regulations like the CSRD.

Sweep: the all-in-one CSRD-optimized software solution

Sweep is an all-in-one platform that helps organizations track, manage, and report their carbon and other sustainability data. It is designed to assist companies in complying with the CSRD’s stringent reporting requirements by offering a scalable solution that integrates with existing workflows, ensuring that data is auditable and compliant across the entire value chain. Sweep is already working with major companies including L’Oréal and Travel + Leisure to help them comply accurately and swiftly with the CSRD.