Phil: [00:00:00] The regulatory landscape for sustainability is constantly shifting and there's a new directive that's set to reshape the way companies operate within the European Union, the Corporate Sustainability Reporting Directive, or CSRD. This is a win for those who value environmental responsibility, but it may present a formidable challenge for businesses.
The CSRD aims to enhance the transparency and comparability of corporate sustainability reports across geographies and industries. Its passage should mean that companies must provide more clear, consistent, and detailed insights into their sustainability performance. The opportunities here are immense, but so are the challenges, and companies will need to act fast to meet very tight deadlines.
Multinationals must be ready to report in 2025 on their 2024 fiscal year. Large companies will have to follow in 2026, reporting on fiscal year 2025. And small to medium sized enterprises will have their [00:01:00] turn in 2027, reporting on fiscal year 2026. Now, non EU country firms with at least one subsidiary or branch in the EU will follow suit through 2028, reporting on their fiscal year 2027.
In today's episode, we'll dive deep into the specifics of the opportunities and challenges posed by the CSRD. We're joined by experts Anna Zonka, Senior Sustainability Regulations Expert, Emanuel Zinzu, Head of ESG and Sustainability at HPC Germany, Lita Tan, President of ANU Global Consulting, and Richard Taylor, Senior Project Manager at HPC.
And Antaia Group USA. Anna has been closely following the creation of CSRD standards since 2021. She has regularly commented to the European Financial Reporting Advisory Group, EFRAG, on their initial drafts to the CSRD. Emmanuel has over five years of experience in ESG, CSR, and sustainability consulting for both local and multinational companies.
Lida, who's [00:02:00] rejoining us on the podcast after her comments in episode one, has 34 years of executive experience. Managing complex environmental cleanup projects in the U. S., leading enforcement inspections, and designing sustainability strategies. Richard leads the ESG advisory team at Entea Group, which supports double materiality assessments and sustainability strategy development globally.
He has been creating and implementing sustainable solutions for more than two decades in a variety of sectors, including professional services, retail, and academia.
Well, thank you everybody for making the time for this call. I'm really excited to have this conversation and to really dig into CSRD, what it means, where it comes from, and how you're practicing globally and making an impact with this, with this regulation, and with this new practice, this new way of operating business.
So, I'm going to start. Really simply with a, with what I think is a softball question, but it could [00:03:00] take up all the time we have. And I'll go to Lita first and then ask others to comment. What does CSRD stand for and where does it come from?
Lida: CSRD is Corporate Sustainability Reporting Directive and my understanding is it comes from Europe regulations and it filters down into the rest of the, uh, the globe, especially into APAC.
As part of the supply chain component of that reporting.
Phil: Super. So maybe I can go to one of the people who are in Europe who probably are living this day to day. And I guess the question I would extend from there is, how does CSRD impact corporations in Europe and multinationals? And then how is it different from previous approaches to sustainability reporting?
Do you want to take that first, Emmanuel, and then we'll see what Anna has to say.
Emmanuel: Should I give a little bit of history on this right now, but I'm not going to go into that. Let's say in a, in a nutshell, okay, CSRD is, um, a [00:04:00] regulatory requirement. So it is a regulatory instrument that is actually to transform how, um, firms and corporates goes about, um, disclosing their commitment to the so called sustainability agenda.
So. This is where, in my opinion, the biggest difference lies. Until 2023, when the EU actually passed the CSRD, okay, reporting, of course, there'll be transformation within the global landscape in the US, in India, in Asia, in Australia, et cetera. But until then, sustainability or ESG disclosure, reporting, communication has always been voluntary.
Okay. So firms are actually free to actually disclose to their stakeholders in terms of customers, um, investors, um, employees, and to the general public, how they're actually contributing to their so called sustainability development or sustainability agenda. So there have been no pressure on this, but of course, those [00:05:00] times there are some sort of benefits attached to.
disclosing your report. Of course, you get to have the chance to probably mitigate or manage specific sustainability related risk if you are able to actually have a system that actually captures this important material topics. Okay. So all these activities have been voluntary, but the biggest issue on this is that firms have been promising.
Firms have been wishing and importantly, financial markets actors or participants wanted to understand or distinguish between a rare sustainability product and a non sustainability product. So it became like more or less like a buzzword. Okay. So everybody was disclosing. So there came a point where you cannot actually Distinguish between a rare sustainability product or service, right?
