September 20, 2024//LEFF Sustainability Group//Katie Parry

CSRD: New ESG reporting mandates introduce opportunities and challenges

The previous blog post in this series introduced the EU’s Corporate Sustainability Reporting Directive (CSRD), including what it is, what it aims to achieve, and whom it will affect. This post will focus on the opportunities and challenges CSRD presents (and do register for our virtual event for more insights on all these issues!).

Many companies we talk to are laser-focused on ensuring that they are fully compliant with the directive’s complex requirements. This is understandable; the negative consequences of noncompliance may include substantial fines (though these vary by country) and even jail time for executives.

But those who view CSRD exclusively through the lens of risk are missing a number of significant opportunities to add long-term value to their companies. This blog post will examine two of the most significant: updating business strategy and supercharging sustainability communications. However, seizing these opportunities will not necessarily be straightforward; the second half of this blog examines some of the key challenges involved in doing so.

Two key opportunities to add value 

Complying with CSRD opens up a number of important opportunities, including ones related to strategy and communications.

CSRD can improve decision-making and sharpen strategy. As we laid out in the first blog post, the intent of CSRD goes well beyond transparency. The aim of this directive is nothing less than to accelerate the transformation of the business environment by profoundly altering the ways in which companies integrate nonfinancial information into their thinking on issues such as risk, resilience, and overall business strategy.

What, concretely, does this mean for companies? They should see disclosures as a starting point for discussion rather than as an end in themselves. CSRD will give companies a full understanding of their material risks and their impact on the environment. Companies that can integrate this information into their decision-making process will have a significant head start in future-proofing their operations and revenue streams, as well as realizing all the cost and reputational benefits of lowering their environmental footprint.

A growing body of research supports the existence of the opportunity to build value by integrating ESG considerations into strategy. A recent NYU meta-analysis of more than 1,000 studies on the link between sustainability and financial performance, for example, finds that the integration of ESG issues into corporate strategy can increase innovation and improve efficiency, stakeholder relations, and risk management—ultimately contributing to better financial performance. Rigorous research is also starting to quantify this opportunity; for example, the World Economic Forum finds that companies that implement ethical supply chain practices can reduce supply chain costs by up to 16 percent and enhance brand value by up to 30 percent.

CSRD can revolutionize sustainability communications. Effective sustainability communications are not just about ticking a regulatory box. Clear, compelling communications can help companies gain a competitive edge in a market that places ever-greater value on environmental responsibility. EY finds, for example, that organizations that publicly embrace sustainability can expect a growth-enhancing boost in their reputation, citing upcoming research showing that sustainably engaged companies have a brand value that is 50 percent higher, on average, than other companies.

CSRD has the potential to facilitate value-boosting sustainability communications. Companies that have a good story to tell will find they suddenly have a wealth of data at their fingertips, which they can use to attract the attention of investors, potential customers, and top talent. And this data will be third-party-verified, which will make it easier for these companies to avoid accusations of greenwashing.

Transparency can also be valuable in and of itself, with 94 percent of consumers more likely to be loyal to a brand when it commits to full transparency. Companies still at the start of their sustainability journey therefore need not shy away from sustainability communications as long as they can illustrate good-faith efforts to improve sustainability outcomes. CSRD compliance will enable companies to do exactly that; they will be able to share a clear road map for where they’re going and can build trust and strengthen customer loyalty by sharing the highs and lows along the way.

Getting communications right does, however, require a clear sustainability communications strategy and the expertise to translate complex data into an engaging story. The next blog post in this series will go deeper into how companies can do this, offering tips and tricks for success.

What challenges does CSRD present for companies?

While the potential opportunities accompanying CSRD are substantial, the new legislation also brings with it a number of significant challenges:

  • Data: Complying with CSRD will require companies to gather and disclose a huge volume of data. There are 82 disclosures across the 12 standards, which together require 1,144 data points. In addition, this data will need to be verifiable by an external auditor. Most of our clients are choosing to use a third-party data platform to simplify this process.
  • Coordination: Every aspect of reporting against CSRD—from gathering data to formulating targets and strategy—requires collaboration among a potentially daunting number of business units and departments, including sustainability, risk, finance, strategy, and marketing. Companies will need to significantly update how they work, including the inputs they use to inform, and who is involved in, their decision-making process.  
  • Communication: Companies will be expected to provide all CSRD-related information (and there’s going to be a lot) in either their annual or management reports. Data tables can do some of the work, but CSRD also mandates some narrative disclosures to explain the relationships between sustainability and financial and risk information—which isn’t something they’ve had to do before. And capturing the reporting opportunity described above will require going beyond compulsory disclosures; companies will need to work harder to figure out how to make their sustainability messaging stand out in a world that is suddenly awash with data.
  • Capacity: While the outputs of CSRD are valuable and important, there’s no glossing over the fact that complying will be resource-intensive. Companies will need to ensure they have the right people in place, including tapping into a growing ecosystem of third-party providers if they do not have the skills or capacity internally.

That CSRD presents significant opportunities—and significant challenges—should not be surprising given the far-reaching aims and implications of this new regulation. We at LEFF are particularly excited by the ways in which CSRD could revolutionize sustainability communications, which is why the third blog post in this series will dive deeper into that issue. We’ll go into more detail about what companies stand to gain and offer some tips for how they can get there.

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.