CSRD: Transparency and Obstruction

Transparency at the heart of CSRD

The new European CSRD (Corporate Sustainability Reporting Directive), which came into force on January¹, 2024, places transparency at the heart of its provisions. This text aims to harmonize companies' extra-financial data; the sustainability reports to be published from 2025 onwards will therefore have to present standardized and homogeneous information.

With regard to climate (one of the five environmental topics covered by the standard), companies will have to share data relating to their activities (e.g. energy consumption, origin of energy used, proportion of fossil fuels, etc.), their impacts (e.g. direct and indirect greenhouse gas emissions) and their "transition plan". This plan cannot be summed up - as has too often been the case up to now - in more or less precise commitments, but must include in particular :

• Short-, medium- and long-term decarbonization targets
• Aligning the company's decarbonization trajectory with the objective of the Paris Climate Agreement (limiting global warming to less than 2°C compared with the pre-industrial era).
• The financial resources required to achieve these objectives, both in terms of capital expenditure (CAPEX) and recurring expenditure (OPEX)
• The decarbonization levers used (e.g. electrification, substitution of fossil fuels for renewable energies, sobriety of use, etc.).

Requirements for other environmental topics - pollution, water and marine resources, biodiversity, resource use and the circular economy - follow the same logic:

• Identify the impact of the company's business model: are the activities carried out compatible with the maintenance of healthy ecosystems over the long term?
• Specify the company's strategy to remedy the situation: quantified objectives, alignment with the scientific consensus to establish the sustainable nature of the actions envisaged, associated financial and human resources, description of concrete actions to be taken.

The 'reactor core of sustainable finance'

Because it enables information to be compared, CSRD is seen by many investors as an opportunity to rationalize investment criteria.

The CSRD is part of a more general dynamic at European level initiated in 2019 with the Green Deal, a set of measures designed to kick-start Europe's ecological transition. Among these measures (a detailed list is available here), we find both texts aimed at encouraging or prohibiting certain practices (e.g. creating the conditions for a hydrogen market, penalizing environmental crimes such as illegal timber trading or water abstraction), but also, and more fundamentally, texts aimed at better establishing the terms of the debate.

Green taxonomy is representative of this effort to apprehend the world from an ecological angle: it proposes a classification system for economic activities, enabling the identification of environmentally sustainable activities. The aim of this classification is to guide private investment towards activities with a positive impact (e.g. climate change mitigation, protection of marine resources, transition to a circular economy...).

The CSRD builds on this text and goes even further: companies must not only indicate the proportion of their activities that are 'sustainable' in the sense of the taxonomy, but also report on the extent to which they are 'sustainable'. character of their business model as a whole by questioning its compatibility with respect for planetary limits. These standardization efforts may appear restrictive - we often point out the high number of indicators required (over 1,000), forgetting to specify that they are not all compulsory - but in reality they are likely to ease the reporting constraints on companies by replacing the numerous so-called 'voluntary' initiatives (not covered by regulation) which have multiplied in recent years, sometimes discrediting ESG investment and its procession of acronyms - the 'alphabet soup'. It was in this sense that Robert Ophèle, then Chairman of the AMF, declared in 2022 that the CSRD was the 'reactor core of sustainable finance'.

CSRD transparency: a means, not an end

Despite these significant advances, the CSRD is above all an initiative linked to transparency, i.e. the accessibility and readability of information. By creating a common language around issues that are often poorly defined, it fosters the conditions for dialogue between economic players, but does not impose the terms or outcome of this conversation.

This is an essential distinction, and one that is sometimes misunderstood: CSRD is a requirement of means (understanding and communicating as accurately as possible), not of results. A company will be able to comply with the CSRD even if its trajectory is not compatible with the Paris Agreement, which is in fact the case for the vast majority of CAC 40 companies.

In the final analysis, the CSRD acts like an accounting system: because it allows real-life elements to be taken into account and counted, it engages the responsibility of companies, which will be 'accountable' for their results, and will eventually have to render accounts to society. It's a tool, essential for initiating action, but not the action itself.

In his essay on Rousseau, Starobinski associates the author's desire for transparency with the inevitable obstacle of the impossibility of perfect communicability between beings. Yet it is precisely through this tension that transparency reveals its creative force: to make something legible is to be able to be read, understood, interpreted, translated into action - and perhaps sometimes into justice. Because transparency is inseparable from the obstacle, CSRD should be seen as just that: the necessary but not sufficient prerequisite for corporate social and ecological responsibility.