So in the so called, we are all used to this term, um, greenwashing. So, um, stakeholders, investors, politicians started to think, okay, we should find a method or a way [00:06:00] where this disclosure can be consistent with our needs. A commonly applied methodology can be transparent on which investors, for example, can make, investors or consumers can make informed decisions on, and of course, can be viable.
So in order to come to this framework, the European Union, as part of their Green Deal, they institute three instruments, which we will talk about later, the Sustainability Financial Reporting Disclosure, the taxonomy, and the CSRD. The CSRD is actually a communication instrument. So this is actually distinguishing itself.
Firms don't have that luxury anymore to use whatever methodology or benchmark to report, but now they have to follow a consistent framework or standard, which we find in the ESRS, okay, which is managed by EFRAC. So this is where the key differentiation comes in. When you don't report or disclose according to their defined methodology by CSRD, and of course, following the ESRS requirements.
There is going to be some sort of, yeah, punishment or [00:07:00] punitive measure attached to it. So that is where the differences comes in.
Phil: Yeah, absolutely. You've kind of opened the door wide open, right? I'm going to go to Anna because what I heard is the CSRD is a communication standard that ultimately allows for informed decisions by consumers, by governments, by regulators, and so on, because the corporations have a consistent disclosure, a common methodology, and a viable practice to it.
So, it seems to me, Ana, that there are both costs in this and benefits to the, to the cor, let's start with the corporations. Can you talk a little bit about one of those that, that really resonates for you or that you see is really important right now?
Ana: I think, yeah, yeah, sure. So, much focus has been, of course, on the cost for corporate, corporations, because of course, when you have to start CSR reporting from scratch.
And here I just have to say that some corporations had to report according to the predecessor of CSRD, which was called NFRD, but like the CSRD scope is much wider. There are a lot more companies that will have to do this [00:08:00] exercise. It's around 50, 000 companies just in Europe who will have to comply with this regulation.
So it is a real pain for a lot of corporations in Europe, and because they don't have systems to collect the data, they don't really necessarily have the expertise to even understand what their baseline is. Many companies still don't calculate their carbon footprint, for example, which is just actually a lot.
really a few of the data points of the CSRD. I think many times it has been said that the CSRD has more than 1, 200 data points, which is a lot. Of course, you don't have to do it data point by data point. You have the materiality assessment to filter through all those information, but still it's, it's intimidating.
It's, it's a lot to process and to build up the processes. And it will also have to be audited. So it's not just some data points. you know, any type of data process will do. You will have to have rigorous systems to collect the data to report. And it's also a lot of narrative data, which is not something that even [00:09:00] companies who used to do reporting, I used to have a rigorous way of like, managing their narratives, actually.
So narratives have to be based in data now and has to go, has to pass the audit as well. So that's one thing on the cost side, but let's also talk about the benefits because I think it does bring a lot of benefits for the companies. Let's, if you just start with the double maturity assessment, which is the first step in the CSRD, where you have to Like we have to identify all your negative and positive impacts and have to identify your risks and opportunities related to sustainability matters.
If you do this exercise right, you will have, you will really have a roadmap for your sustainability strategy, really valuable insight to your company's footprint, and also actually your opportunities, your sustainable transition can bring to you. And to, to Lida's point about the supply chains. which she said previously, this whole exercise is also valuable because you have to do it on your entire value chain.
So this is also a novelty that CSRD [00:10:00] introduces that you don't stop at your first tier suppliers. You have to look at your complete value chain. So, you know, really from the mines, where you mine, whatever material to the consumers who then. and consume your product and maybe throw it to the trash. And like what happens to the trash?
That is also something you have to consider when you do your materiality assessment, and even some of the reporting. So of course, this sort of clarity and transparency is beneficial for a company. It's really good to build on, to create a strategy. And it's also really good to bring in capital and to Because banks now ask for this information, so companies will be more prepared to answer all those questions the banks have and investors might have, which then, at least that's the EU's idea, will help finance the sustainable transition.
Emmanuel: Can I add up to the cost benefit aspects? I have one point, if you don't mind. Sure, please do. Yeah, I'm just, I just wanted to support the very important [00:11:00] point of Anna of saying it helps in bringing capital inflows into the companies, right? This is a very important point because like I mentioned earlier on, the EU Green Deal is actually being channelled or supported by these three instruments of Sustainable Financial Reporting Directive where the EU intends to actually transform its economy to becoming the number one or the first carbon neutral zone or economy in the world.
