What a robust approach to ESG reporting can teach you about your business

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The ESG disclosure landscape is evolving rapidly. New regulations, such as the EU’s Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD), are raising the bar for corporate governance, transparency, and accountability. These regulations reflect a growing societal expectation for businesses not only to minimise their negative impacts but to contribute actively to a more sustainable future.

We believe that this evolution is an opportunity for companies to future-proof their business and strengthen their positive contribution to society. We also believe in data-based decision-making and transparency – we do what we say and we say what we do.

Our latest annual sustainability report details how we are tracking on more than 20 sustainability KPIs, charting progress towards our sustainability goals above and beyond compliance. Goals include a net-zero target approved by the Science Based Targets initiative (SBTi).

Key facets of the report are our double materiality assessment, EU Taxonomy eligibility assessment, and Climate Action Transition Plan.

Double materiality assessment: Revealing the interconnectedness of business and ESG

One of the first steps we took in preparing for CSRD was conducting a double materiality assessment. This process is first and foremost a collaborative exercise. By involving internal stakeholders from across Grundfos –from Group Strategy and Enterprise Risk Management to Human Resources, Business Development and Finance – we identified the ESRS topics material to Grundfos by assessing the potential “impacts, risks and, opportunities” they present. These material topics included climate change, water sustainability, workers in our value chain and business conduct.

The outcome of the double materiality assessment is important for determining the topics that are in scope for our CSRD-compliant reporting from 2025 (as a foundation-owned company we have another year to prepare). However, its real value is in the cross-organisational dialogues and insights created through the process.

Doing the assessment has, for example, helped highlight the importance of developing a broader understanding of climate change’s potential impacts on business operations. Included in this is the growing need – and, therefore, business opportunity –  for solutions to the world’s climate and water challenges.

Another key discussion concerned the meaning of “inherent risk” in the assessment. It created some anxiety to see, for example, corruption or human rights in the supply chain ranked as high risks due to our global business operations. However, the point of the exercise is to show this “raw risk”, underscoring the need to maintain solid business ethics and human rights due diligence programmes for mitigating these risks.

EU Taxonomy eligibility assessment: Aligning core business with sustainability objectives

Another crucial step was conducting an EU Taxonomy eligibility assessment, which we began by assessing our alignment with the minimum safeguards outlined in the UN Guiding Principles (UNGP) and OECD guidelines.

The assessment involved key stakeholders across the organisation and gave us a good understanding of the strength of our human rights due diligence programmes and we were satisfied to see that overall Grundfos is aligned with the minimum safeguards. The recommendations – which included strengthening documentation and extending community engagement programmes – have helped inform our plans for the coming years.

From this first environmental taxonomy assessment, we learned that some activities initially deemed non-eligible could potentially be reclassified with more comprehensive data collection and analysis. Moreover, we realised that while a range of our pump solutions enable energy-efficient production and water provision, these are not necessarily eligible in the current Taxonomy categorisation.

We are now continuing the journey by expanding eligibility assessment for more topics, including water and biodiversity, and will be refining our data as we go, allowing us to generate further insights to inform business decisions.

Climate Action Transition Plan: Turning ambition into action

The development of our Climate Transition Action Plan has been particularly illuminating. This plan, launching later this year, provides a framework for translating our commitment to a 1.5C-aligned emissions reduction pathway into concrete actions. In 2022, we became the first water solutions company to set an SBTi-approved Net-Zero target across the entire value chain. Since then, we have made good progress towards our 2030 goal of 25% carbon emission reduction, focusing on driving innovation and sales of energy-efficient pumps and transitioning to renewable energy. By the end of 2023, we had already achieved an 11.7% carbon emission reduction since our 2020 baseline.

Our Action Plan expands the scope from carbon emissions only to broader climate risk and opportunity management, adaptation and resilience. Key to this is a comprehensive risk and opportunity mapping and analysis initiative, the output of which will shape both our internal action plans and our external climate and energy policy advocacy efforts. It will also of course feed into this year’s double materiality assessment.

One tangible example of our commitment to climate action is our recent Power Purchase Agreement (PPA) with ABO Wind. This agreement will enable us to cover 80% of our EU power consumption with renewable energy from 2025, accelerating our progress towards our 2030 target of a 50% reduction in operational emissions.

A sustainable future, built on solid ground

Robust ESG reporting is about much more than ticking boxes. Our journey so far has been a process of deep reflection, revealing both strengths and areas for improvement. It has highlighted the interconnectedness of our business with broader environmental and social systems.

The insights gained through this process have not only strengthened our sustainability strategy but also informed our overall business strategy. A robust approach to ESG reporting is not just good for the planet and society; it’s good for business. It allows us to build a sustainable future from the ground up.

But we cannot do this alone. The challenges we face are global, requiring collective action. All sustainability professionals have the opportunity to embrace the power of robust ESG reporting. They can use it to deepen their understanding of their own business, its impact, and its potential. They can also engage stakeholders, identify material issues, and develop ambitious yet achievable targets.

By working together, sharing our experiences, and pushing each other to do better, we can create a future where business success and sustainability go hand in hand. Let’s make sure our collective impact makes a real difference, one that will truly hold water for generations to come.

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Louise Koch is the group head of sustainability at Grundfos


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