We confirm: the CSRD misses the mark

Over the coming years, other companies will also be included. In 2026, large companies with a turnover exceeding 50 million will be required to report on the year 2025. A year later, another group of companies will follow. Across Europe, this is estimated to involve a total of 50,000 companies.

The aim of this directive was to accelerate the transition to sustainability in Europe. However, a number of politicians are now seeing what we, as sustainability experts, experience every day: the CSRD is missing the mark.

There are three reasons for this. Firstly, the CSRD is a complex process if you want to tackle it yourself. A company must determine which of the 1,250 (!) data points in the directive apply to its operations. For an average company, that amounts to around 400. It means you have to collect a vast amount of data in record time to substantiate where you stand and the progress you are making.

Consequently – and this is the second reason – the costs are very high. In a study at the end of last year, GraydonCreditSafe cited an average investment of 3 to 5% of annual turnover for Belgian companies to meet the minimum requirements prescribed by the CSRD. That amounts to a total of over 38 billion. The business data providers added that many SMEs simply do not have that money.

That 38 billion, of course, does not cover just the costs of reporting, but those costs are also particularly high. For a company, this amounts to an average of 250,000 to 500,000 euros for drawing up a sustainability strategy, selecting data points and preparing a sustainability report, combined with the audit. Money that cannot be invested in sustainability initiatives.

Added to this – and this brings me to the third reason – is the fact that the auditors who have to approve these reports do not yet have any points of comparison and still need to build up their experience in sustainability. They are venturing into uncharted territory. The result? There are significant differences in the depth of the audit and the associated costs.

So should the CSRD be scrapped? Absolutely not; the idea behind it is very good: ensuring the necessary transparency regarding sustainability efforts and providing a framework for benchmarking.

It simply needs to be simpler and more pragmatic. That starts with fewer data points. The reporting consists of 10 thematic standards (think of climate change, the circular economy and biodiversity, but also social themes such as own staff and employees in the value chain). Let’s define a maximum of 10 to 20 data points per standard, which are important for (just about) every company, and give companies time to mature. That way, we get to the heart of the matter.

In addition, monitoring should also be less rigorous. I am certainly not advocating laxity when it comes to sustainability, as that leads to greenwashing, but we must also give companies some leeway. And it does not help if incorrect reporting is punishable by fines of up to 5% of turnover (as in Germany) or prison sentences (as in France).

Finally, there is no point in auditing the reporting annually. Sustainability programmes and the implementation of projects span several years and are, by definition, long-term in nature. By conducting an audit over a period of two or three years, costs can be significantly reduced.

These measures ensure that the costs of mandatory reporting are reduced. The freed-up budget can then be invested in sustainability projects, making companies stronger and more efficient. It’s all about the right order: first become more sustainable, then report. Unfortunately, it currently seems to be the other way round.

Incidentally… we have been helping companies become more sustainable for 23 years – we haven’t needed compliance for that. We have proven time and again that investing in environmental and social projects is not a cost, but a return on investment. It boosts companies’ profitability, enabling them to reinvest in sustainable projects. This creates an upward spiral of sustainable growth, in which economic progress and social impact reinforce one another.

That seems to be at risk with the current approach to CSRD… Sustainability and profitability go hand in hand – as long as you get the order right.