Companies today are primarily focused on one issue: the CSRD. What does this European sustainability directive mean? How can companies prepare for it and where does the resistance come from? In the podcast "The Climate Changers," Clara and Max asked CSRD- expert Emma Kallen for an explanation. Here are the key takeaways from the conversation.
Prefer to listen? The episode is available on Spotify and Apple Podcasts.
Emma Kallen, CSRD expert and founder of Factor Delta consultancy in Amsterdam, started advising companies on sustainable business practices four years ago. Nowadays, the CSRD forms the core of her work. How do you prepare a company and develop a good sustainability strategy? How do you make sustainability measurable and transparent?
Companies today are primarily focused on one issue: the CSRD. Where did the CSRD suddenly come from?
"The name, Corporate Sustainability Reporting Directive (CSRD), says it all. It is a new directive that requires companies of a certain size to report on their sustainability activities. This directive is part of the broader European Green Deal, an extensive sustainability strategy of the European Union.
The CSRD has several drivers:
1. Transparency: Promoting openness about companies' sustainability practices.
2. Facilitating the sustainable transition: Supporting the transition to a more sustainable economy.
3. Creating a level playing field: Ensuring that all companies adhere to the same sustainability standards, promoting fair competition."
Transparency and sustainability in a fair manner
"Currently, we see that companies do report on sustainability, but they can choose what to report on. This means they mainly communicate about things they are doing well, which is known as cherry-picking.
The CSRD aims to counteract this. Companies will have to be transparent and can no longer choose what to report on. Every company will have the same framework and rules. Additionally, they must publicly disclose how they plan to achieve their goals.
Companies in the same sector will report on the same topics, and these reports are public. This way, you can compare different companies from, for example, the food, fashion, or logistics sectors. This is interesting for banks, investors, and consumers who can compare and evaluate how well companies are doing in terms of sustainability. Thus, creating a level playing field for all companies.
The CSRD is not only about transparency but also encourages companies to take clear steps in sustainability. First, the large publicly traded companies are up. These companies already comply with other regulations that are in line with the CSRD. So, there is already a good foundation, and these companies also have more resources and more impact.
It is a phased approach, so first the large stock market listed companies, then the large companies. In 2027, the stock market listed SMEs will follow, and in 2028 the rest. Ultimately, everyone will have their turn."
That large companies are the first to report is advantageous for SMEs, says Emma Kallen. "This way, a lot of experience is gained, and these companies serve as examples for SMEs that will likely be next."
It is not yet definitive that SMEs must report. However, a draft standard has already been published on how SMEs should report, called the VSME.
CSRD is different from a certification
Certifications often prescribe how sustainable you must be, a minimum level or score, for example, to obtain a green label. The CSRD is more flexible and does not prescribe a minimum level. The CSRD requires you to report on the topics where your company has significant environmental impact. It requires you to formulate a goal, and companies can determine these goals themselves.
Once you have set a goal, you must be able to substantiate why you chose that goal and report your progress. This report is an annual update on where you stand and the steps you have taken toward that goal.
For example: A certification gives you a score on the number of women employed in your organization. The CSRD states that diversity is an important topic you need to report on. It asks, how is diversity within your organization?
The CSRD is divided into the following elements:
- The current impact of your company on people and the environment
- Formulating strategy and policy
- Goals and measures
- How you will ensure this within your organization
The latter can be seen as agreements on who is responsible, what deadlines are set, and what resources are made available. With the CSRD, companies must formulate a goal and report on it.
Resistance
The CSRD is entirely new. Something imposed, something that forces you usually generates a lot of resistance. Additionally, the EU is often very late. For example, they promised sector-specific obligations and guidance protocols, but these are not yet available.
Kallen: "I understand the resistance. We really had to figure out how the CSRD works internally. We all studied for this. We are in this field, and it was still a bit of a search. So I can imagine that a company without a sustainability advisor has no idea what exactly to do.
According to Kallen, hiring a sustainability advisor can be useful. "Especially the first time, it is advisable." Complying with the CSRD is quite a lot of work, and an advisor can provide tailored advice, not a one-size-fits-all approach.".
What is your footprint? What is the impact?
What can you expect from such a CSRD report? What does the report tell me about my own business operations?
It is a classic saying, but "measuring is knowing." The CSRD generates a lot of data. You will need to gather information from suppliers. By working this way, the vague concept of sustainability becomes very concrete. You will see which of your operations has the most impact and you can pressure your suppliers to be more transparent.
"You will also see where you can save and make the right choices for the future. The CSRD is also certainly financially interesting for your company," says Emma.
Also, in this episode, we delve deeper together with Emma into the costs and benefits that the CSRD brings. We also discuss the sustainability news of the past week, and Clara tells us about the impact of climate change on your chocolate bar!
Curious? Listen to the full episode on Spotify and Apple Podcasts.
