CSRD as an opportunity for growth in sustainability: our work with private and family-owned companies
May 7, 2024
Traditionally, private and family-owned businesses have been shielded from having to publicly disclose their sustainability performance. However, the introduction of the Corporate Sustainability Reporting Directive (CSRD) means that more private and family-owned businesses will be required to share detailed non-financial reporting. Far from being a compliance burden, the CSRD can and should encourage companies to leapfrog their sustainability agenda to tell their story and improve their performance.
By way of background, in December 2022, CSRD was adopted and entered into force in January 2023. The Directive strengthens the rules governing the social and environmental information that companies are required to report, expanding the number of companies that are required to report sustainability-related information and broadening the amount of information that companies must report.
The CSRD also requires a “double materiality” analysis, meaning that companies have to report on how sustainability issues might create financial risks for the company, as well as the company's own impacts on people and the environment. The CSRD applies to large EU companies, EU parents of a “large group,” and to listed EU small or medium-sized companies, as well as non-EU companies that have a certain threshold of EU-generated turnover and an EU branch or subsidiary. The specific information that will be subject to reporting is detailed in the European Sustainability Reporting Standards, or ESRS, the first set of which were adopted in June 30, 2023. First reports are due in a staggered timeline depending on the category of company.
A lot of our work in the last three years has been focused on helping privately-held and family-owned businesses understand and prepare for CSRD reporting. Many of our clients have never been subject to any public reporting requirements, and so this necessarily requires some education and preparation. We have found, however, that these businesses are committed to leveraging the process for internal and external growth in sustainability performance. Here are some of the key takeaways that we have learned along with our clients over the last three years:
Using the data collection process as an opportunity for assessment. Many of our clients have used the CSRD preparatory reporting process as a self-audit, helping identify areas for improvement and creating action plans to address them. This process not only benefits the company's sustainability performance but also demonstrates its commitment to internal and external stakeholders. Some of our missions on this front have included assisting companies in identifying KPIs and gaps in their existing processes and policy frameworks that can be remedied to help improve the data collection process.
Developing action plans to improve sustainability performance at all points in the value chain. The CSRD reporting requirements do not just focus on a company's direct impacts; they also look at the sustainability performance of its suppliers and partners. This encourages companies to engage with their supply chain, identify potential risks, and work together towards improving overall sustainability. Some of our missions in this respect have included organization of supplier workshops and trainings to improve coordination in procurement, packaging and logistics.
Creating sustainable and solidarity-driven projects that are complementary to the core activity of the business. With the focus on both financial and non-financial impacts, companies are encouraged to think creatively about how they can contribute to sustainable development. This can lead to new partnerships, innovative projects, and a strengthened reputation as a responsible business. Here, VIVACE has worked to identify and create projects with associations, foundations and charities that not only add value to solidarity stakeholders but also help to offset the environmental and operational impacts of our clients’ businesses.
Taking the opportunity to examine innovation and technological developments in sustainability in the relevant industry. The CSRD reporting process requires companies to provide an overview of their sustainability strategy and goals. This presents a chance for businesses to explore new technologies, processes, and innovations that can help improve their sustainability performance. In this sense, our research practice has been particularly active in exploring new technologies, processes, and innovations that can help improve their sustainability performance.
Leveraging the process as an opportunity for employee training and cross-function capacity-building. The CSRD reporting process involves data collection and analysis from various departments within a company. This provides an opportunity for interdepartmental collaboration and knowledge-sharing, as well as identifying potential gaps in employee training on sustainability practices. Here, we have worked to develop gamified training and capacity-building programs to promote sustainability knowledge and practices within our clients’ organizations.
Overall, the implementation of the CSRD presents a significant opportunity for private and family-owned businesses to strengthen their commitment to sustainability and showcase their progress to stakeholders. It has been a true pleasure to accompany our clients in this sustainability journey, and we are excited to see how this process helps the businesses evolve from both a commercial and human perspective.
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