So actually the EU itself, the central bank itself, is actually going to spend, if I'm not mistaken, more than 300 billion. Annually, okay. Euros annually on each current project in order to actually in the first place fulfill the Paris Climate Agreement. So there are funds that is available there that when firms are able to consistently disclose how they are contributing to a sustainable transformation in their system, they can get access to this at zero interest rates.
You know, this is very, very important. I'm not sustainable finance expert. Maybe [00:12:00] can give you more there, but I mean, as a firm. Thinking of going for a credit of zero interest rate in this era of our world to transform your company sustainably. I think if I'm one of the managers, I'll be running and start engaging with the CSRD and figure out how I could easily go about it and then have access to this.
Enormous, um, funds that are available to help me do what type of energy or sustainability measures I have in my company.
Phil: You know, that's a really great point. A lot of times when we talk about regulatory, all people talk about are the sticks, right? They talk about the fines, the requirements, that sort of thing, the penalties that people don't do what they want them to do.
But I think it's great that you talk about a lot about the benefits, about the carrots, not the sticks, the incentives that it would have. And if you could say to a company. By showcasing how you're going to act and behave in a certain way, we're going to make more capital available. We're going to make it easier for you to grow and to do better.
That's a great way to think about it. I'm curious and I want to switch [00:13:00] to Richard and then come back to Anna real quick. This started in the EU, but it has global impact. And regardless of how we choose to operate country by country, region by region, it's impossible to ignore the interconnectedness of our economy today.
So Richard, can you comment a little bit about how you see this impact your area of where you focus in the world?
Richard: Yeah, it's honestly one of the, the most beautiful things about the CSRD. It's this European focused legislation. You know, like the idea of legislation being beautiful is oxymoronic, but it's really this ask, To increase transparency, regardless of your nationality.
So, the expectation on your supply chain, well, you don't typically source regionally, you're sourcing globally these days. So, to extend that communication hand to your supplier and say, Hey, This is important to me. Therefore, it's important to you. It has global implications. So it's, it's this connectedness, this creating the [00:14:00] system of information that to Emmanuel's point, it's standardized now.
And with that standardization comes some burden, but it also comes a lot of benefit. So in the United States, we may not have many companies that are immediately required to report. I think there's probably Probably 3, 000 or so U. S. companies that have mandatory reporting requirements as things stand now, but they're all part of value chains, right?
And because of that, there's requests coming to the United States for emissions data, requests coming about What is, what is your management of these topics? How can you help us to help the world? And that spirit of CSRED is really where that value creation is in enabling everyone to communicate on the same terms about the same topics to make change.
It may be slower because of that burden. [00:15:00] But it is movement, positive movement.
Phil: Yeah, positive movement towards the standard when you have people have different languages, different histories, different cultures, different approaches to business. Seems like a really, really positive thing and provides the potential for this to, to, to grow.
Deliver the results that they're seeking. Now, some of this has, is about incentives. Some of this is, some of this is about the carrots, but some of this is also about the sticks. So I don't want to pigeonhole you, Lita, into answering that question all on your own, because I know you see a different perspective also about the incentive side.
So maybe you could, can you talk a little bit about the incentive side that you see from your view of the world, and then we can come back around to what are we doing? What are the governments and agencies doing to enforce? The rules set aside as part of this initiative. So can you talk first about how you see the incentives and the benefits of compliance?
Lida: Okay, so the, I'll focus on the benefits and I see [00:16:00] in the supply chain is that, as everyone says, the CSRT brings standardized, the reporting requirements. And that bring consistency to a lot of the voluntary sustainability work that many of the companies have been doing over the years, including in their supply chain.
So one of the benefits that many people who don't work in the supply chain may not be aware of is that a lot of the corporations before, they really don't know their supply chain that well, because oftentimes it's a business decision, right? So whoever makes the business, that's it. They don't necessarily share with the sustainability or EHS compliance people, because compliance just makes sure your factory operates, you know, I don't need to know.
So there's a lack of communication between the, the environmental or sustainability or CSRD folks and the business people. But with this requirement, they have to share The business have to share their supply chain data. And we've seen that as part of the support to a lot of [00:17:00] these multinationals, the very first thing is clean up your supplier data, where are your suppliers are, who are they making?
And so in that effort, it actually creates a much better, a clearer picture. Business network or their own supply chain. So that's one benefit that came out of this. And another benefit is really the data transparency in a past where sustainability requirement, you know, one company is doing carbon footprint.
