Not that complicated? Initial takes on companies’ first CSRD reports 

The sample is small (and decidedly Danish), but the first mandatory sustainability statements suggest complying with the EU’s Corporate Sustainability Reporting Directive (CSRD) isn’t as complex as some claim.  

That’s the view of Maria Tymtsias, co-founder of Palau Project, which provides tools to help with CSRD reporting.  

“Given the whole ‘omnibus’ discussion, and the complexity of reporting on CSRD, the first reports give me the vibe that it’s really not that complex,” she tells REP.  

“And that it’s easy to really to reduce your scope.”  

This isn’t to say that firms are underreporting, she continues – just that they’re sticking to the most material topics for them.  

Smaller companies are “confused”, Tymtsias says, about what their larger peers are going to produce in the first wave of CSRD – which they will have to follow – especially given complaints that auditors are pushing for overly fulsome disclosures. 

“The biggest problem with these reports [is that people] had an idea that you need to disclose everything,” she explains. “Detailed methodologies, the thresholds used, how stakeholders informed the process. And we don’t see that.”  

Double materiality assessment  

At the heart of complying with CSRD is the double materiality assessment (DMA), through which companies identify their key risks, opportunities and impacts (ROIs).  

Tymtsias says the DMAs out so far vary in quality: some comprehensively explain their methodology and the ROIs they settle on, while others make it hard to understand a firm’s impacts even after reading the whole document.  

Anna Csonka, a sustainability regulation expert at Hungarian software company denexpert, agrees that DMAs are a “black box”, but says there’s been a noticeable improvement among companies that published voluntary CSRD reports last year. 

“There’s a lot more detail as companies start to understand what it is that they have to disclose,” she says. “For example, the process behind the DMA.”  

Reports already prompting discussion  

Companies are already learning from each other’s sustainability statements, Csonka observes.  

A debate recently broke out on LinkedIn, for instance, about a change to Danish pharma firm Novo Nordisk’s methodology, which allowed it to halve its reported Scope 3 emissions for 2023.  

“People were questioning, how is this possible? Is this cheating?” recalls Csonka. “Then greenhouse gas professionals come in and say it’s absolutely normal, because they’ve moved from a spend-based calculation to an activity-based one.”  

Then there was the discussion about Pandora omitting governance from its list of material sustainability topics, despite dedicating a whole chapter to it and stating that “sustainability is deeply integrated in our strategic direction and how we conduct business”.  

Csonka tells REP the omission feels like a “such a contradiction”. 

“They cover most of the things ESRS wants in the governance chapter, then you go into the sustainability statement…and they don’t identify any material impacts, risks or opportunities related to governance.” 

Pandora did not respond to a request for comment.   

Positive impact confusion 

The reports have also highlighted a trend for companies to conflate the mitigation of negative impacts with the generation of positive ones. 

Danish insurer Tryg, who has generally been praised for its sustainability statement, talks about its ability to have a “positive impact on climate change by including prevention measures in product offerings”. 

“By preventing claims from happening in the first place or minimising any damage or loss that might occur, Tryg can positively impact the number and size of claims and thereby reduce the climate impact and resource use from replacing broken or stolen items,” it continues. 

Careful to stress she’s not talking about any company’s report in particular, Tymtias describes the practice of assigning positive impact to activities that simply mitigate negative impact as “a red flag from the auditor’s perspective” and a “misinterpretation” of the European Sustainability Reporting Standards.  

Csonka says there’s often pressure on reporting teams to maximise positive impacts, but that very few firms can claim to have them when it comes to topics like climate change and biodiversity.   

“Reporting teams and management must come to terms with this,” she says. “To be okay that they only have negative impacts in certain sustainability-related matters, because they are not going to be alone in this.” 

Tryg did not respond to a request for comment, and nor did PwC, which provided limited assurance on its report.  

Lack of comparability  

Tymtsias also highlights issues with the comparability of the first round of CSRD statements.  

“It’s the first-year reporting, so we shouldn’t judge them too harshly,” says concedes. “But it is a good thing to point out, [because] some of them are organised in a weird way.”  

While the ESRS mandate a specific structure, some firms have “reshuffled” it, which can make their statements harder to follow.  

Csonka does see some structure emerging in the first wave of reports, though, which she says reflects an understanding of the objective of CSRD – to explain impacts, especially negative ones, and how they are managed and addressed.  

“This is the real thread that should be across the report,” she argues. “And I think that’s much clearer in the limited examples of mandatory CSRD reports so far.”