CSRD: Definition and Importance in Modern Businesses

By Irma Bazelyte

Last time we discussed the importance of including Information Technology (IT) into CSRD reporting and how crucial it is to get a comprehensive understanding of IT Management and Sustainability in the sector. Before we jump into the depths and complexities of CSRD reporting, let’s put on out IT glasses on.

Sustainability is no longer a corporate buzzword. For many companies its now a license to operate, making its way into strategies, operations, and — most recently — regulatory mandates. Various stakeholders (customers, investors, and regulators) expect to see that companies are responsible — not in empty words, but measurable, tangible actions.

Enter the Corporate Sustainability Reporting Directive (CSRD), the first truly material piece of EU legislation on ESG. CSRD is more than a simple bureaucratic exercise — it’s aim is to create order and accountability across sustainability reporting. It’s a wake-up call for companies to reimagine their impact on the planet and society.

But what is CSRD, and why is it important? And how does IT (often the unsung hero, but with a huge amount of impact) fit into this shifting landscape? Let’s take a look.

Breaking Down CSRD

CSRD is not just an updated NFRD, but a complete overhaul of the existing EU Non-Financial Reporting Directive. CSRD far surpasses its predecessor in both the breadth and depth, and discipline, of sustainability reporting. It makes environmental, social and governance (ESG) reporting a requirement for companies. Data consistency and auditability is key. Furthermore, it requires companies to look beyond themselves and their operations, but across their value chain: both upstream and downstream.

The directive applies to large businesses and, in some cases, certain SMEs within the EU or the EU markets. In other words, if you’re doing business in Europe, sustainability isn’t another nice-to-have; it’s a must to operate.

The Double Materiality Framework

Double materiality is among the most important concepts of CSRD. It is this insight which inspires companies to consider both the two axes of their sustainability impact:

· Financial Materiality: Which environmental, social, and governance factors have an impact on your company’s performance/risk/opportunity? For example, what is the financial impact of a climate-related disruption to your supply chain or operational costs?

· Environmental and Social Materiality: This sees the other side of the coin and focuses on how your company’s operations affect the environment and society. Are you abusing carbon emissions, biodiversity loss, or social inequality?

This makes a two-sided approach for the companies in scope of CSRD. You can’t only look at how external factors affect your enterprise. You must also assess and disclose how your activities impact the broader world.

IT: The Unsung Hero of CSRD

Now, let’s talk about IT, a line of business that is often not included in the sustainability conversation but has a disproportionately large impact.

· Energy Consumption: Data Centres underpin IT infrastructure and use up massive energy. It is costly both on the companies’ wallet, as well as on the environment.

· Energy Sources: Many companies have strategies for implementing green energy sources across their operations and branches. However, not all companies are able to implement this strategy. This in turn means, that a number of data centres are burning off fossil-fuel generated electricity.

· Product’s Carbon Footprint: All IT equipment has a carbon footprint. This footprint can be broken down into 4 main categories: production, transport, usage (this is where energy consumption steps in), and end-of-life treatment.

· E-waste: More than 50 million metric tons of electronic waste is produced worldwide annually. Most of this waste comes from old servers, devices, and other IT infrastructure.

The Strategic Role of IT

IT is not only an environmental issue — it is essential for business continuity. Whether it is paving the way for seamless e-commerce functions, securing sensitive data, or facilitating remote workforces, IT systems play vital role in virtually every aspect of modern business.

But when companies put together their sustainability reports, the role of IT tends to slip under the radar. It’s like running your data centre without electricity.

IT is also so critical that if it goes down, then the entire enterprise is at risk. Think of a logistics company, where all orders are made on their booking platform; fleet is coordinated by the internal systems; all your customer accounts are logged digitally. Logistics company may suffer huge losses if their fleet is down for a week, but can they truly afford their IT to be down for a week?

Why CSRD Matters for Business

For companies wondering whether CSRD is worth the hassle, here’s why it matters:

· Regulatory Compliance: CSRD is not optional — it is a requirement for companies placed within its scope. Non-compliance may surely lead to diminished investor confidence and the financial penalties (there are to be determined by each EU member state), and the brand damage to the all-important reputation.

· Investor Expectations Are Changing: Investors are requiring information on how effectively a company is managing ESG opportunities and possibilities. Investors are seeking businesses that can show sustainability not just as a principle, but as a driver of value.

· Competitive Advantage: Early adopters of CSRD will have the chance to gain a first-mover advantage in their industry towards sustainability. This isn’t just good public relations; it’s a competitive advantage in an era when customers and stakeholders are holding companies accountable.

A Wake-Up Call for IT

Involving IT in CSRD-related reporting highlights that sustainability is not just the responsibility of the company’s sustainability team. It encourages IT departments to find new solutions, improve efficiency, and minimize their environmental impact while ensuring consistent reliability and performance.

IT Role Crucial for These Industries

Certain sectors rely on IT so much that it would be a big mistake to disregard its role in sustainability:

- Finance: All online banking, fraud detection, and financial transactions rely on robust IT Systems. And these operations are extremely energy intensive.

– Retail: E-commerce has made technology systems responsible for things ranging from inventory to customer transactions. Now, picture you walk right into the Black Friday craziness with broken servers.

– Healthcare: IT aids electronic medical records, diagnostic tools, and patient management systems. And just as important is how we run these systems up as how we run them sustainably.

These are only few examples of the industries that heavily rely on the IT. In todays globalized world, many industries are heavily reliant on the IT to ensure smooth operations and business continuity.

The elephant in the server room

Let us be real: IT is usually the unsung hero of the corporate world. It is the engine that keeps companies running while existing in the background. But IT cannot be a shadow player when it comes to sustainability. To ignore IT’s environmental footprint is also to act as if the various fridge-sized server racks in your closet aren’t there. (Spoiler alert: It’s there, and it’s consuming electricity.)

Remember: Every “cloud” file you save isn’t actually floating in space; it lives in a particular, very tangible, very electricity-sucking Data Centre somewhere. And all that old dusty under-used cable and laptops collecting dust in the storage closets? They’re contributing to the global e-waste crisis.

Conclusion — IT Must Be Part of Sustainability Conversations

CSRD is transforming the commercial mindset on sustainability. Its focus on double materiality ensures that companies consider not just their financial risks, but their impact on the planet and society.

As a key element in CSRD reporting, in terms of both IT environmental footprint and the role of IT as a keystone for business continuity. Ignoring IT in sustainability initiatives is not just a missed call; it is a missed opportunity for big progress.

Engage IT as your ally on CSRD because sustainability is not just what is visible; it is also the energy behind what is unseen.