The EU Corporate Sustainability Reporting Directive (CSRD), which began its pilot phase in 2023, marks a transformative shift in how European companies disclose environmental, social, and governance (ESG) data. As the successor to the Non-Financial Reporting Directive (NFRD), the CSRD significantly expands the scope of reporting obligations, bringing thousands of large companies and, soon, mid-cap firms within its purview. Early lessons from the pilot reporting phase have highlighted the opportunities and challenges companies face in aligning supply-chain disclosures with the CSRD’s ambitious transparency goals. Large EU retailers that participated in the pilot have had to grapple with mapping complex supplier networks, validating climate-related risks, and integrating granular ESG metrics into their public reports using the European Single Electronic Format (ESEF).
One of the most notable outcomes of the pilot phase has been the increased focus on supply-chain data integrity. Large retailers have had to document not just their direct operations, but also the ESG impacts embedded deep within their supplier tiers. This has required innovative approaches to gathering data from suppliers across geographies, sectors, and sizes. Many of these companies have turned to open ESEF XML templates to standardize their disclosures and ensure compliance with machine-readable filing requirements. These templates provide a structured framework for tagging ESG data points according to European Sustainability Reporting Standards (ESRS), facilitating easier review by regulators, investors, and other stakeholders. The experience of these large firms offers valuable lessons for mid-cap companies, which will come under CSRD reporting obligations from 2025 onwards.
For mid-cap firms preparing for their first CSRD reports, early alignment of data collection efforts with ESEF XML structures is crucial. By adopting these templates now, mid-caps can establish consistent data taxonomies and minimize future rework. The process should begin with a gap assessment of existing ESG data against the requirements of the ESRS. Companies should identify key metrics—such as Scope 1, 2, and 3 greenhouse gas emissions, supplier human rights due-diligence measures, and climate risk exposure—and map them to available internal and supplier data sources. Mid-cap firms should also ensure that their reporting systems can generate outputs in ESEF-compliant XML, either through upgrades to existing ERP platforms or through partnerships with external reporting software vendors.
Designing a cross-functional ESG audit is another critical step for mid-cap companies preparing for CSRD compliance. The pilot phase has shown that successful CSRD reporting requires collaboration across finance, procurement, legal, compliance, and sustainability teams. A well-designed ESG audit should draw on data from core enterprise resource planning (ERP) systems, which typically house the financial and operational information needed to support CSRD disclosures. Companies should define clear roles and responsibilities for data owners, establish data validation protocols, and set up automated workflows to reduce manual error. For example, procurement teams can be tasked with collecting supplier ESG certifications and audit results, while finance teams ensure that climate-related financial risks are properly reflected in the company’s accounts.
To implement this cross-functional audit, mid-cap firms should develop an ESG audit plan that includes: (1) a data inventory of all ESG-related data points and their sources; (2) a timetable for periodic data validation and review; (3) internal control procedures to verify data accuracy; and (4) escalation protocols for data gaps or anomalies. Internal audit or compliance functions should oversee the entire process, providing independent assurance of data quality and adherence to CSRD reporting standards. Embedding these practices now will not only support regulatory compliance, but also enhance the credibility of sustainability disclosures in the eyes of investors, customers, and other stakeholders.
The experience of large retailers in the pilot phase also underscores the importance of supplier engagement. Many pilot participants encountered difficulties in obtaining complete and reliable supplier data, particularly from smaller suppliers or those based in regions with less developed ESG reporting frameworks. To address this challenge, mid-cap companies should begin supplier outreach early, providing clear guidance on data expectations and offering training or technical support where needed. Open-data tools and collaborative platforms can also play a role—for example, using shared supplier portals where ESG data can be submitted and verified in a standardized format.
Mid-cap companies can further improve their CSRD readiness by simulating their first report before the formal 2025 deadline. A pilot internal report, structured according to ESEF XML templates and based on available ESG data, can help identify gaps and refine data collection processes. This exercise can also provide valuable insights into the time and resources required to produce a compliant report, enabling better planning for future reporting cycles.
The CSRD will continue to evolve, with further guidance expected on sector-specific reporting standards and digital assurance processes. Mid-cap firms that act now to align their supply-chain disclosures, data systems, and internal audit practices with the CSRD’s expectations will be well positioned to navigate this changing landscape. By leveraging the lessons of the 2023 pilot phase and adopting a proactive approach to data governance, these companies can not only meet regulatory requirements but also strengthen trust with stakeholders and enhance their long-term ESG performance.