The European Union has recently adopted the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS), which aim to improve the quality, comparability and reliability of corporate sustainability information. The CSRD requires all large companies and all listed companies (except listed micro-enterprises) to report on their environmental, social and governance (ESG) performance and impact, using the ESRS as a common framework.
This is a significant step forward for the EU’s sustainable finance agenda, as it will provide investors and other stakeholders with more transparent and consistent information on how companies are contributing to the European green deal and addressing the risks and opportunities arising from climate change and other sustainability issues. However, it also poses significant challenges for companies, especially for those that are not used to reporting on sustainability or that operate in multiple jurisdictions with different reporting requirements. The first reports under the new rules will be published in 2025, covering the 2024 financial year.
Navigating the Landscape: Hurdles in Sustainability Reporting
As businesses embark on the journey of complying with the new sustainability regulations, they face various challenges across different company sizes. These obstacles highlight the complexities of meeting regulatory standards, requiring strategic and innovative solutions. The challenges include:
- Complexity and Diversity of Sustainability Topics: The expansive scope of the new regulations necessitates companies to delve into a broad array of sustainability topics and indicators. Negotiating this complexity demands a holistic and consistent approach to the entire process—from data collection to analysis and reporting.
- Lack of Standardization and Comparability: Without a standardized framework for Environmental, Social, and Governance (ESG) reporting, businesses find it challenging to compare their sustainability performance with industry peers. The absence of a common standard makes it difficult to assess their standing in the industry and region.
- Cost and Time Involvement: For businesses, especially small and medium-sized enterprises (SMEs), creating and sharing sustainability reports can be a demanding job. The process of gathering and analyzing the necessary data requires a significant investment of both time and money.
In addressing these challenges, companies must not only adapt to the regulatory landscape but also strategically leverage tools and technologies, such as artificial intelligence (AI), to transform these hurdles into opportunities for positive change.
AI applications for sustainability reporting
The increased scope and depth of reporting requirements demand a sophisticated and efficient approach to ensure accurate and timely submissions. This is where artificial intelligence (AI) becomes essential in assisting companies to follow the new EU sustainability reporting rules, offering a myriad of solutions to streamline the reporting process:
- Data collection: AI can help businesses collect relevant and reliable data from various sources, such as contracts, agreements, policies, and disclosures containing sustainability information. As an example, a low-code AI platform facilitates the rapid and precise extraction of data from both digital and scanned documents.
- Data analysis and disclosure: AI can help companies review documents more rapidly, handle vast amounts of data more easily, and manage more effectively by building automated workflows that emulate the way humans analyze documents.
- Data verification and assurance: AI assists businesses in verifying and ensuring accurate, compliant, and aligned data reporting by using image processing, natural language processing, and machine learning techniques. One of the ways would be employing cutting-edge AI technology to bring unprecedented accuracy and shorten document processing time from hours to seconds.
AI as a Strategic Partner for Positive Change
As the EU takes a bold step forward with the CSRD and ESRS, companies embracing AI technologies find themselves better equipped to navigate the complexities of sustainability reporting. AI transcends its role as a mere compliance tool and transforms into a strategic partner, empowering companies to turn regulatory challenges into opportunities for positive change.
From efficient data management and predictive analytics to heightened reporting accuracy and automation, AI has become a driving force for companies committed not only to regulatory compliance but also to fostering a culture of sustainability and accountability. In the journey toward a more sustainable future, AI emerges as a catalyst for transformative change, enabling businesses to proactively address sustainability challenges and contribute positively to environmental, social, and governance responsibilities. As companies harness the potential of AI, they not only meet regulatory requirements but also position themselves as leaders in the pursuit of a more sustainable and responsible global business landscape.
UHURA IS AN AI PLATFORM THAT READS AND UNDERSTANDS COMPLEX DOCUMENTS JUST AS HUMANS DO. WE HELP BUSINESSES SPEED UP THE REVIEW AND DECISION-MAKING PROCESSES BY USING AI TO UNCOVER VALUABLE INSIGHTS FROM DOCUMENTS, REPORTS, CONTRACTS AND AGREEMENTS. WE USE CUTTING-EDGE AI, INCLUDING IMAGE PROCESSING, NATURAL LANGUAGE PROCESSING AND MACHINE LEARNING TECHNOLOGY, TO BRING UNPRECEDENTED ACCURACY AND SHORTEN DOCUMENT PROCESSING TIME FROM HOURS TO SECONDS.