When reporting under the Corporate Sustainability Reporting Directive (CSRD), it is crucial to ensure that the information provided meets five key disclosure qualities. These qualities are essential for auditors to have access to relevant and high-quality information for their assessments. Here is an overview of the five qualitative characteristics that your reporting should adhere to:
1. Relevance
The first fundamental quality of CSRD data is relevance. Relevant information should have the capacity to influence stakeholder assessments and decisions, particularly through its predictive or confirmatory value.
This means that the data should be open, transparent, and clear in communicating sustainability matters. It should take into account the context, selection, and importance of the information provided.
2. Faithful representation
Information provides a faithful representation of reality if it is complete, neutral, and accurate. A complete disclosure includes all material aspects related to the content, with appropriate descriptions and explanations, enabling users to make informed decisions.
Neutrality means presenting information without bias, offering a balanced view of risks, opportunities, and impacts, avoiding a skewed focus on either positive or negative aspects.
Accuracy requires presenting data clearly, without netting or compensating figures, and clearly highlighting estimates and their limitations. While accuracy doesn’t require perfect precision, the information should reflect reality as closely as possible.
The enhancing qualities of comparability, verifiability, and understandability further improve the utility of the information provided.
3. Comparability
Comparability enhances the usefulness of the information by ensuring consistency over time, enabling comparisons across and within sectors. Comparable information should relate easily to a reference point, such as a baseline, target, or benchmark, and be reported consistently using the same methods.
In sustainability reporting absolute (raw) data and normalised data (which is made to be comparable on the same scale) should be prioritised; however, the value of relative data (e.g., percentages) is recognised.
4. Verifiability
Sustainability information is verifiable if it allows users to trust the data that informs their decisions, allowing different independent observers with reasonable expertise to reach similar conclusions. Verifiable information should be traceable and auditable, with clear documentation of the processes and methods used to produce the information.
5. Understandability
Understandable information is presented clearly and concisely, enabling all relevant users to grasp the main points. Such information should be laid out in an easy-to-follow manner, often using tables, graphs, and diagrams alongside narrative text to highlight key aspects.
While inherently complex information should not be excluded, it should be presented as clearly as possible. Additionally, sustainability information should be easily accessible, avoid unnecessary abbreviations, and include units of measurement.
By adhering to these five qualitative characteristics, you can ensure that your CSRD reporting is auditable, reliable, and useful for all stakeholders involved.
Example:
Q: Why is the sub-topic ‘climate change mitigation’ relevant for your company under a double-materiality assessment in CSRD?
A: Climate change mitigation is a critical focus for GreenTech Solutions because it significantly influences both our environmental impact and our long-term financial performance. Our recent Sustainability Report, published in 2023, includes detailed metrics on our greenhouse gas emissions and presents our strategic initiatives aimed at achieving net-zero emissions by 2030. We have conducted an in-depth analysis of our supply chain to identify emission hotspots and have partnered with suppliers to implement greener practices. The data collected is in-line with industry-standard reporting regulations, and is rigorously documented and subject to third-party verification to ensure its reliability. Our clear communication strategy and transparent reporting are designed to make our sustainability efforts accessible and understandable to all stakeholders.
Breakdown of Qualitative Characteristics:
Relevance
Relation to characteristic: The answer highlights the dual significance of climate change mitigation for the company, referencing both environmental sustainability and financial outcomes. In doing so, the answer information is relevant, as sustainability and financial outcomes are both crucial to stakeholder decision-making.
Faithful representation
Relation to characteristic: The company highlights the 'detailed metrics' it uses in their Sustainability report. By using detailed quantitative data the company strives to provide a faithful and transparent of it's emissions, commitments and strategies.
Comparability
Relation to characteristic: The data that is collected is aligned with industry standard reporting regulations, and thus allows for comparability across industries, companies and years.
Verifiability
Relation to characteristic: The data that is collected is 'rigorously document' to provide an audit trail. With third-party verification lending credibility, the data allows stakeholders to trust and confirm the reported data.
Understandability
Relation to characteristic: The company highlights how it commits to making its sustainability reporting efforts comprehensible to all stakeholders, ensuring that the information is presented in a clear and accessible manner.