Integrating sustainability into enterprise risk management (ERM) in alignment with CSRD

Abstract

The purpose of this study is to examine how sustainability can be effectively integrated into Enterprise Risk Management (ERM) in compliance with the Corporate Sustainability Reporting Directive (CSRD). This research investigates the current state of Sustainability Risk Management (SRM) within a case company and identifies gaps in its alignment with existing ERM processes to highlight areas for improvement. The study also analyzes the findings in relation to the CSRD requirements, pinpointing gaps and proposing recommendations to address these challenges.

This research explores the SRM process of a Finnish company through a qualitative case study. Data were collected through semi-structured interviews and analyzed alongside internal and external documents. Thematic analysis was applied to uncover recurring patterns and challenges within the current SRM framework

Key findings indicate that the case company faces significant obstacles integrating sustainability into its ERM framework. These obstacles stem from a lack of a systemic approach to SRM, resulting in issues such as unclear conceptualization of sustainability risks, fragmented risk identification processes, and inconsistencies in the evaluation of sustainability-related risks. In the context of the CSRD, the study highlights the need for clearer thresholds and enhanced governance structures to better align SRM with regulatory requirements. Based on these results, it can be concluded that integrating sustainability into ERM in alignment with CSRD requirements necessitates embedding sustainability considerations into the organization’s governance structures and strategic processes. Given the complexity of sustainability risks, this requires greater incorporation of stakeholder expectations into ERM.

This research contributes to the existing body of literature on SRM by addressing obstacles regarding integration of sustainability into ERM. By acknowledging the CSRD requirements and their implications for SRM, the study provides timely insights for organizations adapting to these evolving regulatory demands.