As new mandatory sustainability reporting frameworks in the EU get off the ground, business leaders face an opportunity to enhance corporate value by embracing the transition to net zero.
These regulations aren’t just for EU companies – they’ll apply globally to any company with significant revenue or operations in the bloc.
The required reporting presents an opportunity for companies to demonstrate leadership in sustainability and enhance their market position by ensuring compliance, engaging with stakeholders, managing data effectively, and aligning internal functions. On the other hand, companies that don’t take this requirement seriously risk potential fines, as well scrutiny from regulators, investors, activists, employees and customers.
Whatever goes into these reports will be seen and acted on by stakeholders. Companies that proactively address these requirements will be well-positioned to tell their own story and control the narrative in a rapidly changing global landscape.
Key Challenges
Data Management and Reporting
Companies must invest in digital systems able to manage and report various ESG metrics, such as carbon emissions, energy usage, and supply chain impacts.
Small and large firms alike may find collecting this data challenging and will need to allocate resources accordingly. Relevant data may be incomplete or scattered across various departments and will require dedicated employees in addition to the commitment of several functions including human resources, procurement and finance, among others.
Legal Risks and Enforcement
National authorities across the EU will enforce compliance. Non-compliance can result in significant fines; also, companies may be liable for damage caused by intentional or negligent failure to prevent or bring to an end any adverse impact through appropriate measures. Companies must prepare for potential legal challenges, particularly from competitors who may argue that EU regulations unfairly burden businesses operating in a particular region.