About 50,000 medium-sized and large companies in the EU will be required to report according to the new Corporate Sustainability Reporting Directive (CSRD) on environmental, social and governance (ESG) related topics in 2026 on the year 2025. A recent study by Empact shows that the majority of companies still have a compliance-driven attitude towards ESG. Will the introduction of the CSRD, a pure compliance tool, change this and will companies implement ESG more strategically in the future? We think so because the introduction of the CSRD forces companies to thoroughly review their performance in this area and offers an excellent opportunity to start making a real social impact.
CSRD makes non-financial plans and performance visible
With the introduction of the CSRD, companies will have to report on ESG with the same care as they report on their annual financial performance. That is: complete, transparent and according to legally determined guidelines. In addition, a third party needs to provide limited assurance on the sustainability statements and include them in the management reports of their annual financial reports. As many companies must make their annual financial reports in parts or entirely publicly available, the sustainability statements will become transparent to everyone. This includes the companies’ ESG-relevant strategies, plans, actions, and performance. This ensures that everyone can see how a company is doing on themes such as the environment, employment practices and good and ethical governance.
Visibility leads to decisions
Publicising their ESG information will make many companies think and rethink their strategic directions. Where CSR still has a mostly non-committal character and is often picked up by a department that ‘does something with CSR’, the CSRD encourages a review of policy at the c-level. From the supply chain’s carbon footprint to safety in the workplace and from concrete plans to improve privacy to the impact on social cohesion within communities, it all becomes transparent and public. And not only from your organisation but also from your competitors – all in the same, easy-to-compare format. Poor performance and the lack of a well-considered vision for improvement will sooner or later have (financial) consequences and make an organisation less attractive to stakeholders like customers, investors, and employees.
Against these risks, however, there are also great opportunities to add value and make a real impact. In our view, strategic choices in this area and seizing the opportunities that are available are the way to success.
Opportunities to make an impact
On the one hand, a strong ESG policy revolves around mitigating risks, such as environmental damage and good employment practices in a company’s own operations and along its value chain or employees. On the other hand, strong policies can also ensure that you increase the positive impact, such as the well-being of customers or a beneficial improvement on the company’s diversity and inclusion approach. Both mitigating risks and increasing positive impact offer plenty of opportunities to increase your total impact. We list a few options to make an impact.
1. Reduce your environmental impact
Impact on the environment often refers to CO2 emissions. But the environmental impact is much more than that, and there are many more ways to reduce your impact on the planet. Think, for example, of our impact on biodiversity, mapping your scope 3 footprint, or changing production processes so that you produce less waste. And opportunities such as changing from a linear business model aimed at selling your products to a circular business model aimed at the use of your products. What suits you best obviously depends on a large number of factors. In any case, make sure you focus on things that are relevant.
2. Become a better employer
As an employer, you can choose to simply comply with all laws and regulations. But you can also go further and make a real impact in this area. Opportunities to become a better employer include investing in employee development and ensuring an inclusive and inspiring workplace design. Not only do you create extra value for employees in this way, but employees will also create extra value for you. This is because, for example, they feel better about themselves and are absent less often. And wait, did you also think of retaining talent?
3. Improve your societal (governance) impact
There are also many opportunities in the field of societal impact to reduce the risks of your activities and increase the positive consequences. Simply think of making products healthier so that you make a positive contribution to the health of your customers. Or consider mapping the supply chain for exploitation and poor working conditions (and then act accordingly). Or sponsor social and community projects. The possibilities in this area are extensive.
From report to impact
Most large companies have now started preparing to at least meet the obligations set by the CSRD. In addition, we see that large companies such as Alliander, Nationale Nederlanden, ASML and ABN AMRO have come a long way and report transparently (and quite comprehensively) on many ESG-related topics. These companies are already making an impact with their annual reports.
Do you also want to use the CSRD to take strategic steps and make a real impact? Please feel free to contact us. We are happy to help you.