Revista Centroamericana de Administración Pública (87) Julio / Diciembre 2024  
Corporate Sustainability Reporting  
Directive (CSRD)  
A guide for reporting on  
sustainability in the EU market  
Directiva sobre Informes de Sostenibilidad  
Empresarial (CSRD)  
Guía para informar sobre sostenibilidad en el  
mercado de la UE  
Recibido: 12 de julio del 2024 Aceptado: 15 de noviembre del 2024 DOI: 10.35485/rcap87_9  
Ernani Contipelli1  
Abstract  
This article explores important concepts for understanding how companies will report on sustainability in  
the EU market under the CSRD. The first part of the article discusses sustainability and its connection to  
the Sustainable Development Goals (SDGs) and business, introducing the concept of the triple bottom  
line. It also presents a roadmap for sustainability, using the SDG Compass as a practical tool to emphasize  
the importance of reporting and communication in aligning business operations with sustainability.  
Keywords: SUSTAINABILITY, SDG, EUROPEAN SUSTAINABILITY REPORTING, EUROPEAN  
Resumen  
Este artículo explora conceptos importantes para comprender cómo las empresas informarán sobre  
la sostenibilidad en el mercado de la UE en el marco de la CSRD. En la primera parte del artículo se  
analiza la sostenibilidad y su conexión con los Objetivos de Desarrollo Sostenible (ODS) y los negocios,  
introduciendo el concepto de triple resultado. También presenta una hoja de ruta para la sostenibilidad,  
utilizando la Brújula de los ODS como una herramienta práctica para enfatizar la importancia de la  
presentacióndeinformesylacomunicaciónparaalinearlasoperacionescomercialesconlasostenibilidad.  
Palabras clave: SOSTENIBILIDAD, SDG, INFORMES EUROPEOS DE SOSTENIBILIDAD, EUROPA  
Como citar:  
Contipelli, E. (2024). Corporate Sustainability Reporting Directive (CSRD) A Guide for Reporting on Sustainability in the EU Market. Revista  
Centroamericana de Administración Pública, (87), 181 - 197. DOI: 10.35485/rcap87_9  
1
Webster University - Campus Leiden, Leiden, Netherlands, the Central American Institute of Public Administration, United International Business Schools (UIBS), and Editor-in-Chief at Connections  
for Sustainability Journal. He holds two post-doctorate degrees in Comparative Politics and a Ph.D. in Public Law. He has experience in the academic field in different countries and various  
publications on his research areas of interest: Sustainability and International Cooperation. Email: ernanicontipelli@gmail.com  
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Introducción  
The European Union is developing new regulations as part of the EU Green Deal to guide businesses  
towards sustainability and improved compliance. One key regulation is the Corporate Sustainability  
Reporting Directive (CSRD), which aims to increase transparency and hold companies accountable  
for their sustainability practices, providing stakeholders with information on their approach to  
sustainability issues, including environmental, social, and governance (ESG) factors and double  
materiality.  
This article explores important concepts for understanding how companies will report on  
sustainability in the EU market under the CSRD. The first part of the article discusses sustainability  
and its connection to the Sustainable Development Goals (SDGs) and business, introducing the  
concept of the triple bottom line. It also presents a roadmap for sustainability, using the SDG  
Compass as a practical tool to emphasize the importance of reporting and communication in  
aligning business operations with sustainability.  
The article then delves into key ideas related to sustainability reporting, focusing on ESG  
factors, double materiality assessment, impact measurement, and greenwashing. It concludes by  
analyzing the most important elements of the CSRD and the European Sustainability Reporting  
Standards (ESRS).  
2. The Problem of Sustainability.  
Sustainable development is linked to how we manage and replenish our natural resources under  
a growth-based scenario to comprehensively improve the quality of life. According to Pearce and  
Turner, sustainable development “involves maximizing the net benefits of economic development,  
subject to maintaining the services and quality of natural resources over time”. Thus, it aims  
to balance the goals of economic prosperity and attend to environmental and social concerns  
harmoniously to enhance the intergenerational well-being2 .  
It is essential to consider that everything we produce to meet our needs relies on our natural  
systems. Therefore, prosperity is not something given. Instead, it depends on human interactions  
with the environment that represent how we extract the goods and provide the services we need  
to keep running the “unlimited wants” of our society3 .  
Hence, instead of emphasizing short-term gains, our economic system should point out  
long-term sustainable growth strategies to ensure a better quality of life for people, inserting  
“sustainable development” as a critical concept in development studies and political practices.  
According to this early idea of sustainable development, neglecting the environment can threaten  
global ecosystems and humanity4.  
2
WORLD BANK. (2003) World Development Report 2003: Sustainable Development in a Dynamic World--Transforming Institutions, Growth, and Quality of Life.Available at: http://hdl.handle.  
net/10986/5985.  
