The CSRD: Is it a case of old wine in new bottles or a driving force?

“These are the pitfalls and opportunities of the new reporting standard”

In this series of blogs, we talk to our specialists at 2BHonest about interesting topics that we come across in our work as sustainability consultants.Today we talk to Romeo Kaptijn about the opportunities and risks that the Corporate Sustainability Reporting Directive (CSRD) presents for companies.

Since the final publication of the CSRD, various views have been expressed about the value of this new reporting standard. One of these views is “old wine in new bottles”, citing the pitfalls of previous standards. How do you see this?

It is true that there are different opinions in the market about the CSRD and how it should be dealt with. There are basically two currents of thought. On the one hand, we see companies wanting to gain insight into their level of compliance with CSRD requirements, in which case the ‘traffic light system’ is useful. On the other hand, we see companies setting up large-scale working groups in order to become as CSRD-proof as possible. As such, we see similarities with other standards such as GRI, SASB or IIRC, where a lot of time has been spent on interpretation rather than actual action on sustainability.

How do you view the role of ‘the accountant’ in this debate?

With every piece of information being scrutinised, there is a growing sense of urgency at different levels and among different departments of companies. As a result, it is no longer the sustainability manager who has the task of stressing the importance of transparency: the CFO is now often the driver of this. In my view, this is a positive development, particularly in terms of getting the business world on track to becoming fully sustainable. Nevertheless, we still regularly see the focus on reporting overshadowing everything else.

“Ultimately, we want to challenge our clients on the content of the CSRD, not on whether they meet all the requirements.”

What are the risks of focusing too much on reporting?

The fact that it is accompanied by an accountant’s audit and is part of the management report is a source of concern for reporting companies. The CSRD encourages companies to think about the long term. However, it is the short-term reporting requirements that are now demanding attention. Companies — sometimes encouraged by consultancy firms — want to carry out the gap analysis process in the short term in order to close any gaps as quickly as possible. After all, the objective is to pass the accountant’s audit. The unfortunate upshot is that too little thought is given to the content. As a result, far more resources go into reporting than into, for instance, strategy and implementation.

Accountancy firms seem to have a sizeable stake in this, which is causing unrest among reporting companies. To what extent is the accountant the bogeyman?

By no means should the accountant be held responsible for this — companies should also be more self-critical. If there are doubts in relation to the relevance of requested information, it is up to companies to engage with auditors and provide a sound counterbalance where necessary. After all, despite the comprehensiveness of the CSRD, it really does leave room for interpretation and, hence, discussion. In addition, the CSRD’s comparability between sustainability reports provides a transparent platform for companies to differentiate themselves. This only needs to be done based on what the strategy, policy, objectives and actions entail, not on how detailed they are set out.

What is 2BHonest’s vision and approach in this scenario?

As a consultancy firm, we believe we can play an important role between companies and accountants. Although we also conduct CSRD gap analyses ourselves, our intention is to always remain actively involved in the process afterwards. Identifying gaps is one thing, but actually filling these gaps with valuable content for the long term is quite another. In addition, I feel that some companies really need this support. Particularly parties that don’t yet have a lot in place in terms of sustainability. If you haven’t given enough thought to what you want (and need) to focus on, you may start creating policy documents, action plans and objectives that are based on nothing. This is also known as the ‘shit in, shit out’ principle. Ultimately, we want to challenge our clients in terms of content rather than on (comprehensively) meeting all requirements.

Want to know about the CSRD? Romeo is on hand to help you!