On 5th January 2023, the EU Corporate Sustainability Reporting Directive (CSRD) entered into force. Under this directive a broader range of companies will be required to report on sustainability from 2024. However, a new survey finds widespread lack of preparation for CSRD, especially with regards to ESG (environment, social, and governance).
Carried out by Lefebvre Sarrut, a European leader in legal and tax knowledge, a survey of 744 European companies of various sizes and sectors provides an overview of the degree of maturity of companies with regard to ESG criteria. While there are no significant differences between countries, almost half of European companies do not have a dedicated ESG or CSR policy or manager. The manufacturing industry stands out for its greater maturity on these issues, while the services sector is particularly lagging behind. European companies' level of maturity with regard to ESG criteria currently falls short of EU expectations.
Key findings from the survey include:
- 40 percent of European companies are not familiar with ESG criteria,
- 43 percent of European companies do not have a designated reference for ESG criteria,
- 45 percent of European companies have not taken any action in anticipation of the forthcoming entry into force of the European CSRD directive.
This lack of maturity raises questions at a time when the EU's expectations are becoming clearer. Companies with more than 500 employees or more than €40m in turnover will be required to report on their environmental, social and governance impact, in line with the European CSRD directive, starting in 2024. The scope will then be gradually extended each year: companies with more than 250 employees in 2025, listed SMEs in 2026, and subsidiaries of non-European groups in 2028.
Although often singled out for criticism, companies in the industrial sectors (automotive, manufacturing, chemicals, etc.) stand out for their greater maturity when it comes to ESG criteria, with the deployment of policies aimed at controlling and reducing their social and environmental impact.
Conversely, the service and consultancy sectors stand out for their immaturity and lack of awareness of what is expected of them and of the forthcoming application of the European CSRD directive.
The disparities in maturity can be explained by the early exposure of industrial sectors to environmental criteria, which has enabled the companies concerned to acquire solid experience in identifying and responding to regulations and in deploying ESG or CSR policies. On the other hand, service and consultancy companies, which until now have been exempt from strict regulations, will have to be held to account, forcing them to rethink their ESG impact.
Camille Sztejnhorn, Director of ESG Impact at Lefebvre Sarrut, comments: "Too many companies underestimate the future role of the CSRD directive and - beyond that - the environmental, social and economic issues it raises. If properly understood, ESG criteria (understanding, measuring and improving them) can be a source of value creation. On the other hand, ignoring them runs the risk of compromising the company's long-term viability. It is now imperative for the 50,000 companies that will soon be directly affected by CSRD to grasp these issues, equip themselves with specific tools and/or receive appropriate support. And the sooner they get to grips with it, the less they will experience it as a constraint, and the more they will be able to turn it into a lever for development."
