By Yaerin Ku
The European Union (EU) has positioned itself as a global leader in sustainability reporting and green finance through the implementation of frameworks such as the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy, and the European Sustainability Reporting Standards (ESRS). These regulations aim to enhance transparency, combat greenwashing, and align corporate activities with the EU’s Green Deal objectives.
However, the regulatory landscape remains complex and fragmented, leading to growing concerns about administrative burdens and compliance challenges for businesses. The upcoming EU Omnibus Simplification Package, scheduled for February 26th, seeks to address these issues by streamlining reporting obligations and enhancing regulatory efficiency.(1) Nonetheless, significant uncertainty surrounds its scope and impact, raising questions about its effectiveness in supporting the Green Deal and maintaining EU competitiveness.
Assessing the Progress and Challenges of the Green Deal
According to the latest European Commission joint research report on the EU’s Green Deal progress, as of mid-2024, only 32 out of 154 targets are currently “on track,” while 64 require accelerated progress. Alarmingly, 15 targets are either “not progressing” or “regressing,” and data remains unavailable for 43 targets.(2) This underscores the need for a robust, data-driven approach to sustainability and the importance of frameworks such as the CSRD and the EU Taxonomy to ensure transparency, accountability, and the integration of environmental and social concerns into corporate decision-making.
The report also highlights critical gaps in data and knowledge, particularly regarding ecosystem conditions, natural capital valuation, and the interplay between socio-economic systems and ecosystems. Bridging these gaps is essential for informed policymaking and sustainable investment.
The Importance of the Omnibus Simplification Package in the Context of the Green Deal
The EU Green Deal sets an ambitious target of achieving climate neutrality by 2050, with intermediary goals of reducing emissions by 55% by 2030 and 90% by 2040.(3) To meet these targets, a robust data infrastructure is needed to monitor progress and inform policy decisions. The CSRD plays a crucial role in this ecosystem by mandating comprehensive corporate sustainability disclosures. However, concerns have emerged regarding overlapping reporting requirements across the CSRD, the EU Taxonomy, and the Corporate Sustainability Due Diligence Directive (CSDDD).
The Omnibus Simplification Package aims to address these concerns by harmonizing environmental, social and governance (ESG) reporting requirements, reducing redundancies, and ensuring a more streamlined compliance framework. While it promises efficiency gains, questions remain about the extent of simplification and whether key elements, such as double materiality, will be preserved.
A critical challenge is ensuring that simplification efforts do not weaken the rigor of sustainability reporting. Investors and stakeholders require consistent, high-quality data to make informed decisions, and any dilution of reporting obligations could undermine the EU’s leadership in sustainable finance. Moreover, the EU must balance regulatory efficiency with the need to maintain alignment with global sustainability frameworks such as the ISSB standards and GRI reporting guidelines, especially since GRI continues to be the most widely used by companies across all regions: Asia-Pacific (75%), Europe (71%), Americas (70%), and Middle East & Africa (64%). The countries with the highest GRI adoption rates by leading companies include Taiwan (100%), Singapore (97%), Spain, Japan and South Korea (all 94%).(4)
The Future of ESG Reporting: The Need for Strategic Alignment
Globally, ESG reporting frameworks are converging to enhance comparability, reliability, and investor confidence. As of 2024, more than 70 stock exchanges provide ESG disclosure guidance, up from just 13 in 2015, with mandatory ESG disclosure rules now enforced in 27 markets, including 16 emerging economies. The harmonization of sustainability standards—such as the ISSB S1 and S2, CSRD, ESRS, and the EU Taxonomy—will be instrumental in preventing greenwashing, attracting sustainable investment, and driving meaningful corporate accountability.(5)
Furthermore, studies confirm a clear correlation between sustainability efforts and economic prosperity. Data from the EU Taxonomy reveals that sustainability contributes to Europe’s long-term growth and innovation.(6) As the EU refines its regulatory landscape through initiatives like the Omnibus Package and Competitive Compass, the challenge lies in ensuring that compliance does not become a mere bureaucratic exercise but rather a strategic enabler of sustainable and resilient business models.
