5 Common Myths About the EU CSRD Debunked

Environmental, Social, and Governance (ESG) programs and corporate social responsibility efforts are designed to provide transparency to consumers, investors, oversight and compliance commissions, and the governments driving these mandates. While corporate reporting practices for finance are well established, mandatory disclosures on human capital management are relatively new—and growing in prominence.

Human capital measurement is a growing priority of the C-suite, especially as new regulations and requirements—like the EU Corporate Sustainability Reporting Directive (CSRD)—continue to go into effect. The first reports for the CSRD are due in January 2025 and must compare 2024 data to 2023 data, which means companies that haven't started collecting and analyzing the required data are already nearly a year behind.

Here are five common misconceptions HR teams have about the EU CSRD that are leading organizations to delay preparing for the new regulations—and the reality behind each. 

Myth 1: The CSRD requirements have not been finalized

Largely, they have. The ESRS S1 Own Workforce requirements of the EU CSRD, which cover the "S" in ESG, outline 30+ people-related metrics on subjects ranging from training and diversity, equity, including, and belonging (DEIB) to industrial disputes and accidents. There may well be some changes and additions in the upcoming months around implementation, but the core requirements are already clear.

For the small number of businesses that already have a people analytics platform and access to insights for every business location and job level, preparing to meet the final requirements will not be a huge lift. Organizations that are not in this position will be forced to scramble. And the longer organizations wait to get started, the more difficult and disruptive the process will become.

Assess your CSRD readiness to ensure you are best placed to meet the tight timeline.

Myth 2: We don't need to start reporting until next year

Some of the people reporting requirements of CSRD are relatively straightforward to capture and record. However, if you're not already doing this, there’s a possibility that you're underestimating the time it will take to set this up. Time and again we have seen businesses embark on such projects with delivery deadlines planned for two months that have stretched 6-12 months, and sometimes far beyond. 

Hidden obstacles from an operational standpoint often include resistance from other departments, landing on effective program leadership, confusion between functions on the purpose of the project, difficulty building alignment around measurement processes, and handling changing organizational hierarchies. Then comes maintaining the quality of the data itself: data cleaning, data grading, and the threat of key personnel leaving and taking the data knowledge with them.

Myth 3: It’s only an annual reporting process

Technically, this is true. The CSRD is a corporate reporting requirement that is filed annually. However, these regulations require in-depth year-over-year comparisons that depend on ongoing reporting and analytics. So you’re not just gathering the last 12 months of data and exporting it into a table. You'll need to comment on trending data, which is more prone to change. The HR metrics you submit will need to be accompanied by commentary on gaps, including your organization’s plans to fill them. Inevitably it will take time to reach a consensus on such narratives, but there’s another reason to engage sooner rather than later. 

The CSRD requirements increase HR's strategic impact. HR reporting must not just exist to serve HR. Sparking the people-led CSRD conversation is a great way to support, bolster, and accelerate existing transformation plans in the people realm. If you’re deprioritizing CSRD, you’re ignoring one of your most powerful and practical levers for change.

With Visier People® Workforce CSRD consolidates all of these workforce disclosures into a single solution, allowing HR leaders to quickly measure key ESG metrics, drill into specific business units and locations, and glean the insights necessary to explain the what, how, and why behind each.

Myth 4: HR isn’t involved—CSRD is managed by the ESG team

If you have a dedicated ESG team or provider, you need to ask them if they support the social requirements of the CSRD. Most ESG providers will have some degree of metric capabilities, but ESG-specific vendors will still lack the insights you can glean from a people analytics platform. If you ‘scrape by’ on CSRD, you will never see the benefits and dividends of greater insight into your people needs currently, let alone for a future that we know is sure to be challenging for your people, your business, and your markets.

CSRD reporting marks the elevation of people reporting to the heights of other kinds of data—financial and risk data, for example. Would your CFO let data about finance be presented outside the organization without having oversight of what is presented, and how? The short answer is no. CHROs must follow the same approach. HR is the only function that can credibly turn insights into action and changes that endure within the people realm of the business.

Myth 5: We can already do this in our BI or reporting platforms

You can do some of it, but far from all. Slicing and dicing data is hard and time-consuming. Crucially, you don’t have the option to manage access and role permissions to people data and insights to your management teams. This is what you want to be moving towards: a common understanding that people data can be accessed and interrogated to spark insights that lead to plans that lead to action on people matters. This will soon be business as usual. Decentralizing and democratizing access to people data will yield tangible business benefits in time, well beyond CSRD compliance. 

Ready to get out the starting blocks? Check out our 3-point plan for CSRD-compliant people reporting here.

On the Outsmart blog, we write about workforce-related topics like what makes a good manager, how to reduce employee turnover, and reskilling employees. We also report on trending topics like ESG and EU CSRD requirements and preparing for a recession, and advise on HR best practices like how to create a strategic compensation strategy, metrics every CHRO should track, and connecting people data to business data. But if you really want to know the bread and butter of Visier, read our post about the benefits of people analytics.