Is Greenwashing Over? Brussels pushes towards transparency: be prepared for the CSRD

The CSRD will come into force starting in 2024, focussing on sustainability, social responsibility, and governance (often referred to as the “triple bottom line” of people, planet, and profit). This new directive requires organizations to disclose a so-called ‘sustainability report’, detailing their sustainability efforts and activities in their value chains, including environmental and social impacts as well as governance practices. This report must be validated by external auditors, ensuring transparency and accountability in organizations CSR efforts. What precisely this reporting should entail is best explained to you by such auditors, however, the underlying rationale is that the directive will ensure more transparency on the impact companies are having, beyond their bottom line. It reflects the EU’s commitment to creating a more sustainable and equitable future, with EU Parliament’s lead negotiator Pascal Durand noting that “from now on, having a clean human rights record will be just as important as having a clean balance sheet.”
In turn, these CSRD reports provide benchmarks that can subsequently be used by other stakeholders, such as banks and investors, encouraging them to invest in sustainable operations (such as organizations with a high ESG score). Overall, the extensive law promotes accountability in communicating sustainable practices, with Minister for Economic Affairs, Finance and Industrial and Digital Sovereignty, Bruno le Maire concluding: “Greenwashing is over. With this law, Europe is at the forefront of the international race to standards, setting high standards in line with our environmental and social ambitions.”

Listed organizations already faced similar reporting requirements under the Non-Financial Reporting Directive, or NFRD. For these organizations, the CSRD will replace said directive and become mandatory from 2025. That said, starting in 2026, the directive will require additional compliance by all European organizations that meet two of the following three criteria:
– Your company has 250 employees or more
– Your company has a turnover of more than 40 million euros per year
– Your company has a balance sheet total of over 20 million euros

Before you know it, 2025 will come around, so the sooner you start preparing, the better. As Partner at PwC Netherlands, Kees-Jan de Vries puts it: “I fear that there is a large group of companies that does not want to pay attention to this for the time being or that are still in the denial phase, giving statements like this is so extensive, this can’t be true.” Both reputation opportunities and reputation risks may lurk in the insights that will have to be made public in a few years anyway, and ideally, you should have them identified as soon as possible. This list of actions can help you get started.
– Assemble a team and map out the timeline. Determine if the CSRD applies to your company, and when exactly you need to go public with the reports. From this point onward, backward engineer the planning, filling in the most prominent milestones. When does the report have to be with the auditor at the latest for verification? When do stakeholders have to submit their information to translate it into a first draft?
– Identify your current state of information available. First find out what exactly you need to report on, and whether that information is readily available. Keep in mind that the extensive directive requires all parts of the organization to work together, it cannot be outsourced to one department. Perhaps you are dependent on information from external suppliers, you want to know that as soon as possible.
– Assess reputation opportunities and risks and notify your communications team at the earliest possible stage to help them strategize. Strong internal and external communications during this crucial period will set you up for success.

The signal from Brussels is clear: opting for more purpose is no longer seen as something optional, but as an indispensable component supporting the long-term well-being of European organizations. There is an increasing emphasis on improved sustainability, better social relations, and greater equity, with the CSRD legislation serving as a critical review mechanism. The legislation is coming in faster than you think – with an impact greater than you expect – so start proactively preparing in good time. The transition from transforming the directive into opportunities, instead of merely viewing it as a compliance directive, can result in a shift of energy and perspective. By embracing this viewpoint, companies can unlock cost-saving potential, foster innovation, establish beneficial strategic purpose partnerships and proactively leverage any obstacles ahead.

Want to know more about the upcoming CSRD legislation? We at Fitzgerald are helping organisations to prepare for the upcoming directive from a communications standpoint. Vulnerable and transparent communication is key during this time of transition. Reach out to us for informal advice via hello@fitzgerald.amsterdam.