September 13, 2024//LEFF Sustainability Group//Katie Parry

CSRD 101: What new ESG regulations mean for your sustainability communications strategy

The European Union’s Corporate Sustainability Reporting Directive (CSRD) is top of mind for many of our sustainability clients, with the first reporting deadline coming up in July 2025 (covering 2024 data).

Many companies are unsure, however, about what CSRD means for them and how to prepare. Over the coming months, we’ll help cut through that confusion with a series of posts on this blog and with a virtual event on October 15. We’ll discuss insights into how regulatory developments are changing sustainability communications, strategies for using the new reports to build long-term brand value, and tips on what companies can do now. Please follow LEFF on LinkedIn for more information, including the big reveal of our three exciting panelists. (Spoiler: I’m one of them.)

This first blog post will cover the basics of CSRD: what it is, what problem it addresses, and who needs to care. Our goal is to provide readers with not only a good grounding in these topics but also resources for those who want to dig a bit deeper.

What problem is CSRD aiming to solve?

Over the past decade, policymakers, consumers, employees, and investors have begun asking for more information on environmental, social, and governance (ESG) issues. As a result, the number of ESG reporting standards and frameworks have expanded greatly. (See here for a useful summary of existing rules and guidelines.) Most of these have been optional, however, and varying requirements and metrics have limited the ability to compare across companies and sectors.

Enter CSRD, a new standard for how companies disclose ESG information. CSRD establishes a shared framework for reporting nonfinancial data and integrating financial and nonfinancial disclosures. Detailed, standardized reports will provide greater transparency to all stakeholders. But the overall intent of CSRD is much bigger. The idea is that the metrics and targets that companies now need to report will end up accelerating the transformation of the business environment, increasing resilience and sustainability. And there’s data to support this theory of change: A growing body of research finds that transparent companies tend to perform better—and are rewarded by investors accordingly.

What do companies need to disclose, and which bits are new?

Disclosures made under CSRD must align with the European Sustainable Reporting Standards (ESRS), published by EFRAG. Together, the 12 ESRS cover the full suite of ESG-related topics (Exhibit 1).

Exhibit 1 – What topics are covered by CSRD and the ESRS?

Source: Greenscope, “Final version of the ESRS,” August 2023.

CSRD expands upon and replaces the European Union’s Non-Financial Reporting Directive. CSRD goes further than any previous mandatory reporting framework in a number of ways, four of which are particularly important:

  • Scope 3 emissions: For the first time, many companies will be required to disclose their Scope 3 emissions, which are emissions produced in the company’s value chain. PwC has a good explainer.
  • Data integration: A core goal of CSRD is to integrate financial and ESG information rather than the two being considered as separate silos. To that end, all CSRD-related information will need to be provided within a company’s annual or management report.
  • Assurance: To verify their accuracy, all reports must be audited by a third party before publication.

Who needs to care?

The CSRD requirements introduce mandatory sustainability disclosures for large and listed companies with a significant presence in the European Union. In total, this will likely be nearly 50,000 companies, though not all will have to report immediately (see page 12 of the European Union’s CSRD FAQ document for more information). 

The impact of CSRD, however, will likely be felt beyond those companies immediately affected. The European Union has a long history of exporting its standards, and the CSRD will likely be the first in a series of corporate disclosure directives that mandate the integration of financial and ESG information.

What form will disclosures take?

Companies will be expected to provide all CSRD-related information in either their annual report or their management report. A chunky appendix of data tables won’t be enough; ESRS 1 specifies that companies must provide narrative disclosures to explain the relationships among sustainability, financial, and risk information. There are technical requirements, too, with all sustainability information to be provided in xHTML format in line with European Single Electronic Format regulations.

These requirements will likely further limit the number of companies that have the capacity and expertise to produce their ESG reports in-house, and the LEFF Sustainability Group has already seen an increase in requests for support. We’re really enjoying diving into these projects and are excited by the opportunities these new reports offer to tell our clients’ sustainability stories in compelling, data-driven ways.

