Article: CSRD and ACT Step-by-Step

Mapping the synergies between the CSRD and ACT Step-by-Step standards

Authors : Sophie Proust & Charlotte Alibert 

Company stories

"The ACT Step-by-Step approach was so detailed and structured. Without it, we wouldn't have been able to report on the ESRS climate. ACT Pas-à-Pas enables us to provide evidence and to put our commitments into practice."

"Our ACT Step-by-Step approach will enable us to feed the various data points (DP) of the ESRS E1: Impacts Risks Opportunities, policy & strategy, transition plans, with concrete elements derived from collective work. The ACT Step-by-Step approach will give content and depth to these different DPs."

ACT and CSRD

The European CSRD (Corporate Sustainability Reporting Directive) is a framework regulation drawn up by the European Commission as part of the Green Deal. It aims to harmonize extra-financial reporting by companies, by proposing a common framework for communicating data on governance, social and environmental issues.

The ultimate aim of this directive is to encourage companies to question their business model and transform it to meet ecological and social challenges.

Although considered by some as a constraint due to the reporting burden it places on companies, the CSRD can and should above all be seen as an opportunity for transformation.

Broken down into 12 transversal and thematic standards (five of which relate to environmental issues) known as the European Sustainability Reporting Standards (ESRS), it calls on companies to design their strategies and management processes with a global approach, based on risk and opportunity analyses, while integrating stakeholders into their reflections and actions.

These 12 thematic standards, or ESRSs, deal with cross-functional topics and social, environmental and governance issues. Each ESRS is organized into different categories called Disclosure Requirement (DR), grouping together a number of qualitative and quantitative data points, also known as Data Point (DP).

The CSRD comprises a total of 1,200 DPs, including 219 for ESRS E1 on climate change.

The ACT Step-by-Step methodology aims to support companies in developing their decarbonization strategy with a robust transition plan. The aim is to help companies build a long-term strategy that meets the ambitions of the Paris Agreement.

To date, more than 400 companies have embarked on an ACT Pas-à-Pas program in France, with financial support from the French government via ADEME.

The ACT Step-by-Step methodology released in 2021 consists of five stages (see Figure 1), during which the company is required to work on a significant part of the information that is otherwise required in the CSRD’s harmonized climate change standard (ESRS E1).

Figure 1: The 5-step ACT Step-by-Step process

The ACT Step-by-Step methodology and the CSRD directive are both aimed at a profound transformation of the company, so that it can better respond to the challenges of transition.

We see ACT Pas-à-Pas as a support tool that enables companies to work on the fundamental elements required for CSRD reporting (climate change mitigation section).

ACT Step-by-Step Mapping and CSRD

In order to highlight the existing links between the achievements expected following support with the ACT Step-by-Step methodology (data produced) and the requirements of the CSRD’s ESRS E1, a mapping exercise was carried out.

This mapping meets several objectives:

The mapping available here covers each paragraph of the ESRS E1. It is based on the excel document published by EFRAG* listing all the CSRD publication requirements.

The ACT Step-by-Step methodology is not intended to provide all the data required by the CSRD in relation to climate change. For example, the subjects of carbon offsetting and carbon pricing are not currently included in the scope of the ACT Step-by-Step methodology.

The mapping shows for each PD (and therefore for each DR) the overlap with the CSRD during step-by-step ACT support. These overlaps have been divided into four types:

Full overlap (Yes): The data point is fully processed in the ACT coaching,
• ACT: The data point is partially covered by the ACT methodology,
• Company: The data point is covered by the ACT methodology, but whether it is properly taken into account and processed depends either on the work carried out by the company/ACT consultant pair during the coaching process, or on the way in which the company is already dealing with it,
Null cross-referencing (No): The data point is not processed in the ACT methodology.
In addition, for each data point, details are given of the ACT Step-by-Step process for dealing with the point, and the place where the response elements should have been worked on and/or should be available (when easily locatable).

In addition, the ACT Step-by-Step Mapping table, which positions ACT among other decarbonization benchmarks (TCFD, GRI, SBTi, ISO 14 001), has also been completed to include the CSRD standard. It is available here :

Key mapping findings

During the ACT Step-by-Step process :

• 83% of the PDs from the 7 DRs considered as priorities* for ACT Pas-à-Pas are addressed.
• 9 of the 12 PDs making up ESRS E1 are addressed, more or less completely,
• 38% of the PDs in ESRS E-1 have been addressed. The remaining 62% correspond mainly to issues outside the ACT scope (e.g.: E1-7, 8, 9) or to indicators/information that could be prerequisites for an ACT approach (E1-6),

*The priority PDs concern the DRs relating to the transition plan established (E1-1), the mitigation and adaptation policies put in place (E1-2), the actions and resources put in place (E1-3), the objectives set (E1-4), the analysis of climate impacts, risks and opportunities (IRO-1), the resilience of the business model in the face of climate challenges (SBM- 3) and the integration of strategy into governance (GOV-3). They cover 78 of the 219 PDs in the ESRS E1.

These cross-referencing rates give an indication of the issues that may or may not be addressed during ACT Step-by-Step coaching. It is important to note, however, that not all of the 219 RFPs in the ESRS E1 are relevant to all companies.

The key message here is that an ACT Step-by-Step approach enables a company to embark on a process of progress on the subject of decarbonization (regardless of its starting point) and to substantially address a number of the PDs, particularly narrative ones, requested by the CSRD in connection with the strategic thinking carried out by the company.

It is also important to note that the elements finally produced during an ACT Step-by-Step coaching program depend on the work carried out by the ACT consultant/company pair.

What's next for ACT Step by Step?