The Role of CSRD in Enhancing EU Competitiveness
Despite criticisms of the CSRD’s complexity, its implementation is crucial for strengthening the EU’s competitive position in the global green economy. Transparency in sustainability reporting attracts investment, reduces risks associated with ESG non-compliance, and fosters innovation in clean technologies.
The Draghi report highlights the need for an additional annual investment of 750–800 billion euros to achieve the Green Deal’s objectives. The CSRD is identified as “a major source of regulatory burden”, with the Draghi report citing estimates that the compliance cost of CSRD-reporting ranges from €150,000 for non-listed businesses to €1 million for listed companies.(7)
However, this is precisely the reason the CSRD plays a pivotal role in mobilizing this capital by providing reliable ESG data, which is increasingly demanded by investors. If done right, the EU has the opportunity to set global standards and ensure European companies remain at the forefront of sustainable business practices.
While the EU refines its sustainability regulations, global competitors—particularly China and the United States—are indeed aggressively advancing their clean technology and industrial strategies. China, for instance, has secured a dominant position in electric vehicles (EVs), solar panels, and wind turbines, driving down costs and expanding its influence in emerging markets. Over the past three years, 70% of China’s solar, wind, and EV export growth has come from emerging economies, shifting the balance of power in the clean energy sector.(3)
Therefore, the CSRD can serve as an effective tool to safeguard EU’s industrial competitiveness by fostering a fully functional single market for clean technology, aligning its sustainability strategies with economic growth, and ensuring that decarbonization efforts bolster rather than hinder European businesses in the long run.(8)
If the EU weakens its sustainability commitments, it risks falling behind in the global economic transition. The Omnibus Simplification Package must therefore strike a careful balance between reducing administrative burdens and maintaining the integrity of ESG disclosures.
What is CSRD ?
The Corporate Sustainability Reporting Directive (CSRD) represents a significant evolution in the European Union's regulatory framework for corporate sustainability reporting. Replacing the Non-Financial Reporting Directive (NFRD), the CSRD introduces stricter and more standardized disclosure requirements to enhance transparency, comparability, and accountability in ESG reporting.(9) This directive mandates that companies provide stakeholders—including investors, consumers, and regulators—with high-quality sustainability information to support informed decision-making.
Key Requirements
The CSRD expands the depth of sustainability reporting by introducing several key requirements:
Mandatory double materiality reporting: Companies must assess and disclose the impact of sustainability issues on financial performance and their own impact on the environment and society.
Alignment with European Sustainability Reporting Standards (ESRS): Firms must adhere to ESRS guidelines, which standardize ESG data reporting.
Assurance and verification: Companies are required to obtain third-party assurance for their sustainability reports to enhance credibility and reliability.(10)
Double Materiality and Its Implications
A defining feature of the CSRD is the adoption of double materiality, which mandates companies to assess and disclose sustainability information from two perspectives:
Financial Materiality: The impact of sustainability issues on a company's financial position and performance.
Impact Materiality: The company’s impact on environmental and social factors.
By enforcing double materiality, the CSRD ensures that sustainability reporting extends beyond financial risks to encompass broader societal and environmental concerns. This approach contrasts with traditional financial materiality frameworks, which focus solely on investor-related concerns.
Case Studies: Evaluating Early CSRD Reports
The first wave of CSRD-aligned sustainability reports from European companies provides valuable insights into the strengths and challenges of the new reporting framework. Below, we analyze reports from the four French companies, Sanofi, Bureau Veritas Group*, Unibail-Rodamco-Westfield*, and Legrand*, as well as the two Nordic pioneers, Tyrg and DSV, highlighting best practices and areas for improvement.