3
4
MEADOWS, D. H. et al. The Limits to Growth: A Report for the Club of Rome’s Project on the Predicament of Mankind. New York: Universe Books, 1972.  
CHESHIRE, D. (2021) The Handbook to Building a Circular Economy.RIBA publishing. In 1972, the Rome Club published the report “Limits of Growth” a pioneering document to awaken ecological  
consciousness about the use of natural resources and environmental degradation with a clear message that still holds today: “Man can create a society in which he can live indefinitely on earth  
if he imposes limits on himself and his production of material goods to achieve a state of global equilibrium with population and production in carefully selected balance”.  
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Currently, the SDGs accomplishes the mission to establish a global agenda on social and  
human development to take the bold and transformative steps urgently needed to shift the world  
onto a sustainable and resilient path.  
In other words, the SDGs represent the core of the holistic planetary agenda for economic  
growth, social inclusion, and environmental protection, orientating all global, regional, national,  
and local development endeavors until 2030.  
3. Business and The Sustainable Development Goals (SDGs)  
The SDGs comprehend 17 interconnected global goals elaborated to be a “blueprint for achieving  
a better and more sustainable future for all”. These 17 people-centered goals are integrated,  
stressing that everything depends on everything and balancing sustainable development’s  
environmental, economic, and social dimensions.  
At this moment, there are 169 targets, each of them with between 01 and 03 indicators  
comprising 232 approved indicators to measure the progress in the achievement of the SDGs.  
As a comprehensive societal process, the SDGs involves the interaction of multiple actors to  
cover all aspects of social life, providing an efficient method to combine the desire for environmental  
protection with the need for continued material and economic prosperity5 .  
Figure 1.  
Sustainable Development Goals.  
Note. United Nations.  
5
MOFFATT, I. (1996). Sustainable Development: Principles, Analysis and Policies. Parthenon: London.  
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The SDGs are considered a universal program pursued and applied to all countries around the  
world, not only poor countries. Achieving the goals requires efforts on all fronts: governments,  
businesses, civil society, and individuals everywhere all have an important role to play.  
Business can be an essential partner in progressing on the SDGs by integrating them in their core  
activities and operational decisions to pursue not only profits but also social and environmental  
impact.  
The broad reach of activities and multiple relationships developed by companies throughout  
their supply chains have a significant environmental, economic, and societal footprint. These  
different levels of impact represent an opportunity for companies to mitigate negative impacts and  
promote sustainable actions.  
In this sense, companies should commit to focusing on three different bottom lines: profits,  
people, and the planet to accomplish good results on their performance by achieving positive  
financial impact and incorporating environmentally and socially responsible behaviors6.  
Undoubtedly, business action is a key driver for progress on the SDGs. This mutual need is  
underscored by the fact that companies cannot thrive in failed societies, and enduring success is  
contingent on achieving the SDGs. It’s a shared responsibility and an opportunity for all.  
The importance of environmental and social responsibility in all organizations’ futures is  
becoming increasingly inevitable. Integrating SDGs at the core operations to assess their impact  
and communicate transparently the results is not just a choice, but a necessity for companies that  
aim to ensure an enduring license to perform through 2030 and beyond.  
For companies, the SDGs are not just a legal matter to comply with the regulations. They  
are a strategic tool to unlock market opportunities and manage emerging risks. They position  
companies to perform their core operations and interact with multiple stakeholders, empowering  
them to shape their future.  
Therefore, the work and scaling up on integrating the SDGs through business solutions in  
every part of the organization is not just imperative, but also urgent. This is a task of significant  
importance, as it will help companies face challenges and build a resilient and responsible growth  
strategy.  
There is an evident tendency and incentive for companies to engage in sustainability. However,  
the key to progress lies in developing business strategies that can convert the SDGs into tangible  
actions. This gap affects the measurement and communication of how companies are progressing  
in meeting the SDGs.  
As a result, key stakeholders such as investors, consumers, and employees are unable to see  
the significant role that the SDGs play in enhancing overall business performance and ensuring  
its long-term sustainability.  
4. Roadmap for SDG Integration  
6
GIMENEZ, C. SIERRA, V. & RODON, J. (2012) Sustainable Operations: Their Impact on the Triple Bottom Line, International Journal of Production Economics, vol. 140, issue 1, 149-159.  
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How could companies align their strategies and manage and measure their contribution to  
the SDGs? According to the SDG Compass, five steps assist companies in maximizing their  
contribution to the SDGs and aligning their course to ensure that sustainability is an outcome of  
core business strategy .  
Figure 2.  
SDGs Compass.  
Note. Steps of SDGs.  
4.1. Understanding the SDGs  
Understanding the SDGs is the cornerstone of this process. The company’s grasp of the SDGs,  
especially their complexity and interconnections, is crucial. It uncovers the most potential  
opportunities for its operations and increases business value.  
