New EU rules for companies to report on sustainability – a need for business administrators and professionals to specialize in sustainability reporting?

To go beyond the “carbon tunnel vision” it is necessary to consider the impact of the industry on the whole society, the ecosystems and the water and air for a sustainable future to emerge, instead of only considering the carbon emissions from the industry and companies.

To make progress beyond the “carbon tunnel vision” the European Union (EU) has strengthened the rules regarding how enterprises report on sustainability, in particular the new rules concern the social and environmental information that companies must report. These new rules require all large and/or listed companies to disclose information on the impact that their activities have on both people and the environment. This is the Corporate Sustainability Reporting Directive (CSRD) that entered into force in the beginning of 2023. This means that the first companies, which had to apply to the new rules in the 2024 fiscal year, will publish their reports in 2025. This applies to a broader group of large companies and listed SMEs that now must report on their sustainability. (European Commission 2024.)

To facilitate the reporting, the EU has developed standards for what sustainability reporting should consist of. These are the European Sustainability Reporting Standards (ESRS) (European Commission 2023). In the Nordic countries we also have our own sustainability reporting standard explicit for Nordic SME’s (Nordic Accountant Federation 2024). This is a standard tailored especially for small and medium sized companies, which probably will be affected indirectly by the Corporate Sustainability Reporting Directive (CSRD), as enterprises serving as subcontractors will be asked to provide sustainability data to stakeholders or business partners. This makes sustainability reporting a necessity for some SMEs, even though it is on a voluntary basis without being legalized yet.

The Corporate Sustainability Reporting Directive will make it easier and more transparent for i.e. investors, consumers, and other stakeholders to recognize the sustainability performance of companies. In addition, there are also new EU regulations on providing a digital product passport on new consumer items produced from 2026, which must be available through a digitally readable identifier. This digital product passport (DPP) will provide the consumer with information about the product’s environmental impact, materials, origin, and recommendations on disposal. With the help of this DPP the current lack of reliable product data will be addressed, and it will be easier in the future for the consumer to make responsible, sustainable choices. Both the CSRD and the DPP offer a significant advance in sustainability and product transparency at both business and consumer level, but it will require a lot of data collection for the companies in order to succeed. (European Commission 2024; European Union 2024; Sitra 2024.)

The companies that now are required to prepare a sustainability report according to the new CSRD are obliged to provide the report as a separate section in the management report, audited by an auditor (FAR; Patentti- ja rekisterihallitus 2023). This means that great demands are placed on the auditors, who are appointed to monitor the companies’ compliance with the new regulations. For auditors to succeed in this there are new possibilities for auditors to specialize in sustainability reporting and take a Sustainability Reporting Auditor (SRA) qualification. This qualification will be needed to sign the companies’ Sustainability Report. (Kortesalmi & Lindblad 2023.)

The new rules will not only demand a lot of the auditors, they will also put high demands on the companies themselves, and entrepreneurs, to comply with the sustainability reporting regulations and standards in order to prepare a report that the auditor can audit. This is likely to increase the demand for future training, at least for certain professional categories, to cope with the new standards of sustainability reporting.