*2023 Annual Report (transition phase based on CSRD)
Sanofi, a French multinational pharmaceutical and healthcare company, has emerged as a strong performer in aligning with the CSRD and ESRS. One of Sanofi’s key achievements is its robust carbon reduction strategy, having achieved a 47% reduction in Scope 1 and 2 greenhouse gas (GHG) emissions since 2019.
This demonstrates the company’s commitment to climate action and aligns with the EU Green Deal and Taxonomy objectives. Additionally, Sanofi excels in human capital reporting, highlighting a diverse workforce with 46% female leadership representation and detailing employee well-being programs. Another notable strength is its integration of biodiversity considerations into sustainability reporting, assessing nature-related risks within its supply chain. However, despite these strengths, the absence of an explicit net-zero target creates ambiguity in its long-term climate strategy.
Bureau Veritas Group, a French company specialized in testing, inspection and certification, presents a well-structured sustainability report that showcases a detailed double materiality assessment.
Its clear disclosure of impact, risks, and opportunities (IRO) in line with ESRS guidelines ensures structured and comparable reporting. Bureau Veritas also excels in stakeholder engagement, mapping out key stakeholder expectations and outlining mechanisms for ongoing engagement. Furthermore, the company enhances the comparability of its sustainability disclosures by cross-referencing international frameworks such as the Global Reporting Initiative (GRI), Task Force on Climate-related Financial Disclosures (TCFD), Sustainability Accounting Standards Board (SASB) and Sustainable Development Goals (SDGs). Despite these strengths, Bureau Veritas’ report could benefit from a clearer referencing system for ESRS disclosures to improve readability. Additionally, more detailed action plans with specific targets and performance indicators would strengthen accountability and facilitate tracking progress against sustainability commitments.
Unibail-Rodamco-Westfield, a European multinational commercial real estate company, demonstrates strong compliance with ESRS requirements by providing a well-structured materiality assessment and clear referencing to ESRS standards, making navigation easier for stakeholders.
However, the report lacks a comprehensive summary of both positive and negative sustainability impacts, which could improve readability and provide a more balanced view of the company’s ESG performance. Similarly, Legrand, a French company specializing in electrical and digital building infrastructures, has made significant strides in stakeholder engagement, ensuring that sustainability concerns are incorporated into corporate decision-making. The company also employs the Global Biodiversity Score (GBS) methodology for biodiversity impact measurement, demonstrating a commitment to assessing and mitigating environmental risks.
A detailed description of the stakeholder consultation process in relation to the group's value chain is well demonstrated by incorporating various infographics. Furthermore, additional details are provided in attached documents.
However, Legrand’s report falls short in disclosing due diligence processes, and it does not provide a clear double materiality matrix, limiting transparency on how material ESG topics are evaluated.
Tryg A/S, a leading Scandinavian non-life insurance company, has produced its first CSRD-aligned sustainability report, integrating key elements such as the EU Taxonomy, Double Materiality Assessment (DMA), and the Do No Significant Harm (DNSH) Principle.
The company has effectively integrated ESG risks into its enterprise risk management framework, ensuring that sustainability considerations are embedded in financial decision-making.
The DNSH Principle is an essential part of the EU Taxonomy, ensuring that companies classified as sustainable do not adversely impact other environmental or social objectives. Tryg has taken steps to integrate DNSH principles into its investment policies by screening for fossil fuel exposure and high-emission industries, ensuring that investments align with ESG priorities.
The company also applies minimum safeguards concerning human rights, anti-corruption, and ethical labor standards, adhering to the UN Global Compact Principles. Tryg’s Supplier Code of Conduct (SCoC), for instance, expresses the requirements and expectations for suppliers and partners with respect to sustainable and responsible business conduct based on the ten principles of the UN Global Compact.