4.2. Defining Priorities  
Defining priorities is a key step. The company must conduct a high-level scan of its social and  
environmental impacts, establishing the interconnections with the SDGs across each stage of its  
value chains. This guides the focus of its sustainability efforts.  
4.3. Setting Goals  
Setting goals is a pivotal moment. It is the right time to establish the company’s baseline and set  
the ambition concerning the integration of the SDGs. This defines the path to making the right  
decisions without reputational implications. It is also a chance for the company to announce its  
commitment to the SDGs, building a positive interaction with multiple stakeholders.  
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4.4. Integrating  
Step four is dedicated to engaging all company sectors in the SDGs to transform its operations  
effectively. The company must bring together the different departments and employees to establish  
an appropriate ambiance to construct a real business case for the SDGs.  
These interactions count with the participation of the company’s leadership, which plays a  
crucial role in inspiring the other employees to share the objectives and embrace the cause.  
Their leadership will be instrumental in the successful integration of the SDGs into the company’s  
operations.  
4.5. Reporting and communicating.  
A company can generate business value by promoting sustainable impact only if it communicates  
effectively. The SDGs provide a common language for reporting sustainability performance  
and monitoring progress. This makes it easier for the company to demonstrate its unwavering  
commitment to compliance and its contribution to the well-being of society and the planet.  
This transparency is crucial for showing investors and consumers that the company is part of  
a global effort to meet regulations and secure a sustainable future and that its ethical standards  
are uncompromising7.  
5. Reporting on Sustainability  
Sustainability reports serve as a crucial conduit of transparent communication between companies  
and their diverse stakeholders. They play a pivotal role in disclosing a company’s performance  
and its impacts on various sustainability-related topics, thereby fostering trust and accountability.  
Kaptein and Van Tulder affirmed that transparency provides information to stakeholders, giving  
them proper insight into the issues that are relevant to them8. Therefore, regarding sustainability  
reports, companies are expected to provide explicit information on their performance across  
the triple bottom line, which includes the social, environmental, and economic aspects of their  
operations.  
Transparent and relevant reporting on sustainability is essential for communicating to  
stakeholders how companies deliver the SDGs in their business operations and the risks and  
opportunities they present.  
Consumers, employees, investors, civil society, government, and the media are increasingly  
interested in how companies perform in resolving social issues, reversing environmental  
degradation, and stemming unethical practices in their supply chains.  
Furthermore, the transparent information provided through sustainability reporting holds the  
potential to create shared value for both companies and communities. This can be achieved by  
promoting individual and social lifestyles, educating consumers about environmental protection,  
and fostering a deeper understanding of their interaction with nature.  
7
For instance, the SDG target 12.6 calls on governments everywhere to ‘encourage companies, especially large and trans-national companies, to adopt sustainable practices and to integrate  
sustainability information into their reporting cycle.’  
8
KAPTEIN, M. and VAN TULDER, R. (2003) Toward Effective Stakeholder Dialogue, Business and Society Review, 108:2, 203-224.  
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Initially, sustainability reporting was perceived as a trust-building catalyst, aimed at enhancing the  
company’s reputation. However, it has now evolved into a strategic tool, providing a comprehensive  
view of sustainability decision-making processes. This evolution keeps the audience informed and  
up-to-date, fostering a sense of being part of a progressive movement.  
In addition to formal reports, companies are increasingly using a variety of channels to  
communicate sustainability strategy performance. Corporate websites, social media channels,  
events, product and service labeling, market, and advertising are a few of the many effective ways  
to communicate with stakeholders on sustainability.  
When companies embark on sustainability reporting, it is crucial to address three key  
considerations. These include measuring the real impact, ensuring the information is reliable  
and not mere ‘greenwashing’ (misleading environmental claims), and adopting proper standards  
for sustainability reporting. This approach ensures credibility and comparability of sustainability  
performance across companies and industries.  
5.1. Sustainability Standards and Certifications.  
The uses of certified sustainability standards, such as organic or fair-trade labels, are categorized  
as non-state, market-driven governance approaches that aim to improve the economic,  
environmental, and social sustainability of production9. These standards empower businesses to  
produce goods and services under sustainable, environmental, and social conditions.  
The United Nations Forum on Sustainability Standards (UNFSS), conceptualize them as  
‘‘specifying requirements that producers, traders, manufacturers, retailers or service providers  
may be asked to meet, relating to a wide range of sustainability metrics, including respect for  
basic human rights, worker health and safety, the environmental impacts of production, community  
relations, land use planning and others’’10.  
The sustainability standards are a key governance instrument, serving as a roadmap to facilitate  
the transition to a green economy11 and to guide the integration of sustainability into business  
operations, instilling a sense of capability and responsibility.  
Since consumers and other stakeholders cannot observe or experience the production  
conditions directly, sustainability standards play a crucial role. They act as a bridge, illuminating  
the gap with transparency and trust and thereby ensuring that the production conditions align  
with the consumers’ perceived values.  
