The CSRD a burden for retailers? Three key benefits

08 May 2024 Consultancy.eu 2 min. read

The Corporate Sustainability Reporting Directive (CSRD) is touted to mark the start of a major ESG shift across industries. Anouk Duivenvoorden from IG&H outlines why retailers should consider CSRD as a value-bringing blessing, rather than a compliant-focused ‘tick the box’ exercise.

It seems to be far away still, but the CSRD is approaching swiftly. Between 2025 and 2028 nearly 50,000 European organizations will need to start reporting their ESG impact in line with the directive.

The CSRD will amend the existing Non-Financial Reporting Directive (NFRD) and will substantially increase reporting requirements on the companies falling within its scope. In order to meet requirements, organisations will have to implement a wide-ranging number of organisational, technological and data changes.

The CSRD a burden for retailers? Three key benefits

In their preparations for CSRD, retailers should not just treat the requirements as a paper exercise, but instead as a catalyst of true change – and competitive advantage.

For retailers who can achieve this, CSRD will be a value-bringing blessing, rather than a resource-hijacking burden. Three reasons why: it will help build reputation and consumer attractiveness, it will lift a company’s investment profile, and it will enhance internal decision-making.

Consumers are increasingly demanding retailers to limit their environmental impact. With consumer trust being a key element for success, reputation damage when reports do not show enough progress is a true risk. Even more so when they do not confirm progress that has been suggested in the past and thus expose greenwashing.

With CSRD in place, consumers can more easily select where they shop not only on sustainability intentions but on actual delivery, giving an advantage to retailers that are frontrunners in ESG.

For investors, ESG topics are increasingly important in risk assessments and valuations. Being able to show ESG progress makes a business more attractive to invest in, and makes (re)financing easier and more cost effective. CSRD helps facilitate better comparisons among investors, making well-performing firms stand out and putting those who perform less well at risk of losing investors and therefore restricting growth.

Further readingInvestors warn firms they will exit without ESG progress.

In the boardroom, the required identification of material ESG risks within the value chain will lead to better-informed decision-making and hence, organizational performance. Due to its large upstream value chain, retail is one of the sectors most at risk from the effects of climate change. Therefore, making the upstream value chain more transparent gives vital information to make retailers’ supply chains more resilient and cover risks.

In addition, impact reduction through improving efficiencies will also lead to lower costs.