Sustainable reporting directive creates headaches - and maybe headway

Reposted from www.prmoment.com

Over the past week or so, there has been a growing sense that companies confident about taking a new sustainability reporting requirement in their stride should maybe think again about its consequences.

The Corporate Sustainability Reporting Directive (CSRD) came into force at the beginning of this year, but the deadline for non-EU companies to begin reporting their environmental data from within the bloc has been pushed back to June 2026.

As it has for companies in several sectors that will find it harder in practice to gather the information, given the nature of their operations,

Still, in practice for many firms that means having to start to gather data from across their next fiscal year, whether that begins on 1st January next year or sooner, in order to report it to the EU on time.

Those who aren’t ready face a big headache - and the prospects of fines - if their data isn’t in place and can be communicated effectively. Yet the legwork could also create opportunity.

But that effective communication doesn’t just mean ensuring that a clear and cohesive account of the most important aspects of the data can be shared externally. The directive also places a burden on companies to be able to share details of the impact they’re having financially, environmentally and socially.

As a World Economic Forum update this week put it, while the rules do create extra work, they have “the aim of providing investors and stakeholders access to robust and comprehensive information to make more informed decisions; and establishing greater transparency about a company’s impact on the planet and people.”

It continued: “Though most first-time adopters of the CSRD are using a qualitative and often descriptive approach for the DMA consisting of external and/or internal stakeholder assessments, a few companies are currently working towards integrating impact valuation into their DMA, which brings advantages such as additional value chain insights, neutral and external data, and objectivity and comparability to the process.”

In other words, being forced to report can bring extra benefits through sharpening the pencil - with data.

And that obligation may even help communicators to make progress in getting more of a grip on greenwashing risks and baking in a more central thread to their overall corporate narratives. The forthcoming US SEC climate reporting rules will create a similar challenge, as this piece outlined.

This need to provide what amounts to “double materiality” is what management consultants and lawyers have been firmly across for some time now, and are getting increasingly vocal about as the first reporting deadlines - and time for getting data and communications organised - draw nearer. EY was the latest to publish a guide on how to manage it this week.

On the face of it, it does look like CSRD will herald a compliance burden that mostly impacts finance and sustainability teams. But there are several big considerations for communications teams in all of this.

Firstly, it amounts to a toolkit for avoiding greenwashing. Companies needing to comply with either the initial or the subsequent deadline for non EU-based firms will need to state their environmental impact against set criteria clearly and accurately, without gloss. Communicators will be tasked with ensuring that lands well and can be repeated over time to enhance reputation.

But in doing so, they will need to ensure that other communication with the CSRD data and direction. Not necessarily in tone, but in factual accuracy, and in often enabling the CSRD-related communication to take precedence rather than being overshadowed. The directive compels companies to continue to demonstrate progress over time, so this ‘journey’ effectively needs to be a core element of external communication, rather than a compliance-mandated aside.

Finally, there’s a need to consider how best to make CSRD-driven data, insights and achievements part of executive talk tracks and regular communication cycles, such as ESG or annual reports. Double materiality should not be a box-ticking exercise, but something that becomes a central priority with external stakeholders.

It may seem like another compliance decree from Brussels, but expect the CSRD to have some profound and short-term implications for both public and private companies that are impacted by it over the next couple of years. It points to a need to get started in the next couple of months.