Sustainability standards and certifications, as voluntary third-party-assessed guidelines,  
offer producers, manufacturers, traders, retailers, and service providers a unique opportunity to  
showcase their dedication to sound environmental, social, and ethical practices. This enhances  
their reputation, and fosters trust among consumers and stakeholders.  
These standards require performance in areas such as management effectiveness, branding,  
9
CASHORE, B., AULD, G. and NEWSOM, D. (2004). Governing through markets: Forest certification and the emergence of non-state authority. state authority. In Governing Through Markets:  
Forest Certification and the Emergence of Non-State Authority  
10  
11  
UNFSS (2013). 1st Flagship Report of the United Nations Forum on Sustainability Standards (UNFSS). Available at: https://unfss. org/home/flagship-publication/  
MARX, A and WOUTERS, J. (2015). Is everybody on board? Voluntary sustainability standards and green restructuring. Development (Basingstoke). https://doi.org/10.1057/s41301-016-  
0051-z  
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product quality, attributes, production and processing methods, and sustainable supply chains.  
They are not just about individual businesses. They emphasize capacity building and collaboration,  
working with partners and other organizations to support smallholders or disadvantaged producers  
in making the social and environmental improvements needed to meet the standard. This  
collaborative approach makes the audience feel part of a more significant, impactful movement.  
Typically, sustainability standards are accompanied by a verification process known as  
certification. This process evaluates whether an enterprise complies with a standard and provides  
a traceability process for certified products. This traceability assures consumers of the product’s  
sustainability and enhances their preference for such products.  
Every sustainable standard has assessment factors to help companies measure their social,  
environmental, and governance performance (ESG factors). Some are specialized in one sector,  
some in many. Mapping the different global frameworks that contribute to companies reporting  
different aspects of their social and environmental impact, it is possible to enumerate the following  
standards:  
•Global Reporting Initiative (GRI) - considering a wide range of activities and stakeholders, this  
standard helps companies to report triple bottom line factors.  
•Carbon Disclosure Project (CDP) - aims to describe environmental performance data related to  
GHG emissions, water, forests, and supply chain.  
•International Integrated Reporting Council (IIRC) - defines guiding principles and content elements  
for companies to produce “integrated reports”.  
•Task Force on Climate-Related Financial Disclosures (TCFD) - incentives companies to align  
climate-related risk disclosures with investors’ needs.  
Each sustainable standard is uniquely designed, with specific assessment factors tailored to  
help companies measure their social, environmental, and governance performance (ESG factors).  
These standards cater to a wide range of industries, from specialized sectors to those with  
broader scopes.  
Today, the world of sustainability offers a plethora of opportunities, with hundreds of standards  
and certification schemes for various products. These schemes span diverse sectors, from  
agricultural products to garment manufacturing and office buildings, providing a wide range of  
avenues for companies to demonstrate their commitment to sustainability.  
The prevalence of eco-labels in consumer goods today is a testament to the growing consumer  
demand for sustainable products. With over 400 such standards and certifications existing  
worldwide, it’s clear that sustainability has become a key consideration for consumers, further  
emphasizing the importance of these certifications.  
Selecting a sustainability standard demands the right chemistry between a company’s  
operations, risks, future financial performances, and reporting and communication to demonstrate  
trust and transparency for different stakeholders. To do this task properly, it is relevant to enter  
some critical concepts used mainly by these standards to make the right choice and unlock a  
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company’s potential impact.  
5.1.1. Reporting through ESG Factors and Double Materiality Assessment.  
As companies worldwide increasingly embrace sustainability reporting, several standards have  
emerged that enable a wide range of stakeholders to assess and compare sustainability reports  
more effectively.  
Some common concepts found in these standards, such as the Global Reporting Initiative or the  
Corporate Sustainability Reporting Directive, include ESG factors and double materiality. These  
concepts are not only relevant, but also crucial for understanding how to report appropriately in  
the modern business landscape. They are widely used to verify the integration of sustainability  
criteria in business operations and to evaluate risk and future performance.  
First, ESG (Environmental, Social, and Governance) factors are closely linked to the triple bottom  
line approach, which considers the impact of businesses on people, the planet, and profits (see  
item 2)12. These factors assess the value generated by companies through sustainability efforts  
integrated into their business models13.  
•Environmental factors are critical for the functioning of natural systems and include aspects  
such as climate change, greenhouse gas emissions, energy and water consumption, waste and  
pollution, and environmental degradation.  
•Social factors address important issues like human rights violations, poor working conditions,  
and illegal labor practices, emphasizing the need for empathy and action in building a sustainable  
future.  
•Governance factors focus on companies’ management processes, encompassing their structure,  
control, and transparency. It’s important to recognize that various stakeholders throughout the  
supply chain play a significant role in influencing these factors and ensuring corporate accountability.  
