Merck’s approach to CSRD reporting: the Sustainability Data Initiative
In recent years, the landscape of sustainability reporting has undergone significant transformation, driven by increasing regulatory requirements and stakeholder expectations. With the introduction of the EU Corporate Sustainability Reporting Directive (CSRD), organizations are now faced with the need to significantly enhance their reporting and data collection processes.
By Kai Zinn
The data challenge
Merck had to publish its first CSRD report for the financial year 2024. In the preparation, it quickly became apparent that our previous approach to sustainability reporting would no longer be sufficient. An initial analysis of the new CSRD requirements revealed that only one-third of the required data points had been previously reported. Apart from the number of new data points that needed to be identified and collected, there was also an acceleration of timelines. While we used to publish our Sustainability Report roughly one month after our Annual Report, all CSRD reporting now needed to be integrated into the Annual Report. That meant more data points needed to be available earlier, underscoring the need for comprehensive and, where possible, automated data collection and reporting processes to ensure timely availability and appropriate quality of the data.
Addressing the challenges with the Sustainability Data Initiative
To tackle these challenges, Merck launched the Sustainability Data Initiative (SDI) with the aim of creating a solid data foundation for CSRD reporting. Key elements of the SDI were:
Defining a sustainability data domain with principles for a central and harmonized data model for sustainability data
Reviewing and adjusting data collection processes to ensure data availability, data quality and data traceability
Developing a target system architecture considering our current infrastructure while also evaluating new software solutions
The SDI was supported by two complementary workstreams focusing on analysing and interpreting the CSRD requirements as well as developing an internal control framework for sustainability data and reporting.
In the SDI architecture, existing systems and processes are used to collect the data at the source while also providing possibilities for manual data entry and upload. All source data is transferred to a dedicated sustainability data hub created on an existing corporate data platform. The relevant data is then handed over to a newly implemented external ESG reporting solution which facilitates the aggregation, calculation and reporting of the relevant CSRD metrics. From there, the data can be transferred to the disclosure management tool or used for internal business analysis purposes.
End-to-end data flows via a centralized ESG data platform ensure data availability for various use cases as well as data traceability which facilitates the audit of our CSRD report. The parallel development and implementation of standardized internal controls has further enhanced the data quality.
Implementation approach and benefits
The implementation of the SDI involved a collaborative approach, engaging cross-functional teams. An agile project management methodology allowed us to adapt to unexpected challenges swiftly.
The SDI was not only essential for ensuring regulatory compliance. It also helps to advance sustainability practices across the organization. By making sustainability data readily available, we can improve the sustainability profile of our products and processes. Ultimately, this will not only secure our license to operate but also enhance our differentiation potential and competitive position.
Key Takeaways
There is no one-size-fits-all solution. The individual circumstances, gaps and pain points of each company need to be identified and specifically addressed
External consultants can help with this analysis and suggest appropriate software solutions
Early involvement, enablement and change management of key stakeholders are important to prepare the organisation
This should not only be a compliance exercise; use the data to strategically improve sustainability aspects of your company
Kai Zinn
heads Sustainability Management at Merck. He and his team are working on sustainability reporting topics as well as performance management and steering approaches for sustainability.