While Tryg has made substantial progress in CSRD compliance, the report also reveals several weaknesses that could affect its ability to maintain ESG leadership in the insurance sector. The company’s Taxonomy-aligned activities remain minimal, primarily due to regulatory complexities and classification challenges. Additionally, supply chain transparency is lacking, particularly in terms of DNSH compliance and supplier ESG performance tracking.
DSV, a Danish transport and logistics company, demonstrates a clear commitment to diversity, equity and inclusion (DE&I) in its 2024 Annual Report. The EU CSRD’s Standards for DE&I are clearly defined within ESRS S1 Own Workforce, which includes 17 separate measures and requirements ranging from key DE&I policies and practices, targets, and actions, to workforce diversity and pay equity data.
DSV has elected to set a global, three-tiered target for women at various senior management levels in 2030. The target is set against the 2024 baseline and supports its ambition to create a strong talent pipeline for recruitment to its highest management levels from both genders.
DSV has integrated double materiality into its risk assessment framework, identifying climate risk, emissions, and workforce diversity as key focus areas. A major strength of DSV’s DMA process is its climate risk assessment, where it identifies carbon emission hotspots across its road, sea, and air freight operations. The DMA for DSV has identified significant negative impacts on climate and air pollution, primarily driven by the burning of fossil fuels for energy in its operations and services. The assessment evaluates climate and environmental impacts, risks, and opportunities (IROs) by analyzing DSV’s direct and value chain emissions, strategic forecasts, and industry projections. This analysis is further supported by scenario modeling and data from global institutions, including the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC), ensuring a science-based approach to assessing sustainability risks and opportunities.
The company has made progress in tracking Scope 1 and 2 emissions, achieving a 10.7% reduction in 2024. However, Scope 3 emissions increased by 10.5% due to higher freight volumes and extended shipping distances, particularly due to the Red Sea geopolitical crisis. This suggests that external market conditions continue to challenge DSV’s ability to reduce overall carbon emissions, raising concerns about the effectiveness of its sustainability strategy in achieving long-term net-zero targets.
While DSV’s CSRD-aligned reporting reflects progress in climate risk management and sustainable logistics, it also highlights several key challenges that could affect the company’s ability to maintain ESG leadership. The company’s taxonomy-aligned activities remain limited, reflecting the difficulties of classifying sustainability-linked business operations in the logistics sector. The lack of robust DNSH compliance data and supply chain sustainability reporting further limits the ability of investors and stakeholders to evaluate DSV’s true sustainability impact.
As CSRD expectations evolve, closing these gaps will be essential for DSV to maintain its competitive position as a sustainability leader in the logistics industry. Strengthening taxonomy alignment, materiality disclosures, and DNSH compliance will enhance investor confidence, regulatory trust, and corporate accountability, positioning the company at the forefront of sustainable supply chain management.
Best Practices and Common Pitfalls in CSRD Reporting
Overall, a well-prepared CSRD report adheres to best-in-class practices that enhance clarity, accessibility, and compliance. One of the most effective approaches is consistently using ESRS codes throughout the report. This ensures alignment with regulatory expectations and makes it easier for stakeholders to navigate the information. Additionally, following the ESRS structure and language across all sections provides uniformity, making reports more intuitive to read and compare across different companies. A crucial feature of a high-quality report is an index table by disclosure point, allowing readers to quickly locate specific information. Furthermore, leading reports include a table highlighting non-material topics, ensuring transparency about what is and isn’t considered relevant to the company’s sustainability strategy.
Another key attribute of a well-structured CSRD report is the clear communication of company IRO assessments through dedicated tables. This practice offers stakeholders a concise view of how the company evaluates sustainability-related risks and opportunities. Similarly, material category sections should be structured precisely according to ESRS requirements, ensuring consistency and logical flow. To further enhance transparency, companies should publish a table detailing their stakeholder engagement efforts, outlining who was consulted and how their input influenced the report. These elements collectively contribute to a well-organized, easily digestible CSRD report that meets regulatory expectations while fostering stakeholder trust.
