How a GAP Assessment can help you prepare for CSRD

02 Nov 2023

A good gap analysis is a critical starting point for the CSRD journey, and this will help the transaction to transaction to the full CSRD compliance.

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.

What is the intent of a gap assessment?

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 a high level of gap assessment can assist in you in getting prepared for the CSRD. 

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. 

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 programs. 

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. 

What’s the process? 

I can 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. 

Step 1

Look at the scope of the assessment.  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.  

Step 2

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. 

Step 3

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. 

Step 4

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. 

Step 5

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. 

Finally… 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. 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. 

In summary

We are all learning every day in the world of the ESG.   The legislation is new and still in 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.