One company is doing something else. One company is focusing on compliance of health and safety, but now everybody sort of know, Oh, there's a CSRD reporting somewhere up at the Europe or somewhere else, but what do we have to do? So it filters down. But we're hoping to create a standardization as we help companies apply change to standardization of data collection.
And, and that's really a good benefit for the corporation now that they, their data is more standardized. So it's, it's easier to organize. So those are the [00:18:00] two benefits that I really see.
Phil: It must really be helpful to the data quality management type person because there's now a standard that people must adhere to and it must build up from bottom to top.
Can you share a little bit about how cleaning up supplier data and eliminating the lack of communication helps drive to the bottom line of the business in a way that might be unexpected?
Lida: I can't speak a lot on the business side, but what I can see is that On the data collection, that some of the, their business managers of these suppliers actually get very surprised.
There might be duplicates. There might be suppliers in the same category that perform better than the other. They use that as a negotiation strategy. To sort of push the suppliers to improve their performance, CSRD performance, sustainability performance. So the, we could see that and they actually use the data.
We help them collect to negotiate better deals [00:19:00] and to, at the same time to push to say, Hey, their, you know, sustainability performance is better than yours and we wanted to negotiate. So, so we really see that kind of a competition sometimes that the corporation can use.
Phil: So Anna, I saw you give a knowing smile there as a technical expert and a, and a software person.
I'm sure you see a lot of challenges in data and opportunities in data. Do you have a, uh, an experience in this that you would, that you might want to share about how having better data makes for a better system?
Ana: Yeah, so my knowing smile was actually not because of the Technical expertise in data is also because in Hungary, we have many companies who are also in the supply chain of a big Western European automotive companies, for example, and we have, we have clients who really struggle with, with the fact that like these big companies ask for a lot of data and they have been asking if in different questionnaires, like ECHOWADIS, they have like, they have like full time personnel just answering those questionnaires for [00:20:00] the big companies.
And, and for them at first, CSR already seemed like, Oh no, come on. Just one more thing that we will have to comply with and we will have to collect data for, and now as what they see as a benefit actually is that maybe this will just replace all these other standards that they had to provide data for, and like really sometimes incomparable data.
So what as, as, as a software provider and what we can see is that. See as a, how data can help is that if you collect your raw data, like really not just, you know, you write 42 tons of whatever waste, but like you collect at a time when you are, for example, like shipping waste away from your factory, then you can transform that raw data into these different buckets that I now.
Like, currently they are not always convergent, so maybe you have to answer the EchoBuddy's question and I will have to use it also for the CSRD, but like slightly differently. And some still are required to do GRI reporting by some of their customers. [00:21:00] So yeah, I mean, Having your data right and having as much data on your sustainability performance as possible.
That's just really good because then you can really calculate the different metrics.
Phil: And it seems like it creates a foundation for a whole lot of the promise of big data, right? The promise of being able to look at data across a number of different boundaries and do different things with it. Lida, did you see particular opportunities in there as well?
Lida: The, one of the things I like to point out, Phil and the panel is data is going to be, what we are excited is that data is going to be audited. So there had to be some validity to it. And before, is you collect the data, however each client wants. Right. And I'll tell you a lot of the clients don't really need the data to be verified.
It's just, you collect and sort the data and just give it to whoever wants it. But now there's a auditing or verification, which we're really excited about because you really have to put an effort [00:22:00] to make sure the data you collect is correct. It's usable, it's credible, and that is something I really think it's a key component of CSRD regulation.
And we're very excited about that.
Phil: I want to open this question up to whoever did follow on with that with Lita. If you're going to have to audit the data, someone's going to have to do the audit and someone's going to have to help people prepare for the audit. So what do you think the balance is of working with the actual auditors, the regulators to CSRD requirements, and also with the corporates, the multinationals, about preparing for those audits so that we're speaking apples to apples, right?
We're all speaking the same language. I don't know. Who wants to start with that one? Richard?
Richard: I just had this conversation about an hour ago. It's the law of averages is what you're talking about. Um, we are in uncharted space. Like, this is the first time that we have come together to say that standardization is important.
[00:23:00] Um, but we don't know what that looks like. We have data points that we know we need to fulfill, but there's still like some loose, fuzzy boundary conditions on those data. So collectively, as a global society, we will be reporting and auditing and over time, maybe a short period of time, who knows, we will come to a consensus of this is what's important.
