"Despite criticism, the European sustainability directive is an essential tool"
- Géraldine Poivert, Founder and President of (RE)SET, a consulting firm specializing in environmental and economic transition, France 2030 Ambassador
Accused by business circles of harming corporate competitiveness, the European sustainability directive (CSRD) is reportedly under threat according to recent statements by Stéphane Séjourné. For Géraldine Poivert, however, it is the "compass" needed to set the course for the transition.
Yes, we should have started simpler, with fewer checkpoints and worked in stages. But that is no reason to throw the baby out with the bathwater. The sustainability report is a compass, a guiding tool, a GPS indicating the direction to follow. Ask the Vendée Globe skippers where they would be without these basic tools? Probably stuck in Antarctica, between two threatening icebergs, far from Les Sables-d'Olonne! Certainly not where you would want to be…
Account auditors are not malicious people, but they are probably not outraged enough... Because " the logic of the rebel is (…) to strive for clear language so as not to thicken the universal lie ," as Albert Camus explained!
And yet! The CSRD is not what you think... To clearly state what is well conceived, the CSRD is a sustainability report. A powerful tool, essential to any corporate strategy willing to look beyond its quarterly financial report. A quality compass, pointing to more than just north: the direction of a necessary and efficient sustainable transition! And there is no alternative, no matter how much it displeases the climate skeptics puffing out their chests these days. Because the facts are stubborn.
A diagnostic of the company's vulnerabilities
Los Angeles is burning. Copper prices are soaring, coffee prices too, an orange shortage looms, pollution from microplastics, chemical fertilizers, and other "forever chemicals" is spreading, water is becoming scarce, the unravelling of the "Green Deal" threatens—in short, everything is piling up in an attempt to make us forget the inevitability of the resource revolution! The truth is we must tackle it head-on.
So let's forget the acronyms for a moment. This new sustainability report provides a diagnostic of the company. Across 10 standards, including 5 environmental ones (climate change, pollution, water and marine resources, biodiversity and ecosystems, resources and circular economy), with the others covering social and governance aspects. So, we find the famous ESG themes. For these 10 themes, data is collected, and impacts are measured. The impact on me and on nature. The impact of nature on me. To do this, stakeholders are consulted. Then, we build our "double materiality matrix." Oops!
Auditors and other auditors are serious and precise people; they love concepts—we can't blame them, it's their job. So, the CSRD is based on"double materiality matrix analysis". It sounds a bit intimidating. Yet, it's simple, concrete, and essential. What is the company's impact on its environment, employees, and governance? That's the first materiality. And what are the financial impacts of these factors on the company itself? That's the second materiality.
A simple example: the fishing sector. Fishermen... fish. Therefore, they have an impact on marine biodiversity: there are fewer fish. And this lack of fish means they risk catching less in the future, which will affect their financial revenues. Simple as that. So, overfishing must be avoided if one intends to maintain their activity and make it sustainable: in this case, it's not a groundbreaking discovery. It is this simple principle, known as "double materiality," that guides the entire CSRD.
An obligation to disclose, not an obligation to act
The sustainability report is not an obligation to act, it is an obligation to disclose. But by "disclosing" publicly, you inevitably commit, to some extent, to taking action. That is the virtuous impact of transparency. Because everyone—investors, financiers, or others—can draw their own conclusions from the report, with consequences in terms of borrowing capacity, willingness to support new projects…
A piece of advice to follow: prioritize collective action to cover half, perhaps the most strategic part, of the journey. To mitigate the sometimes tedious nature of the task (identifying all IRIs – impact, risk, opportunity –, collecting data, double materiality matrix), and arrive at concrete diagnostics, companies would benefit from grouping together by sector. They are allowed to do so.
