Financial institutions seeking improvements to CSRD reporting cycle
Now that the first CSRD reports have been submitted, many financial institutions face a new challenge: how can a one-off effort be embedded into a sustainable, annual process? Research by ACE + Company shows that financial institutions are grappling with recurring bottlenecks such as data issues, increased workload, and legal uncertainty.
The first CSRD cycle has according to the research from Dutch consultancy firm ACE + Company exposed numerous procedural and content-related challenges.
Many institutions struggle with missing or inconsistent ESG data, often due to a lack of clear data definitions and lineage. These processes are largely manual. “Most data flows still need to be established, potentially involving up to 1,200 data points. This creates a significant effort to understand what each data point means, where the data can be sourced, and how it moves from point A to B,” says Rens Krediet, researcher at ACE + Company.
Because a lot of manual work is involved, financial institutions are concerned about the quality of certain data.
Towards a professional second cycle
For upcoming reporting years, further professionalisation is essential. The most improvement potential could be unlocked in areas like data automation, centralised data intake platforms, and clearly defined RACI structures with traceable data flows. “Technology such as Gen AI can be an important enabler,” says Rens.
The research shows that organisations are currently relying on transitional structures. They begin by experimenting with innovative technologies within temporary teams and selected departments. This phased approach helps refine methods before they are integrated into the wider organisation.
Organisations are also investing more internally. While external consultants played a major role in the first cycle, the focus is now shifting towards internal staff. As one research participant noted, “We’re currently internalising work that was previously outsourced, so we can become self-sufficient in the long run.”
Rens: “This shift helps to embed CSRD into the daily operations of financial institutions.”
CSRD and risk & control
Besides embedding the CSRD reporting cycle, organisations are also working to incorporate CSRD into their broader risk and control frameworks.
“This helps to ensure ongoing progress and day-to-day relevance,” explains Rens. “However, this is a major task. The legislation must be compared to a wide range of existing policies to identify overlaps, gaps, or duplication.”
Here too, Rens points at the potential of Reg AI and Gen AI. “With smart technology, this kind of work can be carried out much more efficiently and with shorter turnaround times.”
Omnibus?
The arrival of the Omnibus Directive has led many future improvements to be put on hold. This may reduce short-term investment costs, but it also slows down the learning process needed to improve efficiency for the second cycle.
Rens: “Another consequence of this uncertainty is that staff and leadership have deprioritized making improvements to the process. As one participant shared, ‘We’re still trying to sell the importance of CSRD internally’.”
In their efforts to plan and improve the CSRD cycle, institutions are looking not only at legislation and the Omnibus package. The research shows that they also benchmark themselves against peers. “Observing the moves of other banks and joining market initiatives plays an important role in identifying ways to improve their own reporting processes.”
GenAI as a catalyst
The researchers highlight Gen AI in particular as a game changer for the future of the CSRD reporting cycle. “Gen AI can significantly accelerate and structure the process. GenAI can support implementation of an ESG data model aligned with both internal and external guidelines. This helps ensure consistent terminology and definitions. It can also be used to check whether data meets the required criteria, which avoids time-consuming manual validation.”
“Another benefit is the ability to link policy documents and control frameworks to CSRD requirements, helping organisations identify overlap, gaps, or duplicates. GenAI can also be used to monitor legislative updates, such as the Omnibus, and translate them into reporting implications.”
At ACE + Company, they are at the forefront of this development, says Rens. “We have developed our own RegAI platform, which enables our clients to automate up to 90% of the manual work, with conducting (in-depth) impact assessments and with translating complex regulations into operational changes.”