Investors are increasingly integrating these non-financial factors into their analysis processes.  
By doing so, they can identify material risks and uncover potential growth opportunities for  
future investments14. This ESG-rooted approach is enhancing investment strategies and instilling  
optimism in sustainable investing, demonstrating that financial success and sustainability can be  
aligned.  
After analyzing the concept of ESG factors, it is essential to consider the idea of a double  
materiality assessment when reporting sustainability. This comprehensive evaluation considers  
12  
Considering the triple bottom line approach, the ESG factors can be understood as a company’s obligation to improve social welfare; and equitable, and sustainable long-term wealth for  
stakeholders (MOHAMMAD, W. M.W., WASIUZZAMAN, S., 2021. Environmental, Social and Governance (ESG) disclosure, competitive advantage, and performance of Firms in Malaysia. Clean.  
Environment System, volume 02).  
13  
14  
GILLAN, S. L., KOCH, A., STARKS, L.T. (2021) Firms and Social Responsibility: A Review of ESG and CSR Research in Corporate Finance. Journal of Corporate Finance, 66  
According to PARIKH, A. et al. (2023), there are two reasons for investors today attach great importance to ESG factors. First, through ESG investing, ethical investments practices are actively  
promoted. Second, ESG investing enhances the performance of a managed portfolio, thereby increasing returns while reducing portfolio risk (The Impact of Environmental, Social and Governance  
Score on Shareholder Wealth: A New Dimension in Investment Philosophy. In: Clear and Responsible Consumption, vol. 08).  
15  
According to the European Financial Reporting Advisory Group (EFRAG), double-materiality involves: identifying sustainability matters that are material in terms of the impacts of the reporting  
entity’s own operations and its value chains (impact materiality), based on: (i) the severity (scale, scope and remediability), and when appropriate, likelihood of actual and potential negative  
impacts on people and the environment, (ii) the scale, scope and likelihood of actual and positive impacts on people and the environment connected with companies’ operations and value chains;  
(iii) the urgency derived from social or environmental public policy goals and planetary boundaries (EFRAG, 2021, p. 08).  
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both the internal financial impacts on the company (financial materiality) and the external effects  
on stakeholders and the broader environment (stakeholder materiality)15.  
Financial materiality assesses how ESG factors, such as revenue streams, cost structures, and  
long-term financial health and viability, influence a company’s financial performance.  
Stakeholder materiality considers the impact of a company’s operations, products, and services  
on external stakeholders and broader societal issues, such as the environment, society in general,  
and local communities.  
It is relevant to understand that stakeholders are crucial in identifying non-financial risks and  
opportunities for organizations. The transparency gained by involving a range of stakeholders and  
enhancing their collaboration in decision-making processes leads to solid operations and builds  
trust in businesses.  
The first step is to establish the company’s objectives, including the relevant ESG factors that  
are impacted by its operations and the identification of critical internal and external stakeholders.  
After this, it is time to enumerate and classify the ESG factors based on their relevance to the  
company’s operation and business model and stakeholders’ expectations.  
The next step corresponds to respective assessments: a) an internal financial materiality  
assessment using metrics and models to consider potential risks and opportunities related to  
ESG factors and b) an external stakeholder materiality assessment by interacting through surveys,  
interviews, and consultations to comprehend their perspectives and expectations.  
The feedback of these assessments is relevant to prioritizing the classification of the sustainability  
factors by identifying commonalities and differences. It elaborates a materiality matrix that provides  
a better view of the priorities and establishes a classification as high, medium, or low materiality  
according to their impact on financial and stakeholder concerns.  
This logical sequence better integrates ESG factors into the company’s operation, facilitating  
the elaboration of sustainability reports and clearly communicating the materiality issues that  
affect internal and external stakeholders.  
The guidelines outlined by sustainability standards help evaluate ESG (Environmental, Social,  
and Governance) factors and their financial effects. They establish a consistent and safe  
framework that can be adopted throughout a company’s value chain to promote cooperation and  
sustainability. Additionally, these guidelines offer metrics for tracking, assessing, and enhancing  
progress on ESG factors alongside the company’s financial performance.  
5.2. Measuring Impact.  
The sustainable impact measurement is the process by which an organization provides evidence  
that its services provide factual and tangible benefits to people or the environment16. Impact  
measurement demonstrates the benefits the company generates through evidence of sustainable  
16  
STEVENSON, N., TAYLOR, M., LYON, F. and RIGBY, M. (2010). Social Impact Measurement (SIM) experiencing and future Directions for the third sector organisations in the east of England.  
Bradford Social Enterprise East of England.  
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outcomes/impacts.  
One needs to regularly assess the results and outcomes of successfully integrating sustainability  
factors through monitoring and evaluation of the internal and external impact developed through  
the venture.  
