This year’s sustainability reporting was challenging and complicated for both companies and their suppliers, as highlighted in the last panel of the Lider Conference ESG – Sustainable Future titled Reporting Preparation – Practical Experiences. Despite the Omnibus, companies had to submit reports based on predetermined criteria, and Nataša Mikuš Žigman, Director of the Business Sustainability and Green Transformation sector at Podravka, emphasized that although sustainability reporting is not new for the company, it was more complicated this year. The process was challenging, standardized, and there was much discussion about the importance of auditing, which meant that all processes had to be documented and all evidence had to be presented for all processes.
– This means that we had to calculate the carbon dioxide emission scope not only for our four products, 24 related subsidiaries, and 10,000 suppliers, along with a certain number of cooperators; you can then understand how extensive this process was – Mikuš Žigman noted, adding that they had shifted too much towards administrative norms rather than sustainability as a core model, and she welcomed the changes she hopes will refocus on what companies are doing to integrate sustainability back into their business model.
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Kristina Mumić, Director of the ESG Department at Končar Group, stated that they prepared three reports for three companies and a consolidated report for Končar Group with over 5,000 employees.
– About 100 people participated in the delivery, collection, and interpretation of data – Mumić said, emphasizing that this interpretation was the most challenging part of the job, the one you think you know, and after 20 years in this business, you realize you are not so sure about what is required.
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The number of pages in a report is not the same as quality, noted Nikolina Kolarić, Director of the Office for Sustainable Business at Hrvatska poštanska banka, who also mentioned that there were challenges in data collection. And that’s not all; someone had to understand and interpret all the requested data, which was challenging, hence the Omnibus was welcomed with approval.
– It will be much more expensive to adapt business operations if both banks and companies ignore today’s challenges – Kolarić emphasized, adding that there will be challenges in the next two years.
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Tihana Bažant, Director in Deloitte’s Audit and Consulting Department, pointed out that both the preparation of reports and the auditors require knowledge, resources, and experts.
– In a few weeks, we have to audit what others prepare in a year; it is not easy to interpret and verify, especially this year when the standards were very challenging – Blažant emphasized.
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Before the panel, Zvonimir Vlak, Manager in the Audit and Consulting Department at Deloitte, presented the preparation of reports according to the introduction of the Corporate Sustainability Reporting Directive (CSRD) and the Accounting Act, which he assessed as a turning point in corporate reporting in the European Union.
– These requirements have set new, high standards for transparency, quality, and comprehensiveness of sustainability information, with a clear goal of improving decision-making for report users. Already in the first year of implementation, it became evident that the requirements of the CSRD and ESRS are extremely demanding, comprehensive, and complex. The very fact that shortly after their initial application, the so-called “Omnibus package” was proposed to amend certain provisions within the CSRD and ESRS further confirms the difficulty of practical application – Vlak noted, stating that they had to discuss all of this with clients long before the announcement of the Omnibus because there is no single standard that could be established uniformly across all clients, and there were indeed challenges, even regarding data collection, and he even apologized to clients he encountered at the conference if he had been a bit harsh in his approach.
– It is good that we managed to get through the first year – he emphasized.
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Double materiality is the topic that started the third thematic block at the fourth Lider Conference on ESG. The topic addresses a key concept in sustainability reporting according to the CSRD and ESRS, which require an assessment of the organization’s impact on the environment and society, as well as the financial sustainability risks to business operations. Željko Faber from the Financial Reporting Standards Board presented on this topic to all gathered at the Sheraton in Zagreb, focusing on the methodology for conducting double materiality analysis, practical challenges, and best practices in its application.
– Materiality is a subjective assessment, but to make it a little less subjective, the ESRS has prescribed a process for assessing double materiality – Faber said during his presentation while showing the assessment process.
However, he concluded that, as previously established at this conference, 90 percent of companies successfully submitted their reports, which indeed speaks volumes.
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As for how the audit of ESG reports looks in practice, Marina Tonžetić from the Croatian Chamber of Auditors shared at the conference. She stated that the key areas for checking sustainability reports are in accordance with the MSIU 3000 rules, and all stakeholders – from companies to auditors – have invested significant efforts and many internal resources to deliver the first sustainability reports.
– And it is important to note that once we report, it is not the end. It just means we start all over again – Tonžetić said, adding that the reports are extremely complex, but auditors have successfully navigated this first year so they now truly have experience for further work.
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After the conference, a workshop on sustainability reporting in practice was held, which was filled a month and a half before the event, indicating that despite the Omnibus, interest in the reporting topic is indeed significant.
