'Reporting alone will not make organisations sustainable'

Current initiatives which organisations are taking to become more sustainable are often still reminiscent of a 'tapas menu'. According to PwC expert Sebastiaan Nijhuis, 'a coherent strategy that brings together all of these different initiatives' is usually lacking. The European CSRD directive is a great vehicle to initiate and accelerate the sustainability of the business model.

From 2025, many organisations must report on their plans and actions to increase their sustainability according to the Corporate Sustainability Reporting Directive (CSRD). 'But analyzing and reporting alone does not make organisations more sustainable,' says Wendy van Tol, who, like her PwC colleague Sebastiaan Nijhuis, specializes in sustainable business transformations. 

Van Tol sees that the CSRD is an important reason to actually start doing this. The directive takes an organisation's sustainability strategy as a starting point and forces them to be transparent in their non-financial reporting on concrete objectives and action plans regarding sustainability. 'The following applies here: “disclosure is exposure”. The transparency which organisations will soon have to provide about sustainability creates pressure that is often necessary to take this seriously," says Van Tol

Sustainability initiatives are still often a 'tapas menu'

Efforts to become more sustainable are often still fragmented, says Sebastiaan Nijhuis. 'Many organisations are already taking all kinds of initiatives and are very good at telling their story about them. But current initiatives to become more sustainable are often still reminiscent of a tapas menu. What is missing is a coherent strategy which brings together all of these different initiatives. This involves linking care for people, the environment and nature to the most important business processes. Only then will sustainability go hand in hand with future growth and new value creation. If this is not the case, most initiatives will not survive.'

The transformation issue on the table

Nijhuis therefore calls the CSRD a great vehicle to initiate and accelerate the sustainability of the business model. The directive states that organisations must determine which ESG issues entail the most important opportunities, risks and impact through a so-called 'dual materiality assessment'. If organisations then have to report that there is no underlying strategy for making those issues more sustainable, this will create pressure. 

Nijhuis: 'That pressure helps to get the transformation issue on the table. The question becomes: which initiatives do we scale up, and how do we anchor them in our business model, so they actually create value as well as have positive ESG outcomes?'

The five steps of a sustainable business transformation

Determining the current state of affairs regarding ESG and integrating ESG into a new strategy are steps 1 and 2 in a sustainable business transformation (see figure). To actually become more sustainable, it then comes down to a successful change program. Such a program should not only be realistic with achievable goals and the right priorities, but above all it should also move the entire organization. True sustainability can only be achieved if an organization succeeds in developing an integrated approach.

Connecting to become more sustainable 

What do we mean by an integrated approach? Suppose water consumption is one of the material ESG topics for an organisation. Then, not only specialist knowledge on this subject is needed, but also new data sets and reporting processes to report on this in accordance with the CSRD requirements. If reducing water consumption becomes strategically important, that may mean that the research and development department must develop new products, or the operations department must invest in new production processes and locations. To introduce those changes to customers, sales may need new training and purchasing may need to select new suppliers. 

To truly achieve sustainability, all these departments and their input must be connected. 'Otherwise the ESG agenda will remain limited to isolated initiatives,' says Wendy van Tol. 'To the vast majority of organizations, this means that they really still have to go through a transformation. That is what I mean when I mention that reporting alone is not enough to become sustainable.'

An integrated approach: the magic triangle

Under the CSRD, sustainability is no longer a defined subject for which responsibility can be assigned to one department or function. Instead, according to Sebastiaan Nijhuis, it is necessary to build a 'magic triangle'. At the corners there are the teams that until then were responsible for sustainability, for finance & reporting and for various business functions.

A new way of working together 

This combination of teams will only be effective if it is supported by technology and if there is involvement and support from top management. Achieving concrete change often requires a new way of collaboration. 'Working in those magical triangles, in teams in which those backgrounds come together, is not yet common in many organizations,' says Sebastiaan Nijhuis. 'But we see that organisations that are serious about their CSRD implementation quickly realize that there is no other way.'

Proper change management is crucial 

Because new forms of collaboration are required in a sustainable business transformation, change management is crucial for its success. This means that attention needs to be paid to, among other things: 

• Linking sustainability initiatives to the strategic priorities and business operations of the organisation. A clear division of roles and responsibilities must be made among the various disciplines in the magic triangle, and in the various administrative bodies that direct and monitor the transformation. 
• Truly activating the magic triangle by involving employees from the various business units in the design and implementation of the transformation, and ensuring that they have the right specialist and functional knowledge for this. 
• Demonstrating integral leadership and responsibility by the company's top management. Leadership should function as a role model and emphasize in word and deed the importance of a successful transformation.
• Training, education, clear communication as well as providing information to employees, in such a way that sustainability changes from a specialist and technical topic into something that plays an important role in their daily work.