Conversely, some reporting approaches make it significantly harder for readers to extract meaningful insights. One of the biggest challenges arises when companies fail to leverage ESRS codes, making it cumbersome for stakeholders to cross-reference disclosures with regulatory frameworks. The difficulty is compounded when companies use their own material topic language instead of standardized terminology, forcing readers to interpret inconsistent definitions. Additionally, companies that have not restructured their appendix to align with ESRS often produce reports with clunky, disjointed sections. In contrast, those that have fully integrated ESRS into their reporting structure present a far more coherent and user-friendly document. By neglecting these critical elements, companies risk producing reports that are not only harder to read but also less effective in communicating their sustainability performance.
Conclusion
As companies work towards full compliance, regulators and industry stakeholders will likely refine reporting standards to address emerging challenges. Potential global harmonization between CSRD and ISSB's IFRS Sustainability Disclosure Standards could further influence ESG reporting worldwide.(11) The CSRD’s long-term success will depend on its ability to balance regulatory rigor with practical implementation feasibility for businesses of all sizes.
The CSRD is a transformative step in corporate sustainability reporting, establishing a structured and comprehensive framework that emphasizes double materiality, accountability, and transparency. Early adopters demonstrate both best practices and areas for refinement. While challenges persist in implementation, data quality, and international competitiveness, the directive represents a major shift towards a more sustainable and accountable corporate landscape.
As the EU moves forward with the Omnibus Simplification Package, it must ensure that regulatory streamlining does not undermine the Green Deal’s objectives. The Green Deal’s success will depend not only on policy ambitions but also on its execution—ensuring that sustainability and competitiveness go hand in hand. Sustainability reporting is not merely a compliance exercise but a strategic tool for enhancing EU competitiveness, attracting investment, and driving innovation. While businesses require clarity and efficiency in reporting requirements, the integrity of ESG disclosures must remain intact to maintain market trust and regulatory coherence.
The upcoming regulatory changes will determine whether the EU continues to lead in sustainable finance or risks ceding ground to global competitors. Policymakers must take a balanced approach that fosters both business growth and environmental responsibility, ensuring that Europe remains a key player in shaping the future of the global green economy.
As global regulatory alignment progresses, one thing is for sure: the CSRD will serve as a benchmark for sustainability reporting in the years to come.
Footnotes
[1] (February, 2025). Explaining the Commission work programme 2025.
[2] Marelli, L. & al. (January, 2025). Delivering the EU Green Deal - Progress towards targets.
[3] Mendiluce, M. and Hooper, L. (February, 2025). Comment: The dangers of ditching Europe’s Green Deal.
[4] (November, 2024). GRI global adoption by top companies continues to grow.
[5] (2024). Pathway to Sustainability Disclosure Going Mainstream.
[6] Krueger, P & al. (May, 2024). The Effects of Mandatory ESG Disclosure Around the World.
[7] Draghi, M. (September, 2024). The Draghi report: A competitiveness strategy for Europe.
[8] Porter, M. & al. (December, 2024). 2024 Competitive Sustainability Index: Shaping a new model of European competitiveness ‘Beyond Draghi’.
[9] (January, 2024). CSRD : quoi de neuf pour les rapports de durabilité ?.
[10] (February, 2025). The Omnibus Proposal: Here is What You Need to Know.
[11] (November, 2024). CSRD vs. ISSB: Understanding the Key Differences and Similarities in Sustainability Reporting.
About the Author
Yaerin Ku
Yaerin Ku is a graduate from Kyung Hee University and is currently a dual-degree Master's student in EDHEC Business school. She is studying management — finance track and Accounting & Finance. She is dedicated to ESG disclosure and sustainable finance. She has studied and worked in five countries, and is currently working as an audit intern at PwC, which is named a Global Leader in ESG & Sustainability Assurance Services by Independent Analyst Firm. She aims to become a financial and ESG auditor.
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