What now for CSRD implementation and corporate sustainability?

With the softening of CSRD, what’s next for sustainability disclosures? Does this mean a slowdown or reversal of efforts?  

Recent updates in the EU simplification package suggest a significant shift in the world's most comprehensive suite of sustainability regulations. To bolster European competitiveness and attract investment, these regulations may soon be softened.  

Some of the changes mean that CSRD will now be aimed at larger companies - those with over 1000 FTE and €50m net turnover, while non-EU company thresholds will also be increased from €150m to €450m. There will also be fewer mandatory disclosures. These measures are expected to be adopted after public feedback and a period of co-legislator reviews by the Council of Ministers and the European Parliament. Once final texts are approved, each member state will be required to incorporate the updated directives into their national laws.  

With double materiality assessments (DMA) remaining and the scrapping of sector-based disclosures, the good news is that companies will retain control over their disclosures, ensuring that they are both meaningful and helpful and can be supportive in embedding sustainability into their business strategy and governance processes.  

Our recommendations 

Speaking with our clients, the expected changes do bring some relief but have also raised questions: Should we pause or stop our process? Will we have to repeat our double materiality assessment?   

Our advice is that for now, those involved in the process should continue with implementation. And, unless there is a fundamental change in their business model, it is unlikely that material impacts, risks, and opportunities will change. Therefore, if there is a delay of two years, it should just be a case of updating stakeholder engagement. All of the companies we are working with agreed that they would continue with implementation, as they realize the benefits it is bringing.  

Rather than stopping implementation, companies can use this additional time productively. We recommend the following: 

1. Continue to raise awareness and embed systems across business functions to manage risks and opportunities effectively. 
2. Thoroughly explore opportunities and co-benefits across departments and use this information to disclose comprehensively on the benefits your company brings to the environment and society. 
3. Identify efficiencies that bring economic benefits, ensuring your company stands out against peers. This will enhance resilience, position your company to realize economic benefits, and ensure alignment with customer requirements.  
4. Conduct a trial run of disclosures to ensure preparedness and streamline processes, making it less resource-intensive when the actual deadline arrives. 
5. Explore broader disclosure requirements and implement systems to streamline internal processes. For example, by putting in place a climate risk framework, you can disclose comprehensively to CSRD, ISSB S2, California 261, CDP, EcoVadis and those countries that have taken up mandatory legacy-TCFD disclosures, like the UK.  

Companies that believe that CSRD is an administrative burden and a cost with no benefits will cease implementation and risk falling behind their competitors.  

The benefits of CSRD implementation 

During the past year, companies have come to realize the benefits of CSRD through increased awareness of sustainability at the board level. In fact, during recent DMA stakeholder engagement sessions, the benefits of decarbonization were shared by company CFOs and Operational Leaders through the following examples:  

1. Distribution & Logistics – sustainability can drive significant economic benefits through energy efficiency and behavioral changes such as: 
2. Fleet electrification – with fuel prices having increased by 30-40% across Europe due to factors like supply chain disruptions, rising energy costs, and geopolitical tensions, investing in fleet electrification can reduce fuel cost volatility. Additionally, electric vehicles can access urban areas with reduced taxes (e.g., congestion charges), further enhancing cost savings. 
3. Consolidating deliveries - encouraging customers to opt for consolidated or batch deliveries can lower both financial and carbon costs associated with distribution. 
4. Built Assets – sustainability can also help influence improvements in real estate assets. Temperatures exceeding 40 oC have become increasingly common across Europe, particularly in southern and central regions. For example, recent heat weaves in Italy, Greece, Spain, and Albania brought temperatures of up to 44oC. Lower carbon buildings bring economic benefits and resilience to these changes, such as: 
5. Lower energy costs achieved through LEDs, onsite renewables, and improved insulation and glazing 
6. Product quality resilience – well - insulated buildings experience fewer temperature fluctuations, reducing pressures on HVAC systems, protecting stock integrity, and providing better working conditions for employees  
7. Maximizing technology – efficient building management systems ensure that energy usage is optimized through automatic heating, cooling, and lighting settings 

These are just some of the benefits, with CSRD helping companies map and communicate the wider interrelated benefits to stakeholders, including:  

• Enhanced risk management – most companies still don’t include sustainability within their enterprise risk management (ERM) process. By going through the DMA process, it helps companies understand, identify, and manage sustainability risk and opportunities. They can then use this to integrate these issues into their ERM systems, ensuring executive oversight and better management and mitigation of impacts and opportunities on their operations and supply chains. For example, clients may have increasing fuel prices and geopolitical tensions listed in their ERM as risks. However, decarbonization and effective energy management can help companies ensure that they are resilient to increasing fuel prices. Trio has achieved multi-million cost savings for our clients through implementing effective global energy strategies and risk management.  
• Stakeholder engagement – going through a DMA process enables clients to think through a range of interrelated topics. As we work through this process with clients, we often see the “lightbulb” moments as companies realize how these interrelated issues and risks can be turned into business opportunities. For example, by requesting “low emission” products, our client was able to assess its cradle-to-gate carbon footprint, finding more efficient ways to manufacture and package its product. This resulted in reduced material costs, achieving both economic and sustainability savings, while also ensuring its product met the client’s sustainability requirements.  
• Departmental Learnings – the DMA process is also invaluable for sharing best practices across geographic regions. Many of our DMA processes have been global, and stakeholder engagement has enabled businesses to identify and communicate best practices globally across their operations.  

The takeaway 

While the CSRD may initially seem like an administrative burden, companies that have embraced the DMA process have experienced significant positive benefits. Our clients unanimously agree that they will not stop but will continue to refine and enhance their implementation processes. Moving forward, they plan to focus on ensuring that these processes are robust, taking the time to test, learn, and develop further. They recognize that this commitment to continuous improvement not only strengthens their sustainability efforts but also positions them for long-term success. 

Let’s talk about how your company can take this opportunity to assess its wider benefits and streamline its sustainability performance. Please reach out to Sustainability Director Emma Arnold at emma.arnold@trioadvisory.com.