In-House Counsel

What General Counsels Need To Know About EU Corporate Sustainability Reporting

If you are not already involved in your company’s sustainability reporting process, you will need to jump into the fray with both feet. 

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lawyers leaving court walking out of courthouse after trialRemember how transformative GDPR was for corporations around the globe with respect to privacy? Well, get ready for corporate sustainability reporting to follow the same trajectory.

Last week, the EU took another step toward full adoption of the Corporate Sustainability Reporting Directive (CSRD).

The CSRD will require nearly 50,000 companies to provide public reporting on sustainability performance metrics including climate change, biodiversity, human rights, working conditions, and diversity among many others. It is estimated that over 10,000 of the impacted companies will be foreign-owned. Reporting requirements are determined according to thresholds related to EU revenues and presence. Data must be verified by a third party.

The timeline for implementation of the CSRD is much shorter than companies experienced with GDPR. Companies that meet the reporting thresholds will be required to report their 2024 sustainability data by early 2025. Smaller and medium-sized entities will have until January 2026.

Also, it’s important to keep in mind the spiderweb effect of regulations like this. Companies that do business with EU companies will be required to provide data that enables their clients’ supply chain reporting under the CSRD. And as these reporting standards are implemented by larger companies, investors, consumers, and employees will demand data that enables comparisons between companies subject to the regulations and those outside the scope.

In short, the CSRD is poised to define the standard for corporate sustainability disclosure.

What Does This Mean For General Counsels?

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Now is the time to start preparing your company to make accurate and timely sustainability disclosures. If you are not already involved in your company’s sustainability reporting process, you will need to jump into the fray with both feet.

Here are a few practical tips to get you started:

  • Do your homework. Read everything your company is currently sharing about its sustainability practices. This includes statements on your website, internal communications, and sales materials. Look for inconsistencies. Investigate the source of the data. Determine whether there are adequate controls to ensure that the data your company shares on sustainability internally and externally is consistent and accurate.
  • Identify your experts. You will need external help to undertake CSRD reporting. It will likely require a combination of outside legal counsel, accountants, and consultants. Start identifying these experts.
  • Training. Unfortunately, I have seen very few trainings on CSRD for the legal community so far. Fingers crossed that law firms ramp up on this subject this summer. Regardless, you will need to plan training on the legal requirements for your board and executive teams.
  • Team. Identify the team that will be responsible for CSRD reporting. You will need an executive leader and cross-functional representatives who touch on the various topics. These representatives should include members of the legal, operations, finance, human resources, information technology, and communications teams among others.
  • Data collection. The hardest part is likely to be collecting the data that your company will be required to report. You will need to create new systems for collecting and centralizing this data — requiring both subject matter experts and technology support.
  • Alignment. As your CSRD report starts to take shape, circle back to your company’s current statements on sustainability. Ensuring consistency across platforms is critical to avoiding allegations of greenwashing, litigation, and regulatory investigations. Pay particular attention to consistency between CSRD disclosures and other legally required disclosures such as those proposed by the SEC.

CSRD reporting will require an investment of time and company resources. It’s important to keep in mind the benefits of sustainability reporting beyond regulatory climate.

Companies that are transparent about their social and environmental impact more easily build trust and credibility with stakeholders, improve their reputation, and enhance their brand value. By providing stakeholders with information about sustainability initiatives, companies can also foster more meaningful engagement with employees, investors, and customers.

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Moreover, by monitoring and measuring their social and environmental impact, companies can identify opportunities to reduce waste, increase efficiency, and improve their operations. As general counsel, you are in an ideal position to help your company secure the upside of implementing rigorous sustainability disclosure processes.

Christine_UriChristine Uri is the Chief Legal and Sustainability Officer at ENGIE Impact – a company that enables global corporations to accelerate their net-zero carbon journey. Christine began her career as a business attorney 20 years ago, providing legal counsel to businesses ranging from local start-ups to international Fortune 500s. She is a general counsel, sustainability leader, public speaker, and content creator. Christine believes that improving corporate performance on ESG measures is critical to building a more sustainable world. She is passionate about inspiring and empowering in-house legal teams to provide ESG leadership. You can follow Christine on LinkedIn. This article reflects Christine’s personal opinions and not the opinions of her employer.

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