CSRD ushers in a new era of sustainability reporting, and the array of data needed to satisfy the new requirements means companies urgently need to have their reporting plan in place. The stakes are high, and we understand that many involved in the reporting process are feeling anxious about what’s ahead. However, the new regulations do also offer huge opportunities to build stakeholder trust and business value. The next blog post in this series—and our upcoming virtual event—will look in more detail at some of the opportunities and challenges that come with CSRD and how companies can navigate them.

Ready to learn more about the impact of CSRD on sustainability communications? Register for our virtual event below.

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Senior adviser

Allan elevates thought leadership with a veteran editor’s perspective on distinctive content and a journalist’s eye for trends in world events. He began his career as a writer and editor covering business, economics, and the environment for the Tallahassee Democrat, the Miami Herald, The New York Times, and The International Herald Tribune in Paris. Allan went on to work at McKinsey & Company for more than 20 years in Europe, Asia, and North America, where he specialized in emerging markets and shaped global thought leadership as editor in chief and editorial board member of the McKinsey Quarterly. At LEFF, Allan works with colleagues and clients to launch new projects, and he uses his expertise to support the professional development of LEFF’s team of editors.

 

Director of LEFF Sustainability Group

Katie is passionate about the power of storytelling to motivate audiences to action, particularly related to environmental issues—the throughline of her multifaceted career. She has managed a water project for the World Bank, been one of the UK’s climate security negotiators at NATO, helped design green strategies for several governments as a McKinsey & Company consultant, and taught courses on writing for public policy at the Harvard Kennedy School. Based in Brussels, Katie currently develops sustainable content strategies; edits a wide range of climate content, including infographics and major reports; and oversees LEFF’s Into the Weeds interview series, which shares stories of the people and organizations combating climate change.

 

VP of marketing and business development

Chad has brought brand narratives to life for more than 15 years by developing powerful stories, inspiring stakeholders with unique marketing campaigns, and building communities of enthusiastic audiences. Chad honed his approach to content as a sales and marketing executive for Disney and ESPN Media Networks, where he used storytelling to increase revenue for mobile and linear-channel products. Since then, he has held several senior marketing roles across healthcare, education, and technology companies. Most recently, Chad was the vice president of corporate marketing at Telarus, where he developed comprehensive branding initiatives across multiple technology disciplines, including cloud, cybersecurity, and AI. Chad joined LEFF in 2024, and he’s excited to launch innovative marketing strategies that drive growth and deliver transformative results.

Senior adviser

Mary is a data visualization expert with a rare combination of talents. Trained as a fine artist, she also enjoys writing, advanced math, and learning new skills; she taught herself coding and UX, and she’s continued to build valuable proficiencies that keep her on the cutting edge of content. Prior to joining LEFF, Mary worked at McKinsey & Company, developing the precise, engaging charts that have become a hallmark of the firm’s widely read publications. Today, she collaborates with LEFF editors and clients to distill even the most complex ideas into compelling, intuitive data visualizations. By asking the right questions and determining the best formats, she ensures data visuals amplify key insights.

Senior adviser

Peter is an expert at developing clear, compelling stories about complex subjects—a skill that’s served him well as an award-winning journalist, editor, and book author. A former reporter for The Wall Street Journal and writer for Fortune magazine, Peter also spent seven years at the McKinsey Global Institute, where he stayed at the forefront of major trends in business and technology as a senior editor and editorial director. Peter has also written five nonfiction books, including a bestseller in France, where he currently resides. He brings his unique perspective as a collaborative, tactical thought partner to his work at LEFF by uniting stakeholders, upholding a high standard of quality, and ensuring content is well-structured and aligned with client needs.

