Why Environmental Groups Are Questioning CSRD Implementation
The European Union’s Corporate Sustainability Reporting Directive (CSRD) and its accompanying initiatives — the Corporate Sustainability Due Diligence Directive (CSDDD) and EU Taxonomy — have become central parts of sustainability reporting across the bloc since 2023.
However, implementing the regulations has been a little more complicated than was first expected, with pushback coming from several different parties.
Things came to a head in December 2024, when over 90 organisations issued a powerful multi-stakeholder statement. The statement raised concerns about how the regulations are being implemented and offered some suggestions for practical solutions.
This statement follows hot on the heels of the UK government's formal recommendations to the International Sustainability Standards Board (ISSB), which advocated for alterations to the sustainability reporting process.
- Some of the most prominent organisations to sign the multi-stakeholder statement include: E3G, ClientEarth, Fairtrade International, WaterAid, Rainforest Alliance and Oxfam.
Are legal uncertainties are slowing progress?
The statement, which was coordinated by Frank Bold and WWF EU, emphasised the dangers of inconsistency in legal frameworks.
It says that arbitrary amendments to standards are likely to create confusion and unnecessary burdens for those that have to abide by them.
“Any arbitrary change or cut in the standards would risk confusing the market, and demand more efforts from companies which are already investing in the application of the EU standards,” the statement warns.
This is a concern for Brian Tomlinson, Managing Director for ESG at EY, too.
Speaking on CSRD, he says: “Even though these are EU regulations, they are capturing many US-headquartered companies with operations in Europe.
"Companies may discover that more of their business is scoped in, higher up their structure, and including significant non-EU elements of their business”.
The reporting reduction debate
Another contentious issue with which the statement takes umbrage is the European Commission’s target of a 25% reduction in reporting obligations.
The multi-stakeholder group criticised this goal, stating it “lacks precise modelling and fails to demonstrate how it aligns with the actual reporting requirements necessary to achieve policy objectives: it is arbitrary.”
Despite efforts to streamline the reporting process, businesses are already grappling with extensive disclosures under CSRD and EU Taxonomy.
“The disclosures will indicate the extent of policies, action plans, and targets in relation to material issues," says Brian.
"Companies will disclose a broad set of metrics of their environmental and social performance to an extent and granularity that many will not have before”.
Data gaps and the need for evidence-based policy
A recurring theme in the statement is the critical lack of reliable data to inform policy interventions. “Following the EC Better Regulation principles, any policy intervention must be informed from evidence,” the statement explains.
However, gathering such evidence remains challenging, as implementation is still in its infancy.
The multi-stakeholder group suggests prioritising capacity-building efforts to assist states and companies, particularly small and medium-sized businesses (SMBs), in navigating these new requirements.
These businesses are at a particular disadvantage when it comes to reporting, an issue HubSpot's Senior Director of Sustainability raised in a recent interview with Sustainability Magazine.
"Generally, SMBs won't have a dedicated sustainability person. So how do they navigate around Scope 1, Scope 2 and Scope 3 emissions? How do they calculate it? How do they develop their GHG inventory? How do they set science-based targets?" he asked.
"It's daunting; all of these things are. If you're a small business that employs 10 people, that's going to be really hard work."
A long-term perspective
The statement offers a tempered outlook on the initial costs of implementing these frameworks.
While acknowledging the substantial investment required, it argues that costs will decline significantly after the first two or three reporting cycles. “It must be recognised that these challenges will also decrease after two or three reporting cycles.
Similarly, the recurring costs are expected to be significantly lower after the first-time investment”.
Tomlinson echoed this sentiment, advising businesses to focus on building robust systems for long-term compliance.
“The disclosures required by CSRD and taxonomy are strategically significant... All of these elements should feed into a company’s long-term strategy and help their stakeholders better understand how they will manage long-term sustainability issues like climate change adaptation”.
Generally, SMBs won't have a dedicated sustainability person. So how do they navigate around Scope 1, Scope 2 and Scope 3 emissions? How do they calculate it? How do they develop their GHG inventory? How do they set science-based targets? It's daunting; all of these things are. If you're a small business that employs 10 people, that's going to be really hard work.
The way forward
To address these challenges, the statement calls for practical guidance, improved implementation support, and consistency across regulations. This includes standardising definitions and methods to simplify compliance and reduce costs.
Tomlinson offered similar advice to organisations preparing for CSRD: “Prepare for CSRD given the extensiveness of the standards, the process involved, and the assurance standard applied to the disclosures. It is a very heavy lift”.
He highlighted the importance of cross-functional collaboration, urging leaders to ensure their organisations are adequately resourced for the transition.
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