Accounting auditors are not bad people, but they are undoubtedly insufficiently rebellious… Because “ the logic of the rebel is (…) to strive for clear language so as not to thicken the universal lie », explained Albert Camus!
The entire CSRD, from its barbaric acronym – Corporate Sustainability Reporting Directive – to its 12,000 indicators through its ESRS, Iros or other Efrag, is part of a lexical universe which has greatly harmed the apprehension of its reality and its final objective. To the point of making it a foil which is expressed even in the recent speeches of the German chancellor or the most recent former French prime minister.
And yet! The CSRD is not what you think… To clearly state what is best conceived, the CSRD is a sustainability report. A powerful tool, essential to any business strategy that accepts looking beyond its quarterly financial report. A quality compass, which indicates much more than north: the direction of a necessary sustainable and efficient transition! And there is no alternative, no offense to the climate skeptics who are puffing out their chests these days. Because the facts are stubborn.
A diagnosis of the company facing vulnerabilities
Los Angeles is burning. Copper prices are exploding, as are coffee prices, the shortage of oranges threatens, pollution from microplastics, chemical fertilizers and other eternal pollutants is growing, water is becoming scarce, the unraveling of the “green pact” threatens, in short, everything combines to try to make us forget the inevitability of the resource revolution! The truth is that you have to take it head on.
So let’s forget about acronyms for a moment. This new sustainability report provides a diagnosis of the company. Out of 10 standards, including 5 environmental (climate change, pollution, water and marine resources, biodiversity and ecosystems, resources and circular economy), the others relating to social and governance. We therefore find the famous ESG themes. On these 10 themes, we collect data and measure the impacts. The impact on me and on nature. The impact of nature on me. To do this, we question the stakeholders. Then we construct our “double materiality matrix”. Oops !
Auditors and other auditors are serious and precise people, they like concepts, we can’t blame them, it’s their job. So the CSRD is based on the“double-materiality matrix analysis”. It’s a little scary. Yet it is simple, concrete and essential. What is the impact of the company on its environment, its employees, its governance? This is the first materiality. And what are the impacts of these, financially, on the company itself? This is the second materiality.
A simple example: the fishing sector. Fishermen… fish. They therefore have an impact on marine biodiversity: there are fewer fish. And this lack of fish will mean that they risk fishing less in the future, which will affect their financial income. Biblical. So we must avoid overfishing if we intend to maintain our activity, for it to be sustainable: this is not, in this case, a great discovery. It is this simple principle, called “double materiality”, which guides the entire CSRD.
An obligation to say, not to do
The sustainability report is not an obligation to do, it is an obligation to say. But by “saying” publicly, we more or less force ourselves to do. This is the virtuous impact of transparency. Because everyone, investor, financier or otherwise, will be able to learn their lessons from the report, with consequences in terms of borrowing capacity, willingness to support new projects, etc.
A piece of advice to follow: favor the collective to complete half, perhaps the most strategic, of the path. To alleviate the sometimes tedious nature of the exercise (identification of all IROs – impact risk opportunity –, data collection, dual materiality matrix), and arrive at concrete diagnoses, companies would benefit from grouping together by sector. They have the right to do so.
Some sectors are starting to organize themselves in this direction, via their federations. Distributing efforts and reducing analysis costs is always welcome. Avoiding mistakes, reassuring yourself in ownership, interacting effectively with stakeholders, bringing out common solutions, preparing the collective response… The collective is a weapon to make the sustainability report an opportunity much more than a burden !
Yes, we should have made it simpler at the start, fewer checkpoints and worked in stages. But that’s no reason to throw the baby out with the bathwater. The sustainability report is a compass, a compass, a GPS indicating the direction to follow. Ask the Vendée Globe skippers where they would be without these basic tools? No doubt stuck in the Antarctic, between two threatening icebergs, far from Les Sables-d’Olonne! Definitely not where you want to be…