As finance leaders grapple with the Corporate Sustainability Reporting Directive and its complex demands, IT collaboration will become increasingly important, writes David Codd
Finance Directors and Financial Controllers are working hard to understand the implications of the Corporate Sustainability Reporting Directive (CSRD) and to put the necessary reporting in place in their businesses.
But their colleagues in IT also have a vital part to play. This is an unusual challenge for IT, and it’s important to consider how to collaborate effectively.
What are the pitfalls to avoid? And how can you build a strong partnership to deliver your sustainability reporting programme?
The CSRD, finance teams and IT
The CSRD will expand sustainability reporting which will become mandatory for publicly listed companies (plcs) in 2025 for 2024 performance and a year later for all large companies. Finance teams are now performing double materiality assessments and assessing what new measures and information will be required.
However, the underlying data itself must be identified and sourced, its reliability established, and processes put in place to extract and interpret the data and report accurately on an ongoing basis. This has the potential to become very onerous.
IT support will be critical to an effective and efficient process, i.e. high-quality reporting with minimum manual intervention.
An unusual IT challenge
This is an unusual challenge for IT departments for various reasons:
The scope is exceptionally broad
The activities that impact the environment are conducted across an organisation’s operations and – for Scope 3 emissions – through multiple steps in the supply chain. So, the systems and datasets your IT colleagues will have to work with are unusually disparate and will even fall outside the boundaries of the technology estate they control.
The standards are still being rolled out
IT project managers like clear definitions at the start of a project. However, the first sustainability reporting standards have only recently been released, and the taxonomy for digital reporting is a work in progress. Plus, the “limited assurance” concept will give rise to different interpretations of the quality of the audit trail needed.
This is a big project without a conventional monetary business case
Chief Information Officers usually have many more attractive-sounding initiatives in the pipeline than they can deliver at once. So, they work with their finance and functional colleagues to prioritise, and resources are allocated based on financial payback or loss avoidance. Your CSRD-driven reporting programme does not neatly fit these criteria.
How to manage risks
There are several risks when working with an IT team on sustainability reporting.
Confused responsibilities
You usually work with a financial systems team, but IT business partners for supply chain or manufacturing operations will already have been partnering with sustainability managers to develop scorecards. Muddled ownership and communications can result in lost time.
In a large business, reporting is a full-blown programme consisting of several streams. It needs experienced management to coordinate it and manage the relationship with you.
I would also recommend that accountability for IT delivery sits with the head of financial systems, and the IT project manager should sit on the team. This keeps the ownership and lines of communication as simple as possible.
Your IT team can’t resource the project
Since the 2000s, IT resource has shifted from enterprise systems to ecommerce, data analytics and security.
Enterprise resource planning systems teams have been staffed to make incremental changes on the basis that resources can be contracted in as needed.
However, consulting firms are now experiencing heavy demand for their sustainability reporting expertise as deadlines approach.
The work should be scoped out with IT as early as possible. Most of the scope can be clarified now. Finance and IT should accept that adjustments will be needed, but it’s wise to use resources now and make progress. In this case, perfect is the enemy of good.
Motivation
The tech community loves stimulating work – through either buying into a goal or working with innovative technology (and preferably both).
You need enthusiastic professionals volunteering for this project, but you’re competing with exciting fields such as artificial intelligence and the possibility of going to other employers. The people you need have lots of options.
Be aware of the nuanced differences between finance and tech culture and accept that you’re competing for talent.
Reach out to the IT community in your business, explain that CSRD prevents greenwashing and that high-quality reporting is a noble undertaking that will help your business to show the world what you’re doing.
True partnership is key
Recognise the significant challenge presented for both IT and finance by the imperative to develop a quality, efficient sustainability reporting process at pace.
A true partnership between finance and IT is the key to successful reporting.
David Codd is a Non Executive Director and Strategy and Transformation Consultant
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