Recording or documentation will further help develop efficient strategies and plans for  
advancement and improvement. This will also help identify what additional resources and support  
systems are required to make the venture more successful and effective.  
An example of impact measurement is whether the venture has resulted in employment  
development. If yes, how many people have benefitted from it? Has there been any change in the  
standard of living of the people in the community? Has it been able to increase and develop social  
and economic resources in the community?  
This information needs to be recorded, firstly, for future comparison of the measuring process  
and to make the consumers aware of the mission’s achievements and how it has impacted  
bringing about positive, sustainable change.  
5.3. Greenwashing.  
Sustainability standards have the potential to bring benefits, but they may also face challenges.  
For example, some adopters may pretend to pursue noble objectives to gain advantages and  
make false or unsupported environmental claims, a practice known as “greenwashing.”  
Greenwashing is a deceptive practice where organizations make false, misleading, or untrue  
claims about their company, product, or service’s positive impact on the environment. In other  
words, it refers to the act of elaborating unsubstantiated claim to deceive consumers into believing  
that a company’s products are environmentally friendly or have a greater positive environmental  
impact than they do17.  
The European Union is cracking down on greenwashing by introducing the Green Claims Directive.  
This measure aims to eliminate unreliable and confusing green marketing from the European  
market. The directive sets clear guidelines for companies to substantiate and communicate their  
environmental credentials.  
With consumers increasingly concerned about the environmental impact of their purchases,  
around 75% of products in the EU market make some form of green claim. However, over half  
of these claims are vague, misleading, or unsubstantiated. Additionally, almost half of the 230  
ecolabels available in the EU need more verification procedures .  
The EU’s proposal establishes minimum rules for companies to support their claims. This  
includes prohibiting the use of any product rating system that is not based on EU common rules.  
The proposal also outlines minimum transparency requirements for sustainability labels. These  
labels must be verified by an independent third party, such as the EU Ecolabel. This verification  
17  
HAYES, A. (2024) What Is Greenwashing? How It Works, Examples, and Statistics. Investopedia, Available at: https://www.investopedia.com/terms/g/greenwashing.asp  
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process involves a comprehensive review of the product’s environmental impact, from its raw  
materials to its disposal, ensuring that the claims are accurate and not misleading.  
Moreover, the directive creates a registry of trusted ecolabels, which will assist consumers in  
identifying reliable and credible green products.  
In addition, companies will be obliged to provide independent supporting evidence alongside  
their green claims, and market surveillance authorities will have to enforce this provision with  
regular checks and severe penalties in case of infringement.  
One well-known instance of greenwashing involved H&M18. In 2022, H&M faced accusations of  
“greenwashing” — meaning they were making false or misleading claims about their sustainability  
efforts, mainly through the use (or misuse) of the Higg Index, which is H&M’s sustainability  
certification system.  
The Higg Index is a tool designed to assess a product’s environmental impact throughout its  
lifecycle, from design to disposal. However, H&M’s self-reported Higg Index scores were often  
inaccurate or inflated, and the company was not fully transparent about its environmental impact.  
In response to the accusations of greenwashing, H&M has made a strong commitment. The  
company has pledged to intensify its efforts and become fully transparent about its environmental  
impact. This includes publishing a list of suppliers and disclosing the environmental impact of  
each product and other relevant data. Additionally, the company has set ambitious sustainability  
goals, as outlined in H&M’s latest sustainability report.  
These goals include using 100% sustainably sourced materials by 2030 and achieving climate  
positivity by 2030. ‘Climate positive’ means that a company’s operations result in a net removal  
of greenhouse gases from the atmosphere, effectively reducing the company’s carbon footprint.  
This ambitious goal demonstrates H&M’s dedication to environmental sustainability and its efforts  
to combat climate change.  
6. Corporate Sustainability Reporting Directive (CSRD)  
In 2023, the Corporate Sustainability Reporting Directive (CSRD) came into force as part of the  
European Green Deal. This directive aims to assess companies’ sustainability efforts and impact. It  
uses a ‘double materiality perspective,’ considering both the financial implications of sustainability  
issues on a company and the impact of the company’s activities on the environment and society  
in accordance with specific ESG factors19.  
The main objective of the CSRD is to improve information transparency and effectively  
communicate to stakeholders - such as investors, customers, and regulatory bodies - how  
companies are performing in terms of disclosing their ESG factors through the various elements  
outlined in the European Sustainability Reporting Standards (ESRS).  
The CSRD expands on the NFRD (Non-Financial Reporting Directive) and mandates a more  
18  
19  
Another example is the Volkswagen emissions scandal, in which the company was found to have manipulated emissions data to appear more environmentally friendly than it was  
EUROPEAN COMMISSION (2023). The European Green Deal.  
Available at: https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-greendeal_en  
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thorough and detailed approach to sustainability reporting. This means that companies will be  
required to provide comprehensive information about the effects, risks, and opportunities related  
to ESG factors. This may include details about physical damage to property caused by climate  
change, as well as investments in product re-development aimed at reducing environmental  
impact20.  
