How to Prove Sustainable Business

The new Corporate Sustainability Reporting Directive (CSRD), adopted at the European Union level at the end of last year, introduces a stricter, more specific, comprehensive, and thorough variant of reporting compared to the Non-Financial Reporting Directive (NFDR) – with it, there is no more room for manipulation and greenwashing as content becomes more important than form. Additionally, it encompasses more companies that will have to submit sustainability reports (ESRS), totaling fifty thousand, whereas previously only twelve thousand were required to do so.

The obligors for submitting the new report are all large companies, as well as those listed on EU stock exchanges (except micro-enterprises) and companies operating in Europe that are not owned by Europeans. This obligation will arise gradually as national parliaments of EU member states are expected to adopt laws in accordance with the CSRD next year. This means that the obligation to submit the new report in 2025 for 2024 will apply to those companies that have already been submitting reports (according to the NFDR).

Next year, in 2026, for the year 2025, all other large companies that have not had this obligation so far and meet at least two criteria for defining large enterprises will submit reports: more than 250 employees, more than 40 million euros in revenue, and total assets exceeding 20 million euros. Finally, in 2027, small and medium-sized companies listed on the stock exchange will submit reports for 2026, with the EU announcing that it will prepare reporting guidelines for them to facilitate understanding of the process.

Similar to GRI Standards

Due to the entire situation, companies, especially small ones, will have to make additional efforts as the new directive (CSRD) has come at a time when those responsible for preparing these reports have only just begun to grasp the intricacies of writing non-financial reports (NFRD), which are still in effect (until next year). A mitigating circumstance for those already submitting non-financial reports is that they have become accustomed to the process, so the latest obligations can be seen as an upgrade. The Director of Corporate Quality Management at Atlantic Group, Nataša Gladovič, reminds that the company published its first sustainability report in the form of a ‘report according to GRI standards’ for 2013.

– Since then, we have added new elements every year, and the last two publications in the area of sustainability have already been released in the form of an integrated business annual report, which is in line with the requirements of the new directive, the CSRD. Our action plan for 2023 also includes a detailed analysis of the current requirements in relation to the new CSRD requirements that we should apply from 2024. All important functions in the company are involved in the activities. We expect additional news in June when the ESRS is expected to be published. We have reviewed the working versions and can conclude that it largely relies on GRI standards, so we do not expect major challenges in applying these standards, says Gladovič.

In-Depth Sustainability Check

She adds that representatives of Atlantic Group participated last month in a panel on in-depth sustainability checks, one of the co-organizers being the Croatian Business Council for Sustainable Development. Gladovič states that in exchanging experiences with colleagues from other large companies, they confirmed that they are on the right track to meet the requirements within the set deadlines.

In INA, they emphasize that the company has a long-standing tradition of sustainability reporting and an established reporting system based on globally recognized standards.

– We continuously educate ourselves on all current topics and actively participate in workshops organized by partner institutions. All of this has provided us with stable foundations on which we can build our reporting system and adapt it to new requirements. We actively monitor all developments in this area, they state from the largest Croatian oil company.

In the largest construction company, Kamgrad, they say that they also began preparing for sustainability reporting back in early 2022 when the decision was made to create non-financial reports for management purposes. Kamgrad’s Management Board member, Mirjana Igrec, states that while looking at the broader picture of business, they assessed the quality of data from existing non-financial reporting analytics. She adds that these reports are continuously refined to be as prepared as possible when the Corporate Sustainability Reporting Directive begins to be applied.

– Currently, we are guided by GRI reporting standards and are trying to get as close to them as possible because we expect that sustainability reporting standards will be most similar to them, says Igrec, adding that for companies that have not had an official obligation to create non-financial reports, this is an additional burden, especially in the initial phase when reporting provisions are not defined.

However, she advises that all companies should work on ensuring analytics from which reports can later be drawn.

– A mitigating circumstance for Kamgrad is that it has four certified ISO systems, as they largely require data tracking that we assume will also be required by future sustainability reporting standards, says Igrec.

Systematic Self-Assessment

Gladovič emphasizes that for those large companies that have already had an obligation to report on sustainability, the new directive is more than welcome. The reason for this assertion lies in the fact that the previous method was not standardized, so everyone wrote reports in their own way. Those who wanted to could exploit this opportunity for non-transparency and even for greenwashing. This made objective comparisons among companies regarding how they protect the environment and how socially responsible they are more difficult.

Despite the non-standardization of reports, Gladovič emphasizes that at Atlantic, they have understood sustainability reporting from the beginning as an important aspect of self-assessment (similar to Kamgrad) and recognized opportunities for improvements in it, striving to be self-critical in that process. Two years ago, the Group established five fundamental pillars of sustainable development on which it builds its measurement system and continuous progress. Thanks to this commitment, many technological innovations have been launched that have enabled lower consumption of energy and water resources, as well as many innovations in products. Gladovič cites examples such as Donat in a fully recycled bottle, Barcaffè Flora with the sustainable Rainforest Alliance certification, and Cedevita in customized packaging…

– Our integrated quality management system has been predicting the measurement and reporting of non-financial performance indicators for years, so we do not perceive the new directive in this area as a new administrative burden. However, the company will need to do a significant amount of work to meet taxonomy requirements and establish a system for tracking taxonomy-compliant and aligned costs, investments, and revenues, says Gladovič.

INA also believes that the new directive will contribute to increasing transparency and the quality of reports precisely because companies will finally be able to compare how much they truly care about the community and the environment. On the other hand, they add, the obligation of auditing will contribute to the accuracy and credibility of data. The new standards bring a somewhat broader scope of indicators for those companies that have already had an obligation to submit reports, which will certainly be an additional burden, even for the most prepared.

However, they say at INA, for companies that have not had this obligation so far, the new directive will bring not only additional administrative burdens but also the need for a fundamental change in business approach. – INA has high standards and a level of transparency in reporting. This has been recognized by the professional public in recent years, which has awarded the company several times with the ‘Green Frog’ award for the best integrated annual report, they state from the company.

In any case, the new directive should finally show who is lying to us and who truly cares for the community and the environment.