Will the Corporate Sustainability Reporting Directive bring an end to greenwashing?

The CSRD, together with the Sustainable Finance Disclosure Regulation (SFDR) and the Taxonomy Regulation (Regulation 2020/852), are the core components of the requirements of the new EU sustainability reporting framework . The new rules require sustainability reporting and will apply to large companies as well as listed SMEs. For non-European companies, all companies that generate a net turnover of €150 million in the European Union (EU) and have at least one subsidiary or branch in the EU that exceeds certain thresholds must provide a sustainability report. The report must state their environmental, social and governance impacts, taking into account the Sustainable Development Goals (SDGs).

"The measures will be adopted in different tranches," explained Elena Palomeque Pozas, Policy Coordinator DG FISMA at the European Commission (EC), with the first steps to be taken as early as 2023. The CSRD was created to make the reporting areas "comparable in a systematic way, with the aim of making the information disclosed by companies comparable and reliable", she added, after explaining in detail all the dimensions of the new directive.

For the EC, financial markets need access to environmental, social and governance information that is reliable, relevant and comparable so that private capital can be channeled into financing the green and social transition. The measures presented seem to put an end to greenwashing, but some believe that it may even exacerbate the problem.

"This directive is about reporting. This is a means to an end, not an end, and can lead to more greenwashing in the sense that companies only need to focus on the little boxes they should tick," said Filipe Alfaiate, Associate Professor of Impact and Sustainability at Nova SBE, adding that the problem is that many companies continue to deny a central and strategic vision to the topic of sustainability. "On the other hand, if companies assume the directive as a tool for strategic redefinition, and not just as a checklist, it will be possible to make the directive an instrument that drives the way companies act in project and business management in their value chain."

Ana Catarina Rovisco, Head of ESG Relations - Environment at Jerónimo Martins, said she had a "positive outlook" on the CSRD, but warned that "this directive is just a small part among the things companies will have to do to prove they are sustainable".

Tiphaine Dureau, Equity Analyst at Nordea Asset Management, who was also part of the panel discussion, said that this is a positive step to understand the financial risk that companies may face if they do not bet on sustainability, because these measures will "make them more competitive in the long run."

The debate was moderated by Rita Rendeiro, Operating Partner at Maingreen Capital Partners and Co-Founder of Women in ESG. 

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Learn more about this theme in the article written by professor Filipe Alfaiate, published in Jornal de Negócios.