The new regulations require companies to disclose information about their value chain. If this  
information is not available, companies can explain why it is not possible to obtain it within a  
three-year adaptation period. This approach is intended to help companies gradually adjust to the  
new reporting requirements, ensuring a smooth transition.  
The CSRD was introduced to unify the reporting standards in Europe. It sets up mandatory  
guidelines and standards for companies based on the ESRS. These guidelines, to be included in  
annual management reports, aim to streamline reporting processes and enhance transparency.  
The implementation timelines, tailored to the size of the company, provide a structured path for  
adaptation.  
Starting in 2024, the CSRD will be implemented gradually. Large EU companies, which are  
already subject to the NFRD21, and large non-EU companies with more than 500 employees and  
securities listed on an EU-regulated market, will be the first to transition. This phased approach  
will facilitate a smoother adaptation to the new reporting standards.  
By 2025, the CSRD will cover all other large EU companies that are currently not included in  
the NFRD. These standards will be based on the size of the company, which is determined by  
meeting at least two of the following criteria: having more than 250 employees, a net turnover of  
more than €40 million, or total assets exceeding €25 million.  
Additionally, all large non-EU companies with securities listed on a regulated market in the EU  
will also be subject to these standards, if they meet the size criteria like their EU counterparts.  
Starting in 2026, small and medium-sized enterprises (SMEs) in the EU will have the possibility to  
voluntarily opt out until 2028 if they meet at least two of the following criteria:  
-Employ 25 or more people  
-Have a net turnover of at least €8 million  
-Possess total assets worth at least €4 million  
In addition, non-EU SMEs that are listed on a regulated market in the EU must meet the size  
criteria of EU companies.  
Starting in 2028, non-EU companies that do not have securities listed on a regulated market in  
the EU must meet the following criteria to report according to the CSRD:  
-They must have subsidiaries or branches in the EU with a net turnover of at least €150 million in  
20  
The CSRD was introduced because it was recognized that the Non-Financial Reporting Directive (NFRD) from 2014 did not effectively provide stakeholders with reliable and consistent non-  
financial information. The NFRD required large public-interest companies to disclose information on environmental, social, and governance (ESG) issues. However, due to its narrow focus and the  
absence of standardized reporting procedures, the resulting data was often incomplete and fragmented. This lack of consistency made it difficult for investors to make well-informed decisions  
and hindered progress towards a more sustainable economy.  
21  
Large EU companies currently subject to the NFRD are those that meet at least two of the following criteria: Employees ≥ 500, Net Turnover ≥ €40 million, Total Assets ≥ €25 million.  
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the EU over 2 years.  
-They must have a branch in the EU with a net turnover of at least €40 million in the preceding  
financial year.  
The CSRD attempts to create a roadmap for a significant contribution to sustainability by  
broaden the range of organizations subject to regulation, establishing consistent reporting  
criteria, and improving sustainability disclosures’ overall quality and comparability to enhance  
transparency and accountability and coordinating efforts.  
6.1. European Sustainability Reporting Standards (ESRS).  
In a significant move, the European Commission adopted the ESRS as the sustainability reporting  
standard for the CSRD in July 2023. This adoption marks a turning point in how companies  
report on sustainability in the EU market, aiming to ensure comparability and consistency in  
the information disclosed by companies. When combined with financial reports, this provides a  
complete view of an organization22.  
The ESRS are mandatory reporting standards that are aligned with the Global Reporting  
Initiative standards, which are widely accepted and used by companies worldwide to report ESG  
factors23. If a business is currently reporting under these standards, it will ensure compliance with  
the CSRD.  
The GRI standards are not just compatible with the CSRD requirements, they facilitate a smoother  
transition for companies already following GRI guidelines. This alignment ensures that companies  
can confidently leverage existing reporting frameworks to meet new regulatory demands.  
The interoperability between GRI and CSRD is not just a claim, it can be verified by the emphasis  
on transparency and accountability that both prescribe. In terms of materiality assessments, the  
GRI provides a consistent framework to access financial and non-financial impacts.  
The GRI is a globally recognized standard that not only facilitates the establishment of a common  
language but also ensures the comparability of sustainability information with different EU and  
non-EU companies as well as stakeholders.  
EUROPEAN FINANCIAL REPORTING ADVISORY GROUP - EFRAG. (2021). European  
Sustainability Reporting Standards (ESRS). Available at://www.efrag.org/.  
GRI (Global Reporting Initiative) is an independent international organization that assists  
businesses and other organizations in taking responsibility for their impacts by providing them  
with a global common language to communicate those impacts. The GRI Standards enable  
organizations to report information that encompasses all their most significant impacts, including  
biodiversity, taxes, waste, emissions, diversity, equality, health, and safety. This reporting control  
22  
23  
EUROPEAN FINANCIAL REPORTING ADVISORY GROUP - EFRAG. (2021). European Sustainability Reporting Standards (ESRS). Available at://www.efrag.org/.  
