Navigating CSRD and ESG Requirements in Procurement: Optimizing RFQs for Compliance

The Corporate Sustainability Reporting Directive (CSRD) is a game changer for companies operating within or doing business in the European Union. This directive expands the requirements for sustainability reporting and impacts various business operations, including procurement and RFQ (Request for Quotation) processes. The CSRD, which builds on the Non-Financial Reporting Directive (NFRD), aims to make companies more transparent regarding their environmental, social, and governance (ESG) impacts.
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How CSRD Affects RFQs

For companies required to comply with the CSRD, procurement teams must now consider sustainability factors when issuing RFQs. This change is especially relevant because suppliers will increasingly be evaluated not only on their ability to deliver goods and services on time and within budget but also on their adherence to sustainability standards. Here’s how RFQs are affected:

• Inclusion of ESG Criteria in RFQs: Under the CSRD, companies must demonstrate that they are considering environmental and social impacts in their supply chain. This means that RFQs must include detailed questions and requirements regarding a supplier’s sustainability practices, including carbon emissions, waste management, and fair labor standards. Suppliers should also be encouraged to provide documentation proving their compliance with relevant environmental and social standards.
• Double Materiality and Supplier Selection: CSRD introduces the concept of double materiality, where companies must report on how their business impacts the environment and society, as well as how sustainability issues affect their business operations. In the context of RFQs, procurement teams should assess both the direct sustainability impact of the supplier’s operations and how external ESG risks could affect the supplier’s ability to deliver goods or services. For example, a supplier that relies on non-renewable resources may face higher costs in the future due to regulatory changes, which could impact your business.
• Greater Scrutiny and Assurance: The CSRD requires third-party assurance on the accuracy of sustainability data provided by companies. This will likely extend to the supply chain, meaning that procurement teams must ensure that the sustainability information collected from suppliers is verifiable and compliant with ESG reporting standards. This could involve asking suppliers to submit certifications or third-party audits as part of their RFQ response.
  

Ensuring Compliance with CSRD in RFQs

To comply with CSRD regulations, companies must incorporate sustainability measures into their procurement and RFQ processes. Here are some practical steps to ensure compliance:

• Update RFQ Templates: Review and update your RFQ templates to include sustainability-related criteria. This may involve asking suppliers to provide information about their carbon footprint, energy efficiency, waste management practices, or social responsibility initiatives.
• Conduct Supplier Audits: Consider performing sustainability audits on key suppliers to ensure that they meet the CSRD’s reporting requirements. These audits should evaluate whether the supplier’s ESG practices align with your company’s sustainability goals and European Sustainability Reporting Standards (ESRS)
• Implement Long-term Contracts with ESG Compliant Suppliers: Establish long-term partnerships with suppliers who meet sustainability standards. This not only helps you comply with the CSRD but also mitigates risks by aligning your supply chain with long-term environmental goals.
  
• Train Procurement Teams: Ensure that procurement teams are trained on the CSRD requirements and understand how sustainability issues can affect supplier selection and evaluation processes.
  
• Engage in Dialogue with Suppliers: Establish an open dialogue with suppliers about sustainability goals. Encourage them to improve their ESG performance and offer guidance on how they can meet your company’s sustainability criteria.
  

Having clear delivery timelines enables suppliers to determine whether they can meet your expectations without affecting their operations. If you require immediate delivery, this could affect the supplier’s ability to offer a competitive price due to added logistical pressures.

The CSRD is set to impact more than 50,000 companies across the EU, as well as non-EU companies with significant operations in Europe. Compliance will require a comprehensive approach to sustainability, including adjustments to how companies manage their supply chain and procurement processes. By embedding ESG criteria into RFQs, conducting materiality assessments, and ensuring third-party verification of sustainability data, companies can not only comply with the CSRD but also enhance their sustainability performance and build stronger relationships with suppliers.

Companies can prepare for these changes by leveraging platforms like Enquirica, which offers tools to streamline RFQ management while integrating sustainability criteria. With automated workflows, customizable templates, and real-time data tracking, Enquirica helps businesses stay compliant with the CSRD and other regulatory standards while optimizing their procurement operations