Let's keep measuring this. Or, oh, you know, I like what you're doing here, let's merge towards that. So, collectively, I think this is an opportunity for everyone to find where we have the ability to have impact, and measure it, and then manage it. Well, that's really great. Go ahead, Anand.
Ana: Yeah, I just want to contribute to the discussion about the audit that it's really like a learning process.
So many of the companies will learn together with the auditor. So the guys who will come to your company to audit your first CSRD report or a trial [00:24:00] audit before it becomes mandatory will be as new to it as you are. Or maybe you can be actually more prepared because you have done it. You already collected your data, you set up the systems, the controlling systems for the data, so you are more secure in it than the auditors.
I have experienced it firsthand because I used to work at a global dairy company and we went through limited assurance audits and also reasonable assurance audits. on all the ESG data that we published. And it's just, it's so different from what the financial auditors do just because there is no standardization.
And as, as Richard said, we have to arrive to this common understanding of what's important and what is a good proof of what's important. So do you really have to have like a hundreds of invoices from each of your sites to prove that that's how much energy you can generate? consumed or maybe you can do it somehow better and there is a better proof.
So it's, it's, it's, at first it will be super labor intense and very difficult for the auditors to, to [00:25:00] sort through what is, what is good quality reporting and data.
Phil: So, this seems like it could be an opportunity to be really transformational, right? Um, that people need to embrace the, the opportunity, embrace the challenge and avoid the potential conflict and resistance.
Emmanuel, I don't know which one you're more, you're more excited about. Can you help us talk, lead us into this part of the conversation? Where is the opportunity for people to embrace this, this opportunity and how do we avoid conflicts and resistance?
Emmanuel: Thanks. I feel, I mean, um, where the opportunity lies, I think, uh, from the beginning of the discussion, we've mentioned about a lot of benefits that are coming into play here, but to me, I think we are talking about data management rights and data quality and data is going to be audited.
So for me, I think where the opportunity lies is actually the fact that right now we are shifting to an era where we are given the opportunity to actually [00:26:00] collect data on our non financial matrices, which in history, has never been the case. So now we're actually talking about understanding the total value creation of a company, not only based on finance or capital, you understand?
So being able to capture this data, okay, understanding your supply chain, having these matrices within your control helps you as a firm to be able to measure, manage them and continuously improve upon them because we all know you cannot. Um, develop, uh, what you don't measure, right? So this is where the opportunity actually lies for me.
That I think companies need to embrace this chance. Go on this journey. Beginning is beginning. It's painful. It's a painful journey. But at the end of the day, this gives the company or the firms that are actually taking this journey to have the chance to have actually access to this real time data on which they themselves can make informed business decisions.
Because like I [00:27:00] always said, We all need data, especially as a top CEO, as a change manager, you need data that is actually accurate on which you can make a specific business decision on. And if this data is not accurate, it means that you stand a risk of making some decisions that have a long term financial or maybe legal implication under companies which comes with enormous burden, of course.
So this is where I particularly see. The opportunity in why I would encourage firms to embrace this and start collecting this data and going on this journey, putting it into a structured system where they can continuously measure this and improve upon it, than the resistance that they are given to it, because this is just an opportunity for them.
Phil: You make a really good point, right? And I think we've heard something similar. The financial measurements are easy. They have history. They've, they've, we've built businesses on it for a longer period of time. If we're looking at business differently, we're looking at through a sustainability lens, we have to do these impact and sustainability [00:28:00] measurements, which aren't necessarily as straightforward or don't have the history of the work around them as the financial ones do.
You know, one of the things I've heard a lot around the Inogen Alliance is that the environmental health and safety work has helped pave the way for the sustainability work. Are there any insights that you might consider from the environmental health and safety world that we can apply to the journey from the financial reporting to the sustainability reporting that we're talking about right now?
Who wants to tackle that one?
Emmanuel: I've got an EHS expert, but I will say that for me, the real advantage I see in this direction is that, you know, most of the companies or the clients I'm talking to They are fidgeting, right? They are going around and shaking, looking for this data point. But I think the most important thing that EHS has done for us is that it's creates the opportunity that no firm is going to start from zero because every firm or whatsoever has been doing some sort of EHS one way or the other.
So the data is already there. So it creates a foundation or a starting [00:29:00] baseline where we can develop something solid onto. Okay. So that is where I'm not. So think about, we have been collecting injury incidents for years. We've been managing this data. This is not financial. Okay. But at the end of the day, it becomes financial when you're having a lot of loss day out.
