CSRD Implementation Faces Low Confidence Among EU Entities

LUXEMBOURG, 5 ​December 2024 ​- The road to compliance with the ​European Directive on Business Sustainability (CSRD) ​presents important obstacles for ​businesses, as highlighted in a recent PwC report. Only 42% ​of entities required to disclose their sustainability data for fiscal year 2024 expressed full ​confidence in their disposal, ​a number that fell to 14% for those required to disclose from fiscal year 2025.

The ​CSDD is one of the cornerstones of the European Green Pact and aims ​to ​increase sustainability reporting to the rigour of financial reporting. Based ​on European sustainability reporting standards (SSRs), the Directive provides detailed information, including an assessment ​of “double importance” for assessing environmental and social effects, as well ​as financial risks and opportunities. Despite its potential for transformation, the ​complex requirements ​of the Directive have allowed many entities to cling to implementation.

First expectation ​versus ​second

The investigation revealed differentiated readiness differences ​between first-wave reporting entities ​for FY 2024 and second-wave reporting entities for FY 2025. Among AF ​2024 reporters, only a small ​fraction ​(4%) is ready to publish their sustainability reports, while 22% continue to work to understand the scope of the directive. For ​entities in FY 2025, the challenges seem even more ​discouraging, with a significant proportion not exceeding the ​initial stages of planning and understanding.

The report attributes this disparity to the learning curve associated with new methodologies such as the dual evaluation ​of materiality. This ​process requires entities to ​consider their entire value chain, from suppliers to customers below, and ​to integrate sustainability into their core business strategies.

Obstacles to implementation

There are several ​barriers to progress, particularly in data collection, quality ​and ​management. Many entities mentioned difficulties in aligning internal processes with the requirements of the Directive. According ​to the report, data consistency, resource constraints and technological constraints ​are among the critical points of ​pain. These problems ​are ​compounded by the lack of standardization ​of reporting formats, creating additional complexity for entities ​navigating the new framework.

Double ​assessment of materiality remains one ​of the most difficult aspects of ​compliance. While more than half of the entities in FY 2024 have developed sustainability issues in their value chains, they have fewer ​solid ​methods for identifying and assessing physical impacts, risks ​and opportunities. ​This deficit ​highlights the need for ​greater clarity and support in implementing ​the frameworks aligned with the SRS.

Role of ​strategic leadership

The report highlights the importance ​of leadership in addressing these challenges. Chief Sustainability The leader plays a key role in the implementation process, ​while the ​Chief Financial Officer ​(CFO) ensures alignment with financial reporting standards. Collaboration throughout ​C-Suite is essential, as the ​Director-General sets ​the programme and makes sustainability a core organizational priority.

Entities that consider CSRD compliance to be a strategic initiative rather than a simple compliance exercise are better placed to ​release long-term value. Of the AF 2024 reporters, 50% ​rank CSDD reports as a strategic project, compared to only 9% of the AF 2025 reporters who consider it a compliance task.

Long-term value opportunities

Despite ​the challenges, the CSDD offers businesses a ​way to align their activities with evolving stakeholder expectations and market ​requirements. By combining sustainability with their ​strategies, organizations can increase transparency, build stakeholder confidence and gain a competitive advantage. ​PwC points out that the success of compliance requires not only strong ​reporting systems, but also a change of ​opinion to consider sustainability as an integral component of business transformation.

As companies ​across ​Europe prepare for the gradual ​start of the ​CSDD, the directive should redefine the sustainability standards of companies ​and promote ​significant changes. For entities wishing to accept the potential of the Directive, it provides a framework for achieving ​sustainable growth and resilience in an increasingly SG-oriented economy.