GRI (Global Reporting Initiative) is an independent international organization that assists businesses and other organizations in taking responsibility for their impacts by providing them with a  
global common language to communicate those impacts. The GRI Standards enable organizations to report information that encompasses all their most significant impacts, including biodiversity,  
taxes, waste, emissions, diversity, equality, health, and safety. This reporting control enables organizations to take ownership of their sustainability journey. GRI reporting promotes collaboration,  
transparency, and dialogue between companies and stakeholders, ensuring all voices are heard and valued in sustainability.  
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enables organizations to take ownership of their sustainability journey. GRI reporting promotes  
collaboration, transparency, and dialogue between companies and stakeholders, ensuring all  
voices are heard and valued in sustainability.  
The ESRS includes a wide range of reporting standards. This encompasses two cross-cutting  
standards providing a general framework, five environmental standards focusing on key ecological  
aspects, four social standards addressing workforce and community issues, and one governance  
standard emphasizing ethical business conduct.  
- There are two cross-cutting standards: General Requirements (a guide for developing a  
sustainability statement) and General Disclosure (information to report regardless of any materiality  
assessment).  
- There are five environmental standards: Climate Change, Pollution, Water and Marine Resources,  
Biodiversity and Ecosystems, and Resource Use and Circular Economy.  
There are four social matters standards: Own Workforce, Workers in the Value Chain, Affected  
Communities Resources, and Consumers and End-users.  
- There is one governance standard: Business Conduct.  
In compliance with the ESRS, companies must provide quantitative and qualitative information  
regarding their sustainability impact and performance. Additionally, companies must disclose  
details about their actions to enhance their sustainability efforts and management.  
The annual sustainability statement must be prepared in a specific digital format to ensure that  
the information is easily accessible and understandable. The management report has four distinct  
parts: General, Environmental, Social, and Governance, and it should include the EU Taxonomy  
disclosures which refers to economic activities that are aligned with a net zero trajectory by 2050  
and other environmental goals.  
EU Taxonomy disclosures are a crucial part of the EU’s sustainable framework as it allows  
financial and non-financial companies to share a common definition of economic activities  
that can be considered environmentally sustainable. It represents an important tool for market  
transparency, ensuring that stakeholders are well-informed about the company’s sustainability  
efforts24.  
Moreover, the reporting requirements also encompass a company’s internal sustainability  
performance and its entire value chain, providing an additional layer of monitoring. This all-  
inclusive approach guarantees that all companies operating in the EU market contribute to global  
sustainability efforts.  
7. Conclusion  
Sustainability is a significant challenge of our time, requiring the combined efforts of various  
stakeholders. Businesses play a critical role in this collective effort by integrating the Sustainable  
24  
EUROPEAN COMMISSION (2023) EU Taxonomy for Sustainable Activities. Available at: https://finance.ec.europe/sustainable-finance/tools-and-standards/eu-taxonomy-sustainable-activities-  
en.  
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Development Goals (SDGs) into their operations and promoting them throughout their value chains.  
In this strategic process, reporting and communicating transparent and reliable sustainability  
data is crucial for demonstrating to different stakeholders – including public authorities, investors,  
employees, communities, and individuals – how companies are performing in their sustainability  
commitments.  
The establishment of corporate sustainability reporting frameworks and standards enhances  
the quality and comparability of disclosed information. For example, the Corporate Sustainability  
Reporting Directive (CSRD) aims to ensure that companies operating in the EU market will provide  
comprehensive, comparable, and reliable data on their sustainable goals.  
The anticipated impact of the CSRD on approximately 50,000 companies in the EU (a substantial  
increase from the 11,000 companies covered under the NFRD) signals a promising shift towards  
more standardized sustainability reporting in the European economy, expected to foster a more  
sustainable and resilient business landscape.  
The CSRD aims not only to include more companies but also to significantly enhance the  
transparency of sustainability practices. This will provide stakeholders, including investors,  
consumers, and regulatory bodies, with a more precise and comprehensive view of the sustainability  
performance of a significant portion of the economy.  
While large companies may already have some experience with sustainability reporting under the  
NFRD, the inclusion of many SMEs in the CSRD’s scope means they will need to establish reporting  
processes. The proactive recognition of this by the EU and its planned support demonstrate a  
commitment to a smooth transition for all companies, instilling a sense of security and confidence  
in the process and making SMEs feel valued and integral to the sustainability reporting process.  
The CSRD’s broader ambition to influence sustainability practices on a global scale is  
underscored by its inclusion of non-EU companies. This inclusion is a significant step towards  
promoting a more comprehensive global approach to corporate sustainability.  
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