CSRD’s powerful effect

The CSRD creates new insights and transparency 

According to the CSRD, many organisations have to report on their plans and actions to increase their sustainability from 2025 onwards. This is done on the basis of predetermined definitions and standardized standards. Now, if organisations do not have certain matters in order, such as a climate transition plan, they can omit them from their reports. This is no longer possible under the CSRD. The information about sustainability is also checked by external accountants. 

"The effect is twofold," says Wineke Ploos van Amstel-Haagsma, PwC’s chief sustainability officer. 'The strict and standardized reporting requirements create both valuable new internal insights and unprecedented transparency for external stakeholders. That is a very powerful combination.'

Transparency leads to outside pressure 

An important consequence of the standardized sustainability declarations imposed by the CSRD is that it is easier to compare organisations. External stakeholders in particular, such as investors, NGOs and consumers, will soon have much more information to assess an organisation’s sustainability ambitions and efforts. In other words: whether the stated strategies, the policy on ESG topics, the action plans and the committed resources are indeed sufficient for an organisation to achieve the set sustainability goals. 

“If this is not the case, those organisations risk reputational damage and it may even have legal consequences,” Sethi warns. “A number of climate claims have already been filed against fossil fuel players and their financiers.”

Integrating sustainability into everything

PwC colleague Femke Helgers advises organisations to ask themselves one central question: what do they want the world to see of them on 1 January 2025? 'Being ready for the CSRD is not just about good compliance. It is also about a good sustainability strategy that will provide an organisation an advantage over its competition. This will give a huge boost to integrate sustainability into everything they do.'

Helgers advises organisations on improving their positive impact and reporting on ESG sustainability topics. According to her, the CSRD will ultimately push organisations to integrate sustainability into business strategy and invest in successful sustainability-oriented business models. “These investments may hurt profits in the short term, but they put organisations on the right path to achieving positive sustainability results while tapping into new sources of revenue.” 

"Research shows that consumers are sometimes willing to pay extra for more sustainable products," Sethi adds. 'In addition, organisations that contribute to a circular economy by, for example, refurbishing and reselling their products, show that a positive business case is possible.' She acknowledges that such changes are risky because they may not pay off in the first few years. 'But the pressure on organisations to become more sustainable will not be going away. The initiatives they take today will determine the value propositions for the future. Simply put: companies have to have courage.'

Rethinking business strategy 

Improving an organisation’s impact and discovering opportunities - also Wineke Ploos van Amstel - Haagsma is very positive about what the CSRD has to offer. 'Thanks to the CSRD, sustainability can no longer be the domain of a small group of experts and enthusiasts. The guideline must become an integral part of everything an organisation does. It's about assigning responsibility, managing sustainability risks, upskilling staff, redefining processes, leadership profiles and supply chains. The CSRD will initiate and accelerate changes in all of these areas.' 

That is precisely why PwC aims to be CSRD compliant two years earlier than legally required. “The insights you gain from starting early and striving to get ahead of the market are very valuable,” explains PwC's CSO. 'These insights help us understand how we can have a more positive impact on the environment and society, while at the same time the impact this has on our financial position and our value creation process. An additional advantage is that we can serve our customers better, because we have already gone through many of the steps they still have to complete.'

Achieving sustainability goals requires real transformation 

Ultimately, it can take over a decade for sustainability-oriented initiatives to become profitable. “But the changes will only really start if organisations first make the strategic decision to give sustainability the right priority and invest in it,” says Stuti Sethi. Many companies are already experimenting with new business models, but according to Sethi, further steps are now needed. 

'Most organisations are not yet engaged in the real transformation needed to achieve their sustainability goals. Imagine what oil and gas companies, the fast-fashion sector and the packaging industry will look like in 25 or 30 years if we want to achieve the Paris Agreement goals. This gives an idea of the scale of changes needed.”

Companies need to think differently about adding value 

One of the CSRD objectives is to align non-financial information with financial information, both in external reporting and for internal management and audit purposes. Sethi: 'In the longer term, this could lead to a fundamental shift in the way organisations think. From “how do I make money and reduce the negative impact?” to “how do I bring value to society and make money from it?”.' 

But this win-win situation requires enormous effort and resources. 'Investments, further training, it's quite a burden,' realizes Ploos van Amstel-Haagsma. “But,” she adds, “these efforts are really necessary and probably should have been done long ago. Ultimately, this is what enables organisations to increase their positive impact on the environment, society and the company itself.'