Okay. So we've been collecting this metrics for thousands of years as a firm. I mean, we've been collecting incidents on the type of amount of PPE we are giving to our, our, our staff to make sure that they are working safe in a safe environment. We have data on this. Okay, so all these things are already there.
We just need to connect them in a streamline and restructure them into the sustainability lasting framework to push the agenda forward. So that is why I say it.
Phil: And then do it in a way that you're connecting the dots so that you can deliver the outcomes that you're shooting for, right? One of the things I heard, and I think in the first episode, when we were defining EHS, Someone described it simply as, you know what, people have the right to go home, go to work and come home and be as healthy [00:30:00] when they get home as when they went to work, right?
And, and if you think about that in the sustainability, if I think about the supply chain and operations, it means everyone, right? Everyone who is impacted, all the stakeholders who take part in that journey around the company should be minimally impacted by what it is that we're creating. And if we're doing that, We're doing business in a, in a different, in a better way.
And that's something that kind of, that kind of popped for me. I'm curious if there's any other, any other anecdotes or experiences that you had to share, Lina?
Lida: My experience is that EHS compliance is not going to go away, but EHS work did pave the way. So let me just give it an example. of air emission, right?
Before the compliance aspect of environmental compliance is you have to meet local regulations, right? You meet the law, you send the test, they come in and make sure you're not exceeding the law or exceeding the permit limits. That's compliance. But right [00:31:00] now, CSD brought in a much, a bigger scope is that what are you emitting?
And as a brand, I want to know supply ABCDE or 1, What's the total emission? Are they emitting together? So you bring them together rather than individual, like, well, you know, 1, 2, 10, as long as you meet the permit requirements, you're not exceeding it. You're in good shape, but now you're looking at holistically that all this entire supply chain, what are you emitting totally?
Is there a way to decrease it? And the same goes waste, same goes water. So we're doing sort of piecemeal for EHS compliance for each supplier or supply chain, but now we're putting it all together and identifying opportunities to reduce. And so if Supply A has 10 tons of waste, Supply B has 5 tons of waste, and, and, et cetera.
And together, you know, the whole picture before there was no need to know. How do we,
Phil: how do we take that down and take some of the local [00:32:00] lens, um, thinking and apply it to that? Like, if I'm thinking about a supply chain that goes through half a dozen countries from, you know, from, you Eastern Europe to, to the UK, for example, there are going to be different practices.
There are going to be different determinations of what's safe at a local level because people, different cost structures, all those different things. Can you just share a little bit about why a local lens is important, but also maybe what some of the challenges that the local lens, the local practices Create to having a global or a regional supply chain.
That's going to work.
Lida: I'll talk about some of the challenges. Let's just say on the waste reduction before, as long as you meet the law, it's fine, right? So now you're talking about waste reduction and some will we call it zero waste, right? So where you minimize all your waste into the landfill. Now, if you go from China to another country.
China is fairly [00:33:00] mature and be able to sort the waste into zero waste because they have recyclers. They are positioned to take the waste and to sort it out. You go to a country that does not have that infrastructure, you're not going to be able to find a recycler that's going to take that waste. So that supply in that country is not going to be able to meet some of the goals that, that to meet the zero waste or minimizing waste.
So these are the challenges, they're not regulatory, they are maybe CSRD or sustainability challenges. And you go all through the globe, this is just a one small example of trying to implement some of the gaps or improvements that each local regions may have.
Phil: And so how do you manage that from a, from a data perspective or from a, from an operational perspective, because it, it could be in a more developed country as a multinational, I might be ahead of the curve in, in this practice, but in other countries, I might be behind and actually might not be the best thing [00:34:00] for a certain country to, to invest A ton of resources and effort in order to catch up to China because it's not realistic in the short term.
It's got to go at a different trajectory than a resource rich country. It seems like the evolution of the CSRD practice would move at different paces in different regions. Do you all have any other examples of how that is evidenced in your work, Anna?
Ana: I think, I mean, it's not how it's evidenced in my work, but I think there is a A bit of a disillusioned answer to this as well.
So like, because I think Lidak brought up this really good example of recyclability. And when you, when you face that exact challenge, like, like somewhere you can recycle glass, somewhere you can't, like what is a good recyclable package? Then your challenge is like, okay, I have to define a KPI that. that will measure this in a way that I am able to progress.
