CSRD reporting and auditing: success factors and tips

The increasing requirements for sustainability reporting pose significant challenges for medium-sized companies. With the introduction of the CSRD (Corporate Sustainability Reporting Directive), the group of companies subject to reporting requirements has been significantly expanded, meaning that unlisted companies are now also obliged to publicly report on their sustainability performance. The integration of comprehensive KPIs on sustainability performance into regular management reports also increases complexity. For the first time, both financial and impact-related materiality aspects are taken into account in order to provide a holistic perspective on the interactions between companies, the environment and society.

Steps prior to auditing the sustainability report

The first step in sustainability reporting is to carry out a double materiality assessment (DMA) to identify the key sustainability matters for the company. Based on this, structured processes for data collection should be established to ensure the regular collection, aggregation and evaluation of relevant data while simultaneously ensuring its quality. The next step is to create a report in which the current status, defined targets, measures and progress made are communicated clearly and comprehensibly in a non-financial management report. Finally, an auditor subjects the sustainability report to a comprehensive audit to ensure compliance with legal requirements and the reliability of the reported information.

Changes to the reporting structure due to the CSRD

Prior to the CSRD

The introduction of the CSRD (Corporate Sustainability Reporting Directive) makes sustainability reporting an integral part of financial reporting and entails a mandatory audit of these reports. Prior to the application of the CSRD, the management report mainly comprised traditional elements such as the analysis of the development and performance of business activities, the expected development, the corporate governance statement and the description of material risks and uncertainties.In addition, a non-financial statement, including the EU taxonomy, could be integrated, although reporting on sustainability issues was previously voluntary.

With the application of the CSRD

With the application of the CSRD, the management report undergoes a comprehensive expansion. In the future, a mandatory sustainability report will form part of the management report. This contains general information as well as information on environmental aspects (E), social issues (S) and governance issues (G), supplemented by the EU taxonomy. This integration means that sustainability reporting is not only a central component of corporate reporting, but is also subject to a strict audit requirement for the first time. This poses new challenges for companies, but at the same time offers the opportunity to systematically integrate sustainability into their strategic orientation.

Impact of the CSRD

The introduction of the CSRD standardizes sustainability reporting and increases the requirements for data quality and reconciliation processes between financial and non-financial information. More extensive disclosure obligations and increased stakeholder expectations require more precise reports. Mandatory auditing increases regulatory requirements and resource requirements. At the same time, sustainability is becoming more integrated into corporate reporting and is therefore becoming a central strategic element.

Audit stages of the CSRD reporting

Sustainability reporting under the CSRD is subject to a multi-stage review process:

Audit with limited assurance

In the transition phase from 2025/2026, sustainability reporting is subject to a limited assurance audit. This type of assurance ensures that the information provided is plausible and comprehensible, but does not provide full confirmation of its accuracy.

Audit with reasonable assurance

From 2028, the audit will be performed with reasonable assurance, which sets significantly stricter requirements. This type of audit corresponds to the level of the audit of financial reports and requires comprehensive verification of the data.

Authorized inspectors for the sustainability report

Sustainability reports are audited by an auditor, an auditing firm or the auditor of the annual or consolidated financial statements. Independent audit service providers are currently not permitted as they do not meet the national and European quality standards for auditing sustainability reports. In practice, in most cases the auditor of the annual or consolidated financial statements also takes responsibility for the audit of sustainability reporting. This approach guarantees a consistent assessment of financial and non-financial reporting requirements and ensures high-quality and reliable reporting.

4 tips for collaborating with auditors

Effective collaboration with the auditor is crucial for successful implementation of CSRD in the organization. The following success factors play a key role here:

Consistent planning

The structure of a modular CSRD implementation project forms the basis for successful implementation. This involves defining clear objectives and milestones that are tailored to both the needs of the company and the requirements of the auditor. This structured approach ensures transparent planning and efficient implementation of the new reporting requirements.

Early involvement

Early appointing and close coordination with the auditor are essential to ensure smooth cooperation. The requirements, the scope of the audit and the required documents should be clearly defined at an early stage of the project in order to avoid delays and ensure efficient implementation.

Clear communication

A continuous exchange of information with the auditor about progress, assumptions, challenges and results is crucial for successful collaboration. Creating transparent processes will prevent misunderstandings and ensure efficient communication that supports the audit process.

Comprehensive data management

The completeness and reliability of all relevant data must be ensured in order to guarantee sound and comprehensible reporting. An integrated data management system that is directly agreed with the auditor facilitates the availability and verification of the required information and contributes to efficient collaboration.

Recommendations for minimizing the effort involved in sustainability reporting

The implementation of CSRD requirements requires a systematic approach that begins with a clearly documented double materiality assessment. Audit-proof data collection processes, transparent reporting and the creation of efficient audit structures are crucial to ensure complete traceability and smooth cooperation with auditors. Considering these processes and requirements at an early stage can significantly reduce the workload and ensure that the processes are both suitable for documentation and auditing. With precise planning and coordinated processes, companies can not only meet the requirements of the CSRD, but also use sustainability reporting as a strategic tool for transparency and long-term value creation.