People director

Tracy built her career in people operations by developing a wide range of skills; because of her many capabilities, she refers to herself as the “Swiss army knife of HR.” But Tracy’s work goes beyond typical human resources functions: She’s committed to elevating the complete employee experience. She draws on her work across industries—including roles at Rockwell Automation, Harley-Davidson, and the American Medical Association—to promote a workplace culture of openness and acceptance, and she’s guided by her empathic nature and willingness to embrace a challenge. In everything from implementing new processes for feedback and evaluation and supporting employees through times of great change, Tracy makes LEFF a special place to work by ensuring that everyone feels welcome, valued, and seen.

 

Design director

Christa was always drawn to art and design, and over time, she also discovered a passion for progress: She’s motivated by meeting goals, building teams, and refining the many small steps between concept and content. Christa built the foundation of her design career at an advertising agency before moving on to the marketing department of a healthcare university, where she oversaw print and digital projects as a graphic designer, senior creative and brand specialist, and creative services manager. Today, Christa is excited to explore the possibilities of LEFF’s ever-growing content offerings, lead a group of creative designers, and use her experience and strategic design thinking to deliver outstanding results for clients. 

 

Production director

Jen approaches copy with a clear philosophy: Edit in service of the reader. She began her career in journalism, where editing newspaper copy on the second shift meant meeting tight daily deadlines and making quick decisions. Roles as a senior editor, executive editor, and director of editorial production followed, and Jen used her good judgment and love for the written word to elevate copy for entertainment news and B2B publications. Whether navigating the intricacies of highly specialized style guides or constructing crosswords in her free time, Jen is at home in the possibilities of language. At LEFF, she leads the production department: a collaborative, adaptable team that maintains our—and Jen’s—deep commitment to quality and clarity.

 

Group account director

Joe values preparation, but an early career experience taught him to troubleshoot in unfamiliar situations. One of his first roles in marketing required him to travel suddenly to Toronto to help a multinational restaurant business build its presence in Canada. Two years later, Joe had worked through regional differences and complex logistics to help the client meet its goals, and he became a more active listener in the process. Whether successfully delivering game-changing outcomes in an agency setting or at a university, where he directed marketing operations across campuses, Joe remains focused on solving problems with well-informed decisions. At LEFF, he’s overseeing the processes that ensure everyone has what they need to do their best work and strengthening the connection between effective operations and exceptional client service.

VP, content marketing

Karianne has a unique history of engaging audiences and telling stories. After studying music, she found new ways to express herself in the world of branding. Her more than 20 years in marketing and strategy are a testament to her ability to bridge business and creative mindsets, and she has developed content to communicate the ethos of global brands such as GE, State Farm, Motorola, and Procter & Gamble. Prior to joining LEFF in 2024, Karianne was vice president of digital at Weber Shandwick, led workshops at General Assembly, founded her own business, became a certified well-being expert, and released an album. As the lead of LEFF’s content marketing team, she looks forward to helping clients discover new opportunities to make an impact with lively, thoughtful content.

SVP, content innovation

Luke has crafted a writing life by pursuing—and creating—fresh opportunities. As a newspaper journalist in his native Australia and then as a foreign correspondent, freelance writer, editor, and management consultant, Luke developed the keen editorial eye and strategic perspective that has led him to the forefront of thought leadership and B2B publishing. Luke has helped leading organizations share transformative insights through print media and emerging digital platforms. Before joining LEFF, he was an executive editor at McKinsey & Company, managing director of Deloitte Insights, and global editor in chief for EY. Always driven to match the medium to the message, Luke collaborates with LEFF’s content marketing, editorial, and design departments to showcase clients’ most important ideas.

Partner

Alia approaches content like a conversation: She listens to clients to learn about their goals and responds with strategies that resonate with their audiences. Alia is an expert at translating ideas into smart, compelling integrated campaigns, and her experience in the agency world honed her abilities as a versatile creative partner and insightful innovator for enterprise clients such as Toyota, Kaiser Permanente, and Allstate. She got her start in publishing after living and working in Ukraine, where she focused on HIV/AIDS education and grant writing. At LEFF, she has assembled a team of multifaceted creatives who tell clients’ exciting, meaningful stories across channels and formats.