Who benefits from the CSRD?

The burden

The CSRD puts a heavy burden on the shoulders of the companies that must apply it by law. Nearly all managers regard it as “another” heavy administrative burden from “Brussels” (the EU), that  requires a lot of work by employees. consultants and accountants.
So there are two basic questions:

  • who benefits from the CSRD?
  • how can a company turn CSRD from a burden to a benefit (turn it from costs to profit)?

Who benefits primarily from the CSRD?

The Green Deal (the zero carbon emission target in 2050) requires a total restructuring of the economy within the EU, since it requires a massive financial investment. The big issue is here how to direct the available money towards sustainable investments. There are 3 mechanisms in our free market economy of Europe:

(a) the EU-ETS (Emission Trading System) of Carbon Allowances that makes CO2 emissions of companies more expensive. In this way investments in CO2 emission reduction projects become more attractive.
(b) the Tachonomy (a classification system of environmentally sustainable economic activities) reporting requirements, that force companies to reveal the sustainability of there investments. In this way, it creates future security for investors, and protect private investors from greenwashing.
(c) the CSRD that will inform investors on the sustainable performance of companies, as well as their future financial risks which is caused by the transition (the financial consequences of the new requirements in the future economic system)

So, the benefits of the CSRD and the Tachonomy go to the EU (supporting the Green Deal) and the investors (providing transparency).

Content

Is CSRD only an administrative burden to a company? Or can it be turned to a profit?

It would a bit naïve to assume that companies are not aware of their strategic position with regard to the Green Deal transition without the CSRD: modern management is fully aware of the threats and opportunities of the Green Deal. It would be also a bit naïve to assume that “what gets measured gets done” (Peter Drucker) automatically, since that requires much more strategic focus.

On the other hand, it would be a bit foolish to compile all these data, and do nothing with it.