Navigating through the complexities of the CSRD
Hill+Knowlton Strategies expands service in ESG & Sustainability Adivsory
As companies continue to expand their operations globally, they are faced with new regulatory requirements that govern environmental, social, and governance (ESG) standards. In the European Union (EU), ESG regulations have become increasingly important over the years, with the introduction of new laws that impact the way companies operate. In this article, we will explore the impact of ESG regulations, and more specifically the Corporate Sustainability Reporting Directive (CSRD) on companies operating in the EU and how Hill+Knowlton Strategies will help its clients navigate these complex regulatory requirements.
The EU is implementing several ESG standards and regulations, including the CSRD and the EU Taxonomy. In November 2022, the EU Parliament approved to the CSRD and right after the EU Council gave the green light, requiring companies to provide more comprehensive and consistent sustainability reporting. The EU Taxonomy, on the other hand, aims to provide a classification system for sustainable economic activities, helping companies identify which activities are sustainable and which are not. These two regulations are important as they enable companies to demonstrate their commitment to sustainability and ESG, providing investors and stakeholders with the information they need to make informed decisions.
However, despite the importance of these regulations, many companies are not yet fully prepared to comply with them. In the early stages of the CSRD draft, the European Financial Reporting Advisory Group (EFRAG) revealed that only 2% of companies would meet the CSRD requirements if they were in place. This year, KMPG assessed 200 companies and it was found that most of them have reporting gaps against the CSRD. This lack of preparedness is concerning, as companies will need to allocate significant resources and time to prepare non-financial reports that meet the new standards.
The process of preparing non-financial reports that comply with ESG regulations is complex and time-consuming. Companies will need to assess their current ESG practices, identify any gaps, and develop a plan to address these gaps. They will also need to collect and analyze data to support their sustainability claims, which can be a challenging process. In addition, companies will need to communicate their sustainability performance to stakeholders, including investors, customers, and employees.
To support companies in navigating these complex ESG regulations, consultancy firms have ramped up their staffing in ESG and sustainability services. Many of these firms have also acquired or collaborated with sustainability service providers to expand their ESG capabilities. For example, early this month, Accenture entered in a collaboration agreement with Cervest, an AI-powered climate intelligence (CI) platform, to expand their access to historical, current and predictive climate risks. In parallel, ESG Solutions companies as Diligent, launched its own ESG Dashboard, combines performance data with market intelligence to give a comprehensive view of an organization’s ESG posture.
Hill+Knowlton Strategies acknowledges these regulatory trends and is committed to continue supporting its clients by adding an ESG Advisory service to strengthen its capabilities.