So maybe I will not be able to measure, I [00:35:00] don't want to measure it. Like, is it actually recycled in the country where it's used? Because if I measure that, and if I transport the same type of glass to the Middle East, where they don't recycle glass or, and to Europe where you can recycle glass, then, you know, it will go down.
But like, then, then you will think of like other ways. Okay. Maybe I would just measure how my packaging is designed for recyclability. And then you come around and you can even satisfy like some of the requirements of CSRD because you do track your progress, but is it good for sustainability if your packaging is designed for recyclability, but actually it goes into landfill in some of the countries because they just don't have the systems so that that's, yeah.
That's a disillusioned answer to this.
Phil: Well, it sounds like there are some, there are challenges and trade offs that people need to think about in their corporate strategy to, to, to really make the best decision at the time and then make an actionable plan over time. And that by actually getting the same.
Consistent data, at least you're able to [00:36:00] make an apples to apples comparison around should I do this in Eastern Europe or Southeast Asia or Northern Africa? Should I make something that's recyclable or compostable if I'm trying to do, if I'm trying to be on a path? Towards where I, where I can do these things and I can make these sort of investments.
This is to realize the strategic objectives. And I think that Emmanuel talked about earlier on, and it's, it's a, it's a challenge. It's a, it's, I think why Richard says it's a really exciting time right now, because it's an uncharted integration of how to do things best for people around the planet at the same time, when everybody's moving at different paces, hopefully in, in the similar direction.
Any thoughts on that?
Richard: Yeah, this is kind of, I mean, I love systems and CSRD is a system. Going all the way back to the very first question, like CSRD is about transparency, right? It's about I have measured this. This is important to me. I'm telling you about it. It will change. You're going to have to do a double materiality assessment every [00:37:00] year to evaluate your impacts, to collectively establish this is important and maybe migrate.
Your business strategy based on those impacts, but maybe not, maybe not, maybe you will, because you, you already identified, so there's, this is trade offs. Everything by its very nature has a positive and a negative impact simultaneously. There's no such thing as that neutral impact. They both exist at the same time.
You just have to decide what are you going to value. That's the beauty, again, of CSRD. It's like, collectively, we are being asked to do this openly, communicate, to share data, to coordinate it, and make informed decisions.
Phil: Well, that's got to be pretty terrifying to some of the leaders out there, but I see, Emmanuel, you wanted to also make a comment.
Emmanuel: Yeah. I think this is a question I'm going to answer. Your last statement like this seems like a tragedy to some leaders, right? But in all these things, I just want to speak a little bit now from the energy perspective. [00:38:00] Okay. Because from the energy perspective, it's like this, that's, I mean, all these things, companies need support.
They need help. They need local expertise. They need people who understand how the local context works in order to actually fulfill this global reality or needs of them in order to understand how the system are working at different aspects. So this is where you need people that are consistent, that understand the system, that are going to be with you from the beginning.
To the end on your journey. That is where I actually see right now as well in Eugene, we are also a little bit strong because despite our global reach, we also have the local expertise that are vested. That is why actually we are actually discussing all this, that are vested in this topic and are able to actually support these clients to understand the different local systems, the local context in how to actually merge this to fulfill the global requirements of the CSRD reports.
That is what I want to add to.
Phil: Well, I mean, I, we were thinking the same thing then, because I was thinking, this has got to be terrifying [00:39:00] to an executive who says, I have to understand all these nuances of all these different parts of the world. And I can't afford to have all these different, all these different experts from my company.
I mean, how am I going to cover all this? Right. And you just, you just described a solution that I think would help alleviate some of that stress and some of that pressure and give people the opportunity to, opportunity to really. Yeah. Digest these changes, digest these challenges, and make some calculated decisions.
Make some well informed decisions, which is part of the reason we got at this at the top. Now, we're running low on time, and as I said, I'm sure we could do this for a really long time, but I definitely wanted to give each of you an opportunity to Have a parting shot. So as a, as part of a closing comment in our last couple of minutes, I'm thinking for leaders trying to differentiate and drive change in the organization, in their industry, on the planet, what suggestions would you provide for them to take advantage of this as an opportunity?
Lita, do you want to go first?
Lida: Sure. If [00:40:00] I was corporation, a multinational corporation, and I really wanted to make sure that we are maturing. On this CSRD journey that will provide the leadership and the opportunity actually to impact the world because our reach is global or, you know, multinational companies reach is very global and now it is not just a good thing to do, it's a must to do.