This work was carried out with the UTOPIES consultancy, which carried out a critical review of ADEME’s initial work, supplementing it with its field expertise on the subjects of decarbonation and sustainability reporting.

In addition to this exhaustive mapping, further work was carried out to identify potential methodological changes that could be made to the existing ACT methodology and tools, in order to provide better input for sustainability reporting exercises during step-by-step ACT support. This work was carried out on all the PDs, and in particular on the partially or non-overlapping PDs.

The methodological evolutions thus identified can be categorized around the following themes:

Through these typologies of methodological evolutions, we draw the following major evolutions on the core of ACT Step-by-Step approaches:

STRENGTHENING RISK ANALYSIS

analyse-de-risque.png

In order to offer ACT Step-by-Step support that is more in line with CSRD requirements, it will be necessary to provide a more in-depth analysis of companies’ physical risks, opportunities and transition risks (already included in the SWOT of the Strategy Toolbox). This analysis should eventually incorporate both mitigation and adaptation aspects.

 

This analysis will involve identifying the physical risks and climatic hazards affecting the company’s business and value chain, as well as the robust climate scenarios on which the strategy is based. This analysis must also cover the elements of the company that are subject to physical risks, and the financial quantification of these risks.

 

This in-depth analysis will enable us to better anticipate the climatic risks weighing on the company’s business.

CLIMATE GOVERNANCE

The in-depth analysis of the company’s activities required to meet the requirements of the European directive calls for robust climate governance.

The CSRD therefore calls for specific governance to be put in place, to be deployed at all levels of stakeholders, both internal and external to the company.

We could then look at how the company encourages its employees to consider climate change in their missions, and also how the action plan is managed: with indicators, a review process, official validations…

This could give rise to a climate governance guide.

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QUANTIFYING CARBON EMISSIONS

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ACT support requires better quantification of GHG emissions in order to comply with CSRD requirements.

To this end, the Boite à outil Carbone could develop a tab to better quantify the potential for reducing emissions linked to the actions identified in the action plan.

It can also be used to better integrate the study of locked-in emissions and take into account emissions that have already been reduced: all with a view to long-term monitoring of the company’s position on its decarbonization trajectory.

MONITORING AND STEERING THE ACTION PLAN

The CSRD’s expectations are that the action plan should be framed and monitored more closely.

To achieve this, the action plan tab in the strategy toolbox needs to be simplified and made more operational:

  • Making it easier to report on action plan progress
  • By including a prioritization of actions and tracking the effectiveness of actions implemented…
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The following table shows the level of synergies between ACT Step-by-Step and the CSRD for each DR, as well as the main conclusions of the mapping exercise concerning the aforementioned methodology.

What's next?

Better to act than to suffer. This objective mapping exercise shows the extent to which a company embarking on an ACT Step-by-Step program can use the elements developed as part of the process as input for a CSRD reporting exercise. Whether the latter is mandatory or voluntary.

The results show that Step-by-Step support helps the company to structure itself and provide a significant proportion of the narrative elements required in the ESRS E1. This applies in particular to strategy, transition planning and the definition of objectives and actions.

The results of this work were presented during a thematic webinar on September 19, 2024 (see slides).

Prioritization of methodological evolutions is underway. The integration of adaptations to ACT methodologies and tools in line with the conclusions and prioritizations made following this mapping work will be launched shortly, with a view to proposing updated tools in the first quarter of 2025.

The aim will be to facilitate the preparation of the sustainability report (mandatory or voluntary) of companies implementing an ACT Step-by-Step approach, by better identifying the regulatory data actually worked on during an ACT approach, as well as better centralizing the information that will subsequently be useful for the reporting exercise.

Mapping work is also underway for the ACT Evaluation component. To date, the work carried out for ACT Generic and for 6 representative sectoral methodologies has enabled us to draw conclusions about the extent to which the needs of ACT Evaluation methodologies are covered by the ESRSs, and to identify several opportunities for methodological development.

This work will be presented at a special webinar in December 2024.

Glossary and additional resources

Climate Change

Corporate Sustainability Reporting Directive 

Data Point required for CSRD reporting

Disclosure Requirement (ESRS component, e.g. DR 1 – ESRS E1 = Climate change mitigation transition plan)

European Financial Reporting Advisory Group

European Sustainability Reporting Standards

Task Force on Climate Related Financial Disclosure 

Working group on recommendations for climate-related financial disclosures

Global Reporting Initiative 

Independent international standards organization for information disclosure

Science Based Traget Initiative 

A partnership between the Carbon Disclosure Project (CDP), the United Nations Global Compact, the World Resources Institute (WRI) and the World Wildlife Fund to help companies set science-based decarbonization trajectories.

Requirements and recommendations for implementing an Environmental Management System (EMS).

Commission Delegated Regulation (EU) supplementing Directive 2013/34/EU of the European Parliament and of the Council as regards sustainability reporting standards 

https://eur-lex.europa.eu/resource.html?uri=cellar:a17f44bd-2f9c-11ee-9e98-01aa75ed71a1.0008.02/DOC_2&format=PDF 

Educational guide for businesses, Reporting on your climate transition plan in ESRS format, 2023, Financial Markets Authority

https://www.amf-france.org/sites/institutionnel/files/private/2024-02/rendre-compte-de-son-plan-de-transition-au-format-esrs.pdf 

Draft ESRS Set 1 Table XBRL Taxonomy illustrated in Excel 

https://xbrl.efrag.org/downloads/Annex-1-Draft-ESRS-Set1-XBRL-Taxonomy-illustrated-in-Excel.xlsx 

Deploying ESRS: A management tool for the transition, June 2024, Accounting Standards Authority

https://www.anc.gouv.fr/files/live/sites/anc/files/contributed/ANC/Guide_durabilite_2024.pdf