Despite the fact that large listed companies with more than 500 employees must provide insight into the impact of their activities on people, the environment and society from 2024 in their annual report, this year it appears that not a single Dutch company still complies with the intended EU report. -to demand. Companies await the final rules and often experience the EU’s Corporate Sustainability Reporting Directive (CSRD) as a paper tiger rather than a transitional instrument on the way to sustainable business operations.
This is the conclusion of the annual report study ‘Sustainability Reporting’, which KPMG has conducted for the second year in a row among 24 listed and 22 large non-listed companies. Philips, DSM and Ahold Delhaize are the most mature in terms of implementing EU sustainability rules.
Most of the attention in current sustainability reporting is on climate change and the environment. For example, 90 percent of listed and 70 percent of non-listed companies provide insight into the impact of their business activities on the environment, biodiversity and, for example, water pollution. Most companies still provide insufficient information about social aspects beyond the boundaries of their own organization. Where EU regulations require insight into the working conditions of staff throughout the value chain, for example also in the production of parts manufactured in China or India, this is hardly disclosed in the annual report.
A crucial part of European sustainability reporting is the so-called double materiality. This maps both the financial business risks of sustainability and the risks to people and the environment. For example, the dual materiality must show whether the companies are able to cope with floods, higher temperatures or other effects of climate change. At the same time, it must be clear how nature will or will not be affected by, for example, the construction of a new factory. None of the companies surveyed now meet the EU’s reporting requirements for dual materiality.
‘Providing information about sustainability in the annual report is very different from telling how sustainable a company is on the website or in a separate CSR report. This radical change to a new reporting structure according to European guidelines can therefore be better used as a strategic tool on the way to sustainable business operations. In this way, companies can take advantage of the new European legislation and regulations,’ say the researchers.
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Most companies are well underway in establishing Environmental, Social & Governance (ESG) goals, strategy and adaptations of processes and systems, the researchers conclude. But it is often not yet in line with the European requirements for sustainability reporting. Compliance with these CSRD guidelines will soon be more than just a requirement. It also makes companies more attractive to investors, consumers and new employees.
What is CSRD
According to the new EU guidelines, large companies must provide insight into the impact of their activities on people, the environment and society in their annual reports. Organizations are expected to establish sustainability goals and structure their strategy, processes and systems accordingly. Both for own company and for suppliers in supply chains. The new CSRD guidelines will apply to 75 percent of the European economy from 2024. That means thousands of companies in the Netherlands.