Preparing for a CSRD or IFRS S1 and S2 Audit: A Practical Guide

The European Union's Corporate Sustainability Reporting Directive (CSRD) and the International Financial Reporting Standards (IFRS) S1 and S2 have significantly elevated the standards for corporate sustainability reporting. As a result, companies are facing increased scrutiny from regulators and investors. To navigate this evolving landscape, effective preparation for an audit is crucial.

Appointing a Dedicated Point Person

The first step in preparing for an audit is to designate a point person. This individual should have a deep understanding of the company's sustainability practices, reporting requirements, and the specific audit standards. They should be responsible for:

• Coordinating with the Audit Firm: Establishing a clear communication channel with the auditors and ensuring timely responses to their requests.
• Managing the Audit Team: Assembling a cross-functional team of experts to support the audit process.
• Documenting Processes: Ensuring that all relevant processes and procedures are well-documented and accessible.
• Preparing Data and Reports: Gathering and organising the necessary data and reports to support the audit.

Assembling a Cross-Functional Audit Team

To ensure a comprehensive and efficient audit, it's essential to assemble a cross-functional team. This team should include representatives from various departments, such as:

• Finance: To provide financial data and insights.
• Sustainability: To address environmental, social, and governance (ESG) matters.
• Human Resources: To provide information on workforce practices and social impact.
• Operations: To share details about operational processes and supply chain management.
• Legal: To provide legal advice and support.

Granting Access to Relevant Systems and Data

To facilitate the audit process, companies should grant auditors appropriate access to relevant systems and data. This may include:

• Financial Systems: Accounting software, ERP systems, and other financial databases.
• Sustainability Management Systems: ESG software, sustainability reporting platforms, and data management tools.
• Human Resources Information Systems (HRIS): HRIS systems to access employee data and performance metrics.
• Supply Chain Management Systems: Systems used to track and manage the supply chain.

Note: It's crucial to implement robust data security measures to protect sensitive information while providing necessary access to auditors.

Preparing Internal Teams for Interviews

To ensure a smooth audit process, it's essential to prepare internal teams for potential interviews with auditors. Key considerations include:

• Clear Communication: Provide clear guidelines and expectations to employees who may be interviewed.
• Key Messaging: Develop key messages that align with the company's sustainability strategy and reporting requirements.
• Practice Interviews: Conduct mock interviews to help employees feel confident and prepared.
• Ethical Considerations: Remind employees to be truthful and honest in their responses.

Establishing an Escalation Path for Data Requests and Sharing

To ensure timely and efficient responses to data requests, it's crucial to establish a clear escalation path. This involves:

• Designated Point of Contact: Identify a specific individual or team responsible for handling data requests.
• Clear Response Timeframes: Set realistic deadlines for responding to data requests.
• Escalation Procedures: Define a process for escalating complex or urgent requests to higher-level management.
• Data Security Protocols: Implement strict data security protocols to protect sensitive information.

By following these guidelines, companies can significantly enhance their preparedness for CSRD and IFRS S1 and S2 audits. A well-prepared organisation can minimise disruptions, optimise the audit process, and demonstrate a strong commitment to sustainability.