Corporate and Professional Sustainability in Light of the New Reporting Directive

In December 2022, the European Parliament and the Council published a directive that is radically changing the reporting landscape of sustainability: the corporate sustainability Reporting Directive. This new approach to sustainability will require companies to redefine their purpose not just as suppliers of goods or services, but also as active agents in promoting sustainability. However, while the purpose of this directive is laudable, its implementation is raising important questions.

The Complexity Dilemma

For many managers, the new directive has become a source of complexity and an additional burden. The amount of regulations and taxonomies surrounding reporting has often become insurmountable. This has led many companies, especially smaller ones, to rely on expensive global consulting firms to comply with the regulation.

The Alarm for SMEs: Sustainability as a Challenge for Small and Medium Enterprises

Attention to corporate sustainability has grown significantly in recent years, driven by increased awareness of the environmental and social impacts of business activities and pressure from regulators and investors. However, this growing focus poses a significant challenge for small and medium-sized enterprises (SMEs), which often face added costs and complexities in complying with sustainability regulations and expectations. This section will explore the scare SMEs may face in relation to sustainability.

1. Costs and Limited Resources: SMEs, unlike large companies, often have limited financial and human resources. Implementing sustainable practices can involve significant upfront costs, such as adopting more energy-efficient technologies or training staff. These costs can be particularly burdensome for SMEs, which may already be operating on tight margins.
2. Regulatory Complexity: Sustainability regulations are constantly evolving and can vary from country to country. For SMEs, navigating this regulatory complexity can be a challenge. Understanding new laws and regulations, collecting data, and preparing sustainability reports requires time and resources that SMEs may not have at their disposal.
3. Supply Chain: SMEs are often part of larger supply chains and may be subject to sustainability requirements imposed by their customers or business partners. These requirements may require additional investment to ensure compliance, and SMEs may risk losing business if they fail to meet them.
4. Financial Pressure: Access to finance is essential for the development of SMEs, but more and more investors and financial institutions are considering sustainability as a criterion for evaluating companies. SMEs that fail to demonstrate a commitment to sustainability may have difficulties in obtaining financing or obtaining favorable terms.
5. Training and Awareness: Sustainability requires a corporate culture that is oriented towards social and environmental responsibility. For SMEs, promoting this culture among employees may require significant efforts in training and awareness. Lack of knowledge and awareness about sustainability can be an additional obstacle.
6. Collaborative Solutions: To address these challenges, many SMEs are looking for collaborative solutions. They can join consortia or business networks to share resources and knowledge on sustainability. Additionally, industry associations and government bodies can offer support and resources to help SMEs adopt sustainable practices.

The alarm for SMEs in relation to sustainability is therefore a complex and relevant issue. While SMEs may face significant challenges in complying with sustainability regulations and expectations, it's important to recognize that there are also opportunities. Adopting sustainable practices can improve operational efficiency, increase attractiveness to investors and customers, and help build a positive reputation. However, it's crucial that SMