For those companies that will fall within their scope, the Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS) are ushering in a new era of sustainability reporting worldwide. These regulations demand transparency, accountability, and a shift towards global criteria, impacting companies across the globe. As the world moves towards a more sustainable future, the importance of reliable and comprehensive sustainability reporting has never been greater. While from some perspectives there is positive reaction to the introduction of the CSRD and ESRS, there is acknowledgement of the challenges many companies will face.
Both Joaquín Tribolo, ESG & Compliance Leader at BDO in Argentina and Sustainability Manager at BDO in Chile, Benjamín Ayala Raineri, believe the adoption of global reporting criteria such as the IFRS SDS and, for those companies within its scope, the CSRD in their countries will be positive. Local stakeholders will soon start demanding compliance regardless of whether they have any relations with the EU and the value chain of a significant number of EU-based companies means reporting under CSRD will be obligatory. Alison Joutsi, Vice-president, ESG and Sustainability and Pierre Taillefer, Partner, at BDO in Canada, said that Canadian regulators will review the ISSB standards as a starting point for sustainably information Canadian companies will need to report, and consider the requirements of other sustainability standards and frameworks, including the CSRD and ESRS, to determine overall reporting requirements that are relevant to Canada. Other BDO firms expect similar developments in their jurisdictions.
Tessy Martens, ESG leader at BDO in Belgium says the impact will be profound, citing company accountability to stakeholders as a crucial element. Highlighting that the regulations were created to ensure investments are channeled towards activities that support the EU’s sustainability goals, she points out that future company sustainability
“Ensuring the accuracy, reliability, and consistency of data will be crucial to maintaining the integrity of sustainability reporting.”
Tessy Martens, ESG Leader, BDO in Belgium
However, while these sustainability reporting standards are welcomed by some, others are concerned at the impact on already over-stretched teams. Ákos Veisz, Managing Partner, ESG Advisory at BDO in Hungary believes Hungarian companies underestimate the complexity of what is required to report under CSRD. These sentiments are echoed by both Viola Möller, ESG Partner at BDO in Germany and Matthias Hrinkow from BDO in Austria who both highlight the widening of the net to include a significantly larger number of companies who will be required to report on sustainability, many of which have no experience with this type of reporting, nor the resources to support it.
Another issue companies will need to get to grips with is the level of detail required by CSRD reporting and subsequent scrutiny by stakeholders. Möller says that while German companies are familiar with financial reporting, until now sustainability reporting has been quite low-key. The new requirements will mean greater public disclosure, and this will require a cultural shift for German companies which may be uncomfortable reporting in such detail. This could also be true for companies in other jurisdictions.
In this fast-paced regulatory environment, business leaders must recognise that sustainability is no longer an option but a fundamental aspect of long-term success. Adapting to and adopting sustainable business practices will not only secure a company's future viability but also foster positive relationships with customers, investors, and other stakeholders.
In conclusion, the publication of the first IFRS SDS and their subsequent endorsement by IOSCO, combined with the global applicability of the CSRD and ESRS to non-EU entities with a legal presence and which do significant business in the EU, marks a pivotal moment in reshaping the future of sustainability reporting and accountability. The shifting regulatory landscape necessitates a deep understanding of these frameworks for business leaders to remain compliant, build trust, and lead with purpose in an era where sustainability is a non-negotiable imperative. By staying ahead of the curve and embracing sustainable practices, organisations can pave the way for a more resilient and responsible future, benefiting not only their bottom line but also the well-being of our planet and society at large.