The role of investment-grade data in sustainability reporting

Introducing investment-grade data

The Corporate Sustainability Reporting Directive (CSRD) currently requires all businesses to comply with step-by-step verification by a third party, where an outside party is trusted to confirm if each process meets data standards. This is known as investment-grade data. 

This type of data collection was established to produce trustworthy information for stakeholders and the purposes of reporting,; to be a reliable method of auditing and verifying processes, and to be capable of providing a yearly foundation for standardization and improvement.

Why is this type of data useful?

Investment-grade data is sought after as both an additional method of data collection and analysis, and a more dependable reflection of a company’s sustainability status, beyond the initial environmental, social, and governance reporting.  

Generated as a type of data that is durable and long-lasting, it can be used for many years by investors and stakeholders to more accurately inform decisions, rather than just providing a solo examination.  

A major motivator in the expansion of stricter laws on reporting and data collection is the International Sustainability Standards Board’s (ISSB) need to have data that is transparent and standardized. 

Providing transparent data, such as digital tagging, will be vital alongside EHS compliance metrics to meet reporting demands. Additionally, these new laws aim to standardize data collection across businesses, effectively making all data comparable – and therefore analyzable.

Standardization of data

For some time, methods of data collection and sustainability reporting have been rather segregated across countries, with many organizations utilizing their own preferred framework for tracking and measuring. However, many leading businesses have recently encouraged the standardization of sustainability reporting to enhance clarity, comparison, and transparency. 

Standardizing data will also aid in the establishment of simplified reporting standards, dictated primarily by the CSRD, that all businesses will be able to follow.  

The importance of standardization is exhibited clearly in the convergence of organizations like the ISSB and EFRAG. To ensure a seamless integration of a more centralized platform – and to increase business likelihood of maintaining compliance – standardization must occur at an operational level, starting with methodologies for tracking and reporting sustainability.

What does standardization look like? 

The landscape for global compliance reporting is shifting rapidly. Where previously, setting achievable goals for sustainability were acceptable, trends are now enforcing the presence of verifiable data as the foundation of reporting. Businesses are expected to demonstrate how they will meet sustainable reporting requirements through measurable data collection.

Digital tagging 

Digital tagging appears to be the expected and most appropriate methodology for data collection and reporting. Its ability to produce cohesive, transparent, and comparable data makes it a frontrunner for businesses.  

The CSRD states that “digital tagging is essential in order to seize the opportunities digital technologies present to radically improve how sustainability information is used.” 

How can taggable data assist in the final report? 

• It helps determine which facility or location the metric applies at the point of collection 
• It dictates which company goal the metric supports 
• It reveals the metric’s importance in relation to the company’s materiality assessment 
• It ascertains how the metric can be accessed and used for various surveys or questionnaires

How will investment-grade data be audited?

Under the new laws published by the CSRD, it will become mandatory from 2025 for companies to have their sustainability reports verified by a statutory auditor, audit firm, or independent assurance service provider.  

Auditors will check the following for compliance: 

1. The process the company followed to identify the information reporting, according to standards 

1. Whether the company has complied with the obligation to mark up its sustainability reporting 

1. Whether the company’s reporting met the requirements laid out by Article 8 of Regulation (EU) 2020 / 852 (Taxonomy Regulation) 

Auditors will be required to carry out reporting assurance in line with EU assurance standards that will be adopted by the Commission. The limited assurance standards will be adopted by 1 October 2026, while the reasonable assurance standards will be adopted by 1 October 2028.  

To correspond with the need for standardized data, there is also a need for globalized auditing standards, which organizations like the International Auditing and Assurance Standards Board (IAASB) have already begun implementing.