If the planet is facing the wall of global warming and its consequences with one climate disaster after another, European companies are facing the wall of legislation on corporate sustainability (CSRD), to which they generally subscribe philosophically, but are wondering how to implement it.

While the first 11,000 companies--insurance companies based in Europe, European banks, certain large European companies and certain non-European companies that are listed in Europe--will, in 2025, have to report on the implementation of the CSRD in 2024, the challenge could very quickly concern many other entities, which are not all prepared for it in the same way.

“The intention was born out of the Paris agreements. There’s a climate challenge. We have to be able to limit global warming to 1.5 degrees, and that is more or less the core of this directive on corporate sustainability reporting,” explains PWC advisory partner and sustainability leader Michael Horvath, who, along with deputy manager partner and technology and transformation leader , has co-authored a 56-page educational report titled “” on how to meet these obligations. “Companies need to understand that they have been doing financial reporting for years now, but that there is a second angle to this, which is non-financial reporting, where they do not yet have standards at company level, and not all of this is set at European level either, which means that there will obviously be difficulties... Especially as the two reports will be considered at the same level,” he says.

Value chains to be examined

For the time being, “many companies are wondering whether they will be in the scope or not” from next year, says Horvath. After this first stage, for which companies are already best prepared to report, in 2026 for the year 2025, European companies that meet two of the three conditions (more than €50m in turnover, more than €25m in assets and/or more than 250 employees) will have to comply; then, in 2027 for the year 2026, all companies listed in Europe; and the following year, non-European entities that have had a turnover of more than €150m in recent years and meet another condition.

“You have to look at the value chains,” explains Horvath. “You could very well have a large distribution chain, forced to postpone. Once it has implemented the processes, it will ask itself how it can improve its balance sheet. What are they going to do, they’re going to look at everyone in the chain, from the end customer through logistics to producers?” Obviously, if the distribution chain wants to green its balance sheet, it will have to talk to its stakeholders, in a game of soft power, to invite them to green their own balance sheets if they have not already understood.

Assessing dual materiality will be key

The key point, says Horvath, will be to establish an assessment of dual materiality, which ‘walks’ on two legs: financial materiality (how environmental, social and governance (ESG) factors impact a company's financial and economic performance) and impact materiality (how a company’s activities affect its environment, society or stakeholders). “It’s an external effect similar to what we have in part with Dora [Digital Operational Resilience Act] and it’s something you’ll hear more and more about in the market. People aren’t particularly keen on it, because it means potentially having to account for a lot of different activities within your groups, which makes it extremely complex to manage. And it can’t be ruled out,” he says. “Defining the scope is one of the big issues, because it can be done correctly or wrongly. And, underneath it all, I think this is probably the most important aspect: it’s all audited at the end.”

This data should end up in the hands of the European Commission, which will then be able to benchmark entire sectors of the economy, while management will inevitably have to try to limit the company’s impact in order to remain among the most virtuous players.

Data to consolidate, management systems to organise

Data is also a sensitive issue, as highlighted by the survey attached to the report: 55% of the companies questioned said that they had difficulty in obtaining quality, reliable data, while 45% were not convinced that they had sufficient resources to meet their obligations. Nearly one company in two (48%) has put in place comprehensive training programmes for its teams, while one in three has made do with specific training. Four out of five companies will adopt technology, if they have not already done so, in order to be able to report properly, a responsibility that falls mainly to the financial director (29%) and the CEO (27%) for those who are already in the process of finalising their first report, while the second ‘promotion’ has delegated it to the financial director (34%) or to a director in charge of overseeing the sustainability strategy and environmental, social and governance responsibility or CSO (22%)--a role that does not yet exist everywhere.

“If the challenges of having quality and consistent data are anticipated, the demands for accurate and real-time ESG reporting represent an opportunity for growth,” adds Carré. “Companies need to invest in robust data management and reporting systems to overcome the obstacles.”

And the report also shows that companies, even if they will find it difficult to get going, see it as an opportunity: fewer than one in five say they expect no effect from this European directive.