To strengthen sustainability initiatives, the EU has updated its ESG reporting regulation, replacing the Non-Financial Reporting Directive (NFRD) with the new Corporate Sustainability Reporting Directive (CSRD). The CSRD aims to elevate sustainability reporting to the same standards as financial reporting. As a result, companies will need to apply a higher degree of rigour to their ESG reporting to meet these stringent new regulations.

And whether the CSRD affects your company or not, once voluntary ESG reporting is increasingly becoming mandatory. CSRD compliance is just the latest example of regulators placing sustainability reporting on the same footing as financial reporting, representing a trend that organisations in all industries and markets need to understand and plan for.

The CSRD reporting challenge

In the urgent need to comply with CSRD and other ESG reporting frameworks, companies across industries are facing several common challenges to ensure the completeness, accuracy, and auditability of their data:

• Investing time and effort to collect data from siloed applications, which is error-prone if done manually
• Integrating sustainability data with financial and operational transaction data for a true and detailed accountancy
• Connecting complex supply chains and different types of suppliers in consistent, reliable data sharing
• Managing the change throughout the organisation to prioritise ESG data collection and reporting
• Keeping up with changing standards as CSRD and other ESG reporting frameworks are constantly evolving
• Aligning ESG data collection and reporting with broader corporate strategy and long-term business value

Overcoming these challenges requires understanding CSRD’s overall intent to transform companies as a whole so they become more sustainable.

At SAP, we believe that the best way for our customers to bring sustainability into the core of their business—and, in fact, the simplest way—is by using a cloud ERP-centric approach to sustainability.

Adopting cloud ERP for sustained CSRD reporting

Our point of view is that only with a cloud-based software-as-a-service (SaaS) model can organisations confidently meet the challenges and changes required by CSRD and other ESG regulations in the coming months and years. Our approach centres around SAP S/4HANA Cloud Public Edition, a comprehensive, ready-to-run solution that delivers the latest industry best practices and continuous innovation.

SAP S/4HANA Cloud Public Edition provides you with the foundation to enable comprehensive sustainability reporting features that draw on your core systems and processes including:

• An integrated, standardised reporting framework that brings financial and non-financial data together and streamlines detailed disclosures on ESG metrics
• Automated collection, aggregation, and consolidation of sustainability data from internal and external sources including your supplier networks
• Real-time analytics and dashboard capabilities to continuously monitor sustainability performance and make data-driven sustainability decisions
• Audit trails and data verification processes to ensure accuracy and compliance with CSRD standards as well as boost confidence with stakeholders
• Scenario planning and impact analysis to better understand sustainability strategies and support CSRD’s impact, risk, and opportunity reporting requirements
• Extensibility and adaptability to ensure the accommodation of future changes in CSRD requirements and other sustainability reporting standards

The key features above, supported by the cloud-based sustainability solutions described below, establish SAP S/4HANA Cloud Public Edition as a powerful foundation for embedding sustainability into your business processes. With this approach, you can measure and manage your sustainability bottom line as quickly and as accurately as your financial bottom line.

SAP S/4HANA Cloud Public Edition and SAP Sustainability Solutions

The robustness of SAP S/4HANA Cloud Public Edition combined with the specialisation of SAP Sustainability solutions provides both the sustainability data and process integration you need to ensure continuous, streamlined CSRD compliance.

Two sustainability solutions in particular, SAP Sustainability Footprint Management and SAP Sustainability Control Tower, provide critical tools for adhering to CSRD guidelines with standardised, easy-to-audit reports as well as automated workflows and compliance checks.

The integration power of these solutions brings your entire business ecosystem together—including your extended supply chains—helping you make more informed and financially sound decisions on your sustainability objectives and plans.

SAP sustainability footprint management

SAP Sustainability Footprint Management solution delivers advanced and highly detailed calculations to expand your insights into your carbon footprint. It assesses your total carbon footprint across all categories of greenhouse gas (GHG) emissions identified by the GHG Protocol, taking into account the materials, transport, and manufacturing factors involved in your product carbon footprints.

When combined with our cloud-based SAP Sustainability Data Exchange application, SAP Sustainability Footprint Management can pull master and transactional data from SAP S/4HANA Cloud Public Edition and incorporate it with carbon data from across your supply chain.

SAP Sustainability Data Exchange also conforms to standard sustainability models and industry frameworks to simplify data sharing. It connects you with over six million companies within the SAP Business Network to automatically pull the information you need from suppliers within the network into SAP Sustainability Footprint Management.

SAP Sustainability Control Tower

SAP Sustainability Control Tower equips organisations with reliable, auditable ESG data to address evolving sustainability regulations including CSRD. It enables sustained ESG reporting by streamlining preparation of European Sustainability Reporting Standards (ESRS) disclosures, and it also supports reporting in line with EU Taxonomy disclosures.

SAP Sustainability Control Tower integrates with SAP S/4HANA Cloud Public Edition to bring ESG impact data and ERP transaction data together. This ERP-centric, AI-enabled approach allows you to meet your sustainability requirements with confidence:

• Capture data right at the source, leveraging integrations into your existing SAP solutions
• Use AI technology to kickstart your sustainability reporting and gain further insights into your data
• Calculate audit-ready ESG metrics from predefined content that’s constantly updated to keep up with changing regulations, or create your own metrics
• Keep regulators and other stakeholders informed on CSRD compliance with sustainability reporting and data updated and accessible in real time
• Manage what you measure by tracking progress towards sustainability goals and acting on targets you set and risks and opportunities you identify