CSRD software selection: Guide for companies

The Corporate Sustainability Reporting Directive (CSRD) and thus the obligation to publish an annual sustainability report as part of the company’s management report affects around 15,000 companies in Germany alone. The specific requirements of the CSRD are set out in the European Sustainability Reporting Standards (ESRS).

Why the use of CSRD software can be useful

The 12 ESRS standards comprise over 1,100 data points and even if you read through the 281 pages, there are still many unanswered questions. Those responsible for implementing the CSRD struggle to aggregate this amount of information and obtain the data. Conducting a double materiality analysis, including stakeholder involvement, can also be very resource-intensive. In addition, the sustainability report has to be machine-readable and ultimately has to be audited by an auditor.

Does it sound impossible to create the CSRD report? The use of CSRD software can offer companies in accomplishing this mammoth task support:

  • Compliance with ESRS standards: software simplifies the overview and coverage of the relevant subject areas and often guides through the creation process
  • Increased efficiency Software-supported automation of error-prone manual processes in data collection and management leads to greater efficiency
  • Stakeholder engagement: User authorizations allow interest groups to be directly involved and tasks to be delegated efficiently
  • Audit and publication requirements: CSRD tools mostly support the fulfillment of documentation requirements for auditors as well as digital reporting with XBRL tags
A CSRD study by PwC confirms that every second company plans to use reporting software solutions to fulfill CSRD reporting obligations.

Selection guidelines for CSRD software

The selection of CSRD software providers is usually more difficult than expected. There is still no “standard software” such as SAP among ERP providers. Instead, the ESG software market is very dynamic and fragmented, as a CSRD study by Ubirch confirms.

When selecting ESG software providers, the following aspects should be considered first and foremost:

  1. Type of software provider
  2. Software categories from ESG Tools
These two aspects are examined in more detail below.

Type of CSRD software provider

The Sustainability Software Radar from Swisscom and Atlantic Ventures speaks of over 240 providers of sustainability software. Other sources cite figures of over 700 tools in this area. While the total number of providers is not particularly relevant, you should take a close look at what kind of provider you are dealing with and which types of providers are suitable for your own company.

The Sustainability Software Radar distinguishes between the following typesof software providers :

  • Start-ups: Young companies that focus on innovation and often develop innovative technological solutions and exploit gaps in the market or create new categories.
  • Independent Software Vendors (ISV) / Software as a Service (SaaS): Providers who market independently developed software products directly, often cloud-based as a service.
  • Global tech groups: Large, established companies that are active in various technology sectors and offer a wide range of products and services.
  • Professional service providers: Firms that specialize in consulting services and provide client-focused solutions, such as the Big 4 consulting and auditing firms.
  • Open SourceOrganizations that develop and maintain software with freely accessible source code.

The following overview shows examples as well as specific advantages and disadvantages for each type of CSRD software provider.

The investigations by Swisscom and Atlantic Ventures have shown that Start-ups are the innovation engine of the industry. Due to the regulatory environment in the EU, start-ups are European providers are a driver and leader in this rapid development of new software tools.

In addition to established ESG software providers, global software groups such as IBM, SAP and Salesforce have also entered the market. Overall, a trend away from isolated solutions towards platforms for holistic sustainability management can be seen.

Software categories of ESG software

In addition to the division of the software market for sustainability software into provider types, there is also a distinction between the various software categories:

  • Reporting software: Supports the creation, management and publication of ESG and CSRD reports. Ex: Greenomy; Atlas Metrics; Luup
  • ESG management: Enables continuous monitoring and management of ESG data and initiatives. Ex: Workiva; CONSUST FramesCube; Daato
  • CO2 / GHG management: Supports companies in measuring, setting and monitoring CO2 targets and increasing energy efficiency. Ex: Global Climate; Code Gaia; Carbmee
  • Supply chain management: Focuses on ESG challenges within the supply chain – both upstream and downstream. Ex: osapiens; IBM Envizi ESG Suite; IntegrityNext
  • ESG ratings: Provides ratings and rankings of a company’s ESG practices in order to establish comparability between companies. E.g. EcoVadis; GRESB; Sustainalytics
  • Training platforms for sustainability topics: Provides knowledge and skills for companies in the areas of sustainability, ESG or CSRD. Example: XU sustainable; Greenomy Academy
It should be noted that there are overlaps between the categories and individual tools can also be assigned to several categories.

When deciding on the most suitable ESG software category for your own company, the following concrete steps can help you select CSRD software.

CSRD software selection process

CSR Tools has developed a 5-step process for CSRD tool selection:

  1. Needs analysis and objectives: Defining objectives and creating an evaluation model or specification sheet to define specific requirements for a software solution, including weighting the criteria.
  2. Research and comparison of tools: Desk research and use of databases such as the ESG tool overview to create a longlist. Carrying out an initial narrowing down of the relevant software providers and arranging demo appointments with the relevant providers.
  3. Vendor evaluation: Evaluate the software providers based on the information available and ask questions of tools if necessary.
  4. Negotiation and test phase: Final contract negotiations with the 2-3 preferred providers and clarification of details. Ideally, test access to the CSRD software is provided so that the tool can be tested with relevant stakeholders. Decide on preferred software and sign contract.
  5. Implementation: Define clear responsibilities and tool owner (if not already done). Involve and train relevant stakeholders and conduct change management if necessary. Implement data and system integration into existing software landscape. Check whether objectives have been met.

Evaluation model for the selection of CSRD software

CSR Tools has developed an evaluation model that supports companies in the selection of CSRD software. The model includes a step-by-step guide; predefined criteria that can be adapted and expanded as required and an evaluation logic including weighting of the requirements. These advantages result from the use of the CSR evaluation model for ESG tool selection:

Benefit now from the advantages of the ESG tool selection valuation model and download the CSRD software valuation model.

Conclusion for the CSRD tool selection

The introduction of software to fulfill the CSRD reporting obligation may be more complex at the beginning, but offers enormous advantages and efficiency potential for companies in subsequent years. In addition, a software solution is usually more robust than a collection of Excel files.

The range of providers and categories for ESG software is huge, but with a clear objective and a structured process, companies can find the right tool for their specific needs.