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CSRD: how to consolidate balance sheets?

Summary

The introduction of CSRD (Corporate Social Responsibility) within the European Union imposes new obligations on companies, in particular to consolidate balance sheets.
Consolidating balance sheets involves synthesizing financial and non-financial information from various departments to produce a comprehensive report on performance in terms of sustainable development, corporate social responsibility (CSR) and environmental, social and governance impact.
Companies must define key indicators, collect internal and external data, follow ESG reporting standards, harmonize methodologies, consolidate data and write a comprehensive report following CSRD requirements. This report can be externally audited and disclosed to stakeholders to reinforce confidence.
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INDEX

Data collection

Follow ESG reporting standards

Harmonization of methodologies

Data Consolidation

Writing the CSRD report

Conducting an external audit

Disclosure of the report to stakeholders

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Introduction

With the implementation of the Corporate Social Responsibility Directive (CSRD) at the European Union level, companies must anticipate new obligations today. Consolidate balance sheets is an essential step that aims to synthesize financial and non-financial information from different departments within a company to produce a comprehensive and consistent report on sustainability performance, corporate social responsibility (CSR), and environmental, social, and governance impact.

Someone with a calculator to consolidate balance sheets as required by CSRDSomeone with a calculator to consolidate balance sheets as required by CSRDSomeone with a calculator to consolidate balance sheets as required by CSRD

Gather and synthesize information

For each materiality issue, companies must define the key indicators that will allow them to measure their performance. They must then identify the internal and external data sources that will provide the information needed to calculate these indicators.

Data collection

Companies need to have internal processes in place to collect data from different entities and departments. These processes may require the collaboration of multiple departments, including human resources, environment, finance, and more.

The company must ensure that it adapts its organizational structure to make data collection more reliable. This involves training existing staff or recruiting project managers.

Some information from external sources may be relevant to consolidating balance sheets. These sources include industry reports, government environmental reports, supply chain data, market research, etc.

Follow ESG reporting standards

Each company needs to identify ESG reporting standards that apply to its industry, geography, and sustainability goals. The use of ESG reporting standards helps make data more comparable across companies, promoting consistency and transparency of information. The CSRD is structured around 12 sustainability reporting standards with which the 50,000 companies in the European Union affected by the directive must comply.

Harmonization of methodologies

Companies must adopt the methodologies specified by the reporting standards. They outline how to collect, measure, and report ESG data. The teams responsible for data collection and management are trained and sensitized to these methodologies. These demanding processes require rigor and precision.

Data Consolidation

Data consolidation involves integrating information from different departments and sources following specified methodologies. A good understanding of the issues at stake in CSRD is a key factor in the consolidation of balance sheets.

Companies can implement consolidation tools to integrate and process data from all entities (internal and external). To do this, companies can use HR management software or carbon footprint software.

Harmonize data, consolidate reports: the CSRD requires total transparency.

a glass bubble in front of trees representing CSRD transparency

Produce a complete and consistent report

To produce a complete and consistent report, it is essential to follow a structured process and ensure that the report meets all the requirements of the CSRD, hence the importance of consolidating data upstream.

Writing the CSRD report

Companies must write a comprehensive report following the structure and sections specified by the CSRD. This report should include information on sustainability strategy, management policy, actions to limit environmental impact, ESG risks, and key performance indicators.

The report should be transparent about how the data was collected and processed. The methodologies used must be explained and the company must be objective about the limitations of its report.

Conducting an external audit

The reports may be subject to an external audit by an independent auditor. The results of the audit are included in the report, which promotes transparency and reliability of the information.

Companies need to be able to identify areas where they can improve on emissions so that they can implement appropriate corrective actions.

Disclosure of the report to stakeholders

Reports are communicated to stakeholders, including investors, partners, and employees. This allows these external actors to assess the reliability of ESG information. By consolidating its reporting, the company significantly boosts the trust of stakeholders.

Consolidating balance sheets requires the use of reliable software, such as the carbon footprint calculation software D-Carbonize, which supports companies in the collection, management, and analysis of GHG-related data.

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