Back
Back
industry
Back
Back
If you work in regulatory compliance, you’ve probably noticed that a big change is afoot. The EU’s move toward evidence-based compliance (EBC) is reshaping how organizations handle compliance going forward. Instead of focusing on prescriptive frameworks that put more stress on procedures over outcomes, EBC emphasizes continuous monitoring, data-driven decision making, and proving compliance through evidence rather than just completing steps. This shift is particularly timely given the upcoming legislation, such as the Corporate Sustainability Reporting Directive (CSRD) and the Digital Operational Resilience Act (DORA), which require a more agile and technology-driven compliance strategy.
In this post, we’ll dive into the challenges, opportunities, and the driving forces behind EBC, and how advanced compliance tools can help make this transition smoother. We’ll also look at how professionals can take advantage of this shift and prepare for these new regulations. (See EBC cheat sheet at the end!)
The push toward EBC is being driven by a combination of factors:
CSRD: This directive broadens the scope of companies required to report on sustainability and will demand detailed, evidence-based data on environmental, social, and governance (ESG) activities. It aligns well with the principles of EBC, as it requires transparent and verifiable information.
DORA: This regulation focuses on ensuring the operational resilience of financial entities, particularly around digital risks like cyberattacks. It emphasizes continuous monitoring of digital systems, which fits neatly into the EBC framework of real-time compliance management.
Compliance in the EBC era requires continuous data collection, integration, and analysis. If your company operates in multiple regions or industries, this can quickly lead to data overload.
The challenge: Regulatory compliance professionals need to ensure that data from various sources and departments is consistently collected, validated, and managed in a secure manner.
The impact: This requires investment in tools and resources to manage large-scale data efficiently. Without the right tools, the risk of non-compliance grows.
With real-time monitoring and compliance checks, adopting new technologies is not an option—it’s a necessity.
The challenge: Compliance teams need to implement advanced technologies, like AI and blockchain, to ensure continuous monitoring of compliance activities.
The impact: While there is an initial learning curve and financial investment, the long-term benefits include more efficient operations and reduced compliance risks.
EBC’s performance-based approach means organizations are evaluated by outcomes rather than following a rigid checklist. This flexibility can create uncertainty.
The challenge: Regulatory professionals must figure out how to meet compliance goals in an environment where the path to compliance isn’t always clear.
The impact: A deep understanding of regulatory expectations is critical, and teams need to develop internal frameworks that align with flexible, outcome-focused requirements. They also must nurture closer relationships with regulators and regulatory bodies.
The EBC framework enables a shift from reactive to proactive compliance, meaning you can address risks before they become violations.
The opportunity: You’ll have the chance to resolve compliance issues as they arise, avoiding costly fines and keeping your relationship with regulators positive.
The impact: By catching issues early, you reduce risk, build trust with regulators, and avoid the last-minute scramble before audits.
One of the great benefits of EBC is its reliance on data. With the right tools, you can turn that data into actionable insights for your compliance strategy.
The opportunity: Data-driven insights allow for more informed decision making, letting you allocate resources more effectively and reduce risk in critical areas.
The impact: Better decisions mean fewer compliance risks, more efficient operations, and a smoother compliance process.
Organizations that successfully adopt EBC can gain a significant competitive advantage, especially in industries where regulatory compliance is a key differentiator (think pharma, medical devices, foods, etc.).
The opportunity: Strong compliance programs signal trustworthiness and reliability to customers, partners, and regulators. Being seen as a leader in compliance can enhance your brand’s reputation.
The impact: Leading in compliance not only protects you from penalties but also attracts more business and investment.
Regology offers comprehensive regulatory intelligence by providing real-time updates on new and amended regulations, with extensive coverage of EU laws, directives, and guidance documents. Organizations can build their own digital law libraries, automatic version control and customize alerts to receive notifications in specific regulatory areas, ensuring they stay informed of changes that matter most. This helps compliance teams maintain an up-to-date understanding of their regulatory niche, reducing the risk of missing critical updates.
In addition to regulatory insights, Regology's advanced compliance management features allow you to map regulatory requirements to their internal policies and procedures, conduct gap analyses to identify compliance issues, and centralize documentation for easier access and audit preparation. Through enhanced data analytics and reporting, you can monitor their compliance status via interactive dashboards, generate automated reports for internal use or regulators, and maintain audit trails for complete transparency.
Regology also enhances collaboration and workflow management by enabling task assignment, deadline tracking, and automated workflows, which reduce manual errors and improve efficiency. By streamlining compliance processes and automating labor-intensive tasks, Regology allows teams to focus on strategic initiatives, proactively address potential risks, and boost overall compliance oversight, leading to greater regulatory confidence and preparedness for audits and inspections.
The EU has introduced several key pieces of legislation that embody the principles of evidence-based compliance. Compliance teams need to be particularly attentive to the following:
Adoption Date: November 28, 2022
Effective Dates:
The CSRD represents a significant expansion of the EU's sustainability reporting requirements. It aims to address the shortcomings of the NFRD by increasing the number of companies required to report on sustainability matters and by enhancing the consistency, comparability, and reliability of sustainability information.
The directive aligns with the EU's broader commitment to the European Green Deal and the goal of making Europe climate-neutral by 2050. By mandating more detailed and standardized reporting, the CSRD seeks to promote sustainable investment and encourage companies to adopt more sustainable business practices.
Compliance teams will need to enhance their systems for collecting and managing ESG data, often requiring collaboration across departments. Policies and procedures will likely need updates to meet new reporting standards, and teams must ensure that sustainability data is accurate and verifiable for external audits. Additionally, transparent communication with stakeholders about sustainability efforts will be crucial for maintaining accountability and trust.
Entry into Force: January 16, 2023
Application Date: January 17, 2025
DORA is a response to the increasing digitalization of financial services and the growing threat of cyber risks. It establishes a comprehensive framework to strengthen the IT security of financial entities within the EU, ensuring they can withstand, respond to, and recover from all types of ICT-related disruptions and threats.
The regulation is part of the EU's Digital Finance Package, aiming to foster innovation while ensuring that financial markets remain resilient and secure.
Organizations must establish clear governance structures for ICT risk management, involving senior management and relevant committees. Close collaboration with IT and cybersecurity teams is essential to implement necessary controls and testing procedures. Policies related to ICT risk management, incident reporting, and third-party risk may need to be created or updated. Additionally, organizations must be prepared for timely and accurate reporting of ICT incidents to regulators.
The shift toward evidence-based compliance in the EU represents a new era of regulatory management. While the challenges—particularly around data management and technology integration—are significant, the opportunities for those who embrace this shift are equally promising. With upcoming legislation like CSRD and DORA, it's becoming more important for regulatory compliance professionals to start preparing now. Purpose-built AI platforms like Regology can help organizations navigate these changes more smoothly, allowing them to stay ahead of evolving requirements and be audit-ready at all times. By utilizing AI-powered platforms, organizations can be well-positioned to adapt as evidence-based compliance practices potentially expand beyond the EU, helping them remain agile and compliant on a global scale.