And I think this presents an opportunity for all the companies. That big or small with supply chain that collectively they can really now make the network, global network much tighter on this journey.
Phil: Richard, what are your thoughts?
Richard: I think that that notion of making a tighter global network is really the differentiator.
We can put a business lens on it and talk about efficiencies and synergies like even go as far as, uh, Deploy like lean thinking or Six Sigma thinking. There [00:41:00] is a lot of opportunity to recognize waste, time waste, material waste, and sustainability, actual waste. And that's really like, I think the differentiation here is being able to get in front of that and recognize not only like financial wealth, but also societal value.
Phil: Super. Anna, what are your thoughts?
Ana: I think a key message could be, or what I would say is like, don't be afraid of being transparent, like sort of vulnerable. So like this technique of telling all the positive sustainability stories just didn't really work out. before like nobody, like people stopped believing in it.
So like by opening up and showing your negative side and negative impact as well, but still show that, okay, yes, I admit to it. I do have this negative footprint, but here are my actions and my plans to actually make up for it and do and drive positive change. I think that's just so refreshing for customers, consumers alike that, you know, you [00:42:00] should just go all in on that.
Phil: It seems like quite a challenge and quite an opportunity for people to be positive and to go all in on that. Emmanuel, do you want to, do you want to bring us home? I would say take
Emmanuel: the materiality assessment serious, the double materiality assessment. Start by doing the very first important aspects, your internal analysis.
Do your internal benchmarking to understand to what extent do you already today fulfill this CSRD requirement so that you are able to identify the gaps and then you are prepared actually to identify the resources in the most efficient way. To close this gap to at the end of the day, not only to be compliance, but actually charting a sustainable transformation, business transformation, not only for your children, but the children of the next generation.
Because all these things we are discussing is always fulfilling just one objective, [00:43:00] and that is in the definition of what sustainability stands for. We today. Being able to fulfill or meet our needs today with the available resources we have, whether it's a production practice, consumption practice, whatever it is, without actually compromising the ability of the next generation of fulfilling their same need with the same available of resources.
And in order to be able to do that, it is better, in my opinion, to be proactive. Then being reactive. And this starts with the materiality assessment.
Phil: Start with this material assessment, and it takes so much more. It seems like CSRD is this practical approach to a really big vision, and it requires a lot.
Passion, leadership, courage, positivity, and insight. And you guys clearly provide a lot of that in your work. And thank you so much for sharing your wisdom with us today. I expect that a lot of people are going to get a lot of comfort. And a lot of discomfort out of what you shared, but, uh, you know, [00:44:00] they say that the best things are never easy, but they're always worth it.
Thanks again. We really appreciate it. Thanks for having us, Phil.
Ana: Thank
Phil: you, Phil.
Ana: Thank you.
Phil: Thanks, guys.
Thanks again to Anna, Emmanuel, Lita, and Richard for joining us on the podcast. And now, here are my top takeaways regarding CSRD. One, there's significant talk of the cost and challenge this legislation will pose to corporations. And that is warranted. Many companies don't have the current understanding or expertise to meet these new and potentially intimidating requirements.
That said, there are many benefits, and going through this process can both provide a company with a roadmap for its sustainability strategy and illuminate the opportunities that the sustainable transition can bring. 2. There is a cost, but it can also help capital inflow into the companies. The EU is investing in sustainable companies to fill the Paris Climate Change Agreement requirements.
The information is also useful [00:45:00] to investors. 3. While CSRD is a European legislation, it will undoubtedly have global impact, increasing a company's transparency regardless of nationality. Supply chains are global. CSRD will have a waterfall effect far beyond the boundaries of the EU. Historically, supply chains lacked transparency when it came to the issues related to ESG and sustainability, so this will drive global change in the future.
That should deliver ripples of positive impact. We learned through this conversation that if companies can embrace this as an opportunity and overcome resistance, it can be extremely beneficial and maybe even transformational. Thank you for joining us on this episode of Rethinking EHS. We'd like to thank our exceptional guests for sharing their expertise.
Please don't forget to hit that subscribe button wherever you listen to podcasts so you never miss an episode. For more tools and tips on how to work globally with the local lens, check out the global resources page on the Inogen Alliance website to access [00:46:00] webinars, downloads, ebooks, and more. Find the link in the show notes or visit www.
inogenalliance. com forward slash resources. Follow Inogen Alliance on LinkedIn for the latest updates. And until next time, let's innovate, inspire, and rethink EHS together.
