General introduction to key changes 2023

In the 2023 CSA, 38 questions were removed from the questionnaire for the sake of simplification (which means an average of 17-18 questions deleted at industry-specific level). You can read more about the major changes (the restructuring of the Operational Eco-Efficiency criterion into 4 criteria, the split of the Real Estate industry, etc.) in this article on methodology changes.

The scoring and weighting methodology was also adjusted to reflect methodology changes mentioned above. Building on that, a new ESG score was introduced to better address gaps in disclosure with a modelling approach.

Following is a summary of the highlighted findings from performance on the updated elements in the 2023 CSA, organized by dimensions and criteria.

Governance & Economic Dimension
Transparency & Reporting
This criterion replaced the Environmental Reporting & Social Reporting criteria from previous years. The CSA results showed that most companies have established clear boundaries for sustainability reporting. A new question “Sustainability Taxonomies” was added to reflect progress of alignment and revealed gaps in alignment with existing taxonomies and frameworks between different industries, with the utilities industry in front, as well as gaps between eligible and aligned revenues, operating expenditure, and capital expenditure.

Materiality
With the advent of CSRD, two new questions related to external material issues have been introduced to capture the double materiality concept in the CSA. However, 80% of companies have not disclosed any externalized impact on stakeholders. Finch & Beak identifies a major gap here and offers its Double Materiality Assessment to leading companies to better address this caveat.

Supply Chain Management
In participants’ supplier code of conduct (SCOC), environmental aspects tend to be overlooked compared to health & safety and competitiveness topics. Fortunately, 71% of companies has screening processes on environmental risks, second only to social risks, which shows promising signs for SCOCs to improve in the coming years.

Environmental Dimension
Biodiversity
Companies are requested to take immediate actions to mitigate the high speed of biodiversity loss and land degradation. However, only 9% disclose biodiversity risk management-related information that is up to CSA standards, and even fewer have biodiversity integrated in their management processes. When it comes to mitigating actions, a number as low as 5% are working on transforming actions, implying a “business as usual” mentality for most participating companies.

Climate Strategy
Efforts made under this criterion have been well captured, as an increase in score across major industries can be observed. The most popular form of board-level oversight on climate-related issues is a climate committee. Nevertheless, one third of the participating companies do not have such a committee in place. As for emissions reduction targets, results showed a preference of absolute targets over intensity targets, as well as a lag in Scope 3 target setting compared to Scope 1 and 2.

Both of the above criteria underwent changes to facilitate alignment with TCFD and TNFD frameworks, as well as the GHG accounting principles.

Social Dimension
Talent Attraction and Retention
Findings from this criterion revealed that companies are still applying conventional methods of talent management. For example, 79% of companies continue to use the traditional employee appraisal approach of management by objectives, whereas innovative methods like agile conversations and team-based performance appraisal are used much less. Similarly, employee wellbeing is monitored most frequently through traditional engagement & satisfaction surveys. What looks more promising is the diverse support programs adopted, notably working-from-home arrangements, as well as the relatively high level of disclosure regarding these support programs.

Immediate actions to be taken

The next cycle of methodology changes will start shortly, and we advise you to follow them to prepare for CSA 2024. Updates will begin as early as next week, in the form of proposals for feedback, and changes in public disclosure requirements will become available in January. Some of the new elements to be included are an update on the Innovation Management criterion, a question on companies’ initiatives being deployed for waste, water & energy, a proposal on sustainable raw materials, as well as a simplification of the Sustainable Finance criterion. However, rest assured, the S&P analysts hinted that there will be a lower number of methodology changes in 2024 compared to this year.

Looking to accelerate your journey towards improved ESG benchmarking?

With over 15 years of experience in ESG rating & benchmarking support including the CSA, Finch & Beak is one of Europe’s leading experts in improving our clients’ sustainability programs and ESG performance.

The Finch & Beak company vision is to accelerate sustainability. Our ESG and sustainability strategy work are characterized by a continuous improvement method that leverages existing assets in the short term while identifying opportunities for strategic development in the future.

If your company is interested in being supported in its CSA process, download our ESG Acceleration Support Service Description or contact us at hello@finchandbeak.com or +34 627 788 170 to discuss how Finch & Beak can help you improve your ESG performance.

Photo by Samson on Unsplash.