CSRD: when sustainability reporting gets real

04 Feb 2025

Companies in the EU are facing a radical shake-up to what they must disclose about the sustainability of their operations. Yvonne Holmes, Head of Group Sustainability for DCC plc, is all for it.

Corporate sustainability reporting is going through an overhaul. The EU is introducing the Corporate Sustainability Reporting Directive (CSRD) to replace 2014’s Non-Financial Reporting Directive (NFRD). Around four times as many businesses, including private companies and SMEs, fall into the CSRD’s scope, compared with the NFRD.

It's a get-real moment for several reasons. The new directive requires third-party verification of disclosures, which will also help address greenwashing concerns.

“It is starting to put non-financial information on the same footing as financial information. It requires more robust controls and assurance over the data and disclosures,” says Yvonne Holmes, Head of Group Sustainability DCC.

The new framework also makes it easier for investors and other stakeholders to compare company performance. One set of standards - the European Sustainability Reporting Standards (ESRS) - underpins the CSRD, replacing a bingo card of disparate voluntary standards that businesses could previously select from to frame their disclosures.



A step-change in transparency
Yvonne sees the strengthening and broadening of reporting as beneficial. "Until now, businesses only needed to look at how social and environmental issues might impact their profits, their viability. That was impact from the outside in, if you like," she says. "It’s now mandatory to go beyond the single materiality of financial impact and report on your own impact and that of your value chain on society and the environment. That’s the ‘inside out’ of the equation, known as double materiality," she says.

Each company does its own double materiality exercise and decides on the ESRS topics most critical to them. Although it’s complex, Yvonne views CSRD compliance process as helpful to organisations wanting to reach certain sustainability goals. "To me, this is baselining the information, focusing accountability within an organisation and saying: ‘We need to achieve this; these core targets need to be in everyone’s objectives,’" she says.

"With CSRD you take a deep dive into the value chain"
As a FTSE 100 company, a certain amount of DCC’s externally assured reporting was already in place, so the lift isn’t as great as a lot of other companies might be experiencing. "This is more about maturing our processes than having to start from scratch," says Yvonne.

But this doesn’t mean there aren’t challenging aspects. "CSRD requires you to go up the value chain. And the supply chain is the hardest to report on," she says.

"I would say that’s going to be a journey for a lot of companies: understanding your supplier ecosystem, where the risk hotspots are and where you need to focus attention," she says. "You can’t just wash your hands and say: ‘It’s someone else’s problem,’" about the supply chain," she says. "With CSRD, you need to take a deep dive into it."

She gives an example of how companies motivated to do this can make a difference. "A DCC business, PVO International, is a specialist in procuring solar-energy system related products. Polysilicon, a pure form of silicon, is a key raw material for making solar panels, and more than half the world’s supply comes from China, where there are human rights abuses in the Uyghur region. That’s a risk, right?" she says. "So PVO follows the paper trail and will say to a supplier: ‘Okay, you got an invoice from there. Now show me that that’s been paid,’ to ensure it’s not a fake bill of materials and the product comes from where it’s said to.

"That’s what’s so powerful about this process," she adds. "Creating that interconnectedness of influence. It’s not just about you. It’s about what part you play in the chain, and how you’re accountable for that level of tracing and scrutiny, that’s going to force change for the better."

Will CSRD lead to real-world accountability?
Critics may call sustainability reporting "window-dressing for the financial markets," but Yvonne vehemently disagrees. "No, I am a strong believer in CSRD," she says.

"Complying with CSRD doesn’t distract us from doing the things that are core to our energy transition strategy, like reducing emissions in our fuels by introducing biofuels and expanding into the zero carbon energy management services business. That activity is full on, backed by authentic ambition."

Knowing your impact, being transparent about it and having a strategic plan for how you’ll compete amid sustainability-driven market forces is beneficial both for reputation and value creation.

The trustworthy, more comprehensive information that will come out of CSRD will enable real progress to be measured and make it easier to signal that your company is serious about sustainability.

"Getting your reporting in place may be an effort but it’s fundamental to be able to measure progress. Ultimately, it is about safeguarding our environment and society against catastrophic harms. There can’t be room for inaction," she says.