Exclusive interview with Michel Scholte

Impact Entrepreneur, Speaker & Co-Founder, Impact Institute; Instructor, CSRD Academy

CSRD: Popular myths, common mistakes and key opportunities

CSRD mandates comprehensive and consistent reporting on sustainability metrics, driving companies to disclose their environmental, social, and governance (ESG) performance more transparently. It is also seen by many as overwhelming, burdensome or costly. There are still many questions left unanswered.

In an exclusive interview for Sustainability Index Magazine, Michel Scholte helped us identify the most popular myths, common mistakes and key opportunities around the intriguing CSRD.

Michel is an impact entrepreneur, keynote speaker, sustainability writer, director and co-founder of Impact Institute and True Price. In this role, he focuses on calculating and improving the true price of products, including social and environmental costs. Impact Institute provides data, software, (digital) education and advice on impact measurement and management. Michel is also a founding board member of Impact Economy Foundation, where he develops an open-source impact accounting method together with Harvard Business School’s Impact Weighted Accounts Initiative.

1. Impact Institute is a social enterprise on a mission to empower organizations and individuals to realize the impact economy through open-source standards for impact measurement and valuation. How would you define “impact”? What is your piece of advice for a company that aims to identify and improve impact, but is not sure where and how to start the journey?

At Impact Institute, we define “impact” as the tangible and intangible consequences of an organization’s actions on the environment, society, and economy. It encompasses both positive and negative effects, measured not only in financial terms but also in social and environmental dimensions. Essentially, impact represents the real-world footprint of an organization’s activities.

For companies aiming to identify and improve their impact, my advice is to start with a comprehensive impact assessment. Begin by mapping out your value chain and identifying key areas where your operations intersect with environmental and social factors.

Engage with stakeholders, including employees, customers, suppliers, and communities to gather diverse perspectives on your impact. Use robust measurement tools and frameworks, such as the Impact-Weighted Accounts Initiative, to quantify and analyze these impacts.

Once you have a clear picture, prioritize areas for improvement based on their significance and feasibility. Set measurable goals, integrate them into your core business strategy, and continuously monitor progress. Transparency and accountability are crucial. Communicate your impact goals and achievements openly to build trust and drive collective action.

Remember, the journey towards positive impact is ongoing and requires collaboration, innovation, and a commitment to sustainability at all levels of the organization.

2. CSRD ACADEMY was started by Impact Institute to empower businesses and professionals to help them comply with the CSRD and address the current sustainability challenges through the guidance of leading experts in sustainable development, finance, education and compliance. Which are, in your view, the top three consequences of CSRD for the transformation of the role of businesses? What about the key opportunities you envision for companies?

Through CSRD ACADEMY we educated more than 500 professionals and 100 companies across Europe and beyond. The Corporate Sustainability Reporting Directive (CSRD) will significantly transform the role of businesses in three major ways:

1. CSRD mandates comprehensive and consistent reporting on sustainability metrics, driving companies to disclose their environmental, social, and governance (ESG) performance in a more transparent manner. This heightened transparency will foster greater accountability and trust among stakeholders, including investors, customers, and regulators.
2. Businesses will need to integrate sustainability into their core strategies, decision-making processes, and operations. This shift from peripheral CSR activities to central strategic imperatives will encourage companies to innovate and adopt more sustainable practices, leading to long-term resilience and competitiveness.
3. CSRD emphasizes stakeholder engagement and requires companies to consider the interests and impacts on various stakeholders. This will drive businesses to engage more deeply with their stakeholders, fostering collaboration, and addressing material issues that are critical to their long-term success.

There are multiple key opportunities for companies under CSRD, but I will focus on the top three. First of all, early adopters of comprehensive sustainability reporting can differentiate themselves, attract sustainability-conscious investors and customers, and gain a competitive edge. Secondly, identifying and managing ESG risks proactively, companies can mitigate potential financial and reputational risks. Last but not least, the push for sustainability can spur innovation, leading to more efficient processes, cost savings, and new business models that align with a low-carbon and circular economy.

3. What are the most popular myths around CSRD and the most common mistakes made by companies in reporting?

Many believe CSRD will be overwhelmingly burdensome and costly. While compliance does require effort and investment, the benefits of improved risk management, enhanced reputation, and long-term sustainability far outweigh the initial costs.

There is also a misconception that CSRD imposes a one-size-fits-all approach. In reality, CSRD allows for sector-specific adaptations, recognizing that material impacts and reporting needs vary across industries.

One of the most common mistakes in reporting includes poor data quality and the lack of reliable data sources that can undermine the credibility of sustainability reports. Companies often fail to invest in robust data collection and management systems.

Another mistake we identified is that, when reporting, some companies focus on superficial disclosures rather than addressing material impacts. It’s crucial to provide meaningful and substantive information that reflects genuine sustainability efforts.

It is also important to mention that failing to engage with stakeholders can result in overlooking critical issues and missing valuable insights. Effective reporting should be inclusive and responsive to stakeholder concerns.

4. You are a frequent Speaker on topics that include sustainability reporting frameworks, stakeholder engagement, and ESG metrics. In what ways do you believe CSRD will impact relationships in the business environment?

CSRD will profoundly impact company and stakeholder relationships in various ways.

By mandating detailed and reliable sustainability disclosures, CSRD will enhance trust between companies and their stakeholders. Transparent reporting allows stakeholders to make informed decisions and hold companies accountable for their ESG performance.

CSRD encourages ongoing dialogue with stakeholders, fostering a more collaborative and inclusive approach to sustainability.

Companies will need to actively engage with stakeholders to understand their concerns, expectations, and priorities, leading to more responsive and impactful sustainability strategies.

As companies align their operations with sustainability goals, the interests of various stakeholders – such as investors seeking long-term returns, customers demanding sustainable products, and communities concerned about environmental and social impacts – will increasingly converge. This alignment can lead to stronger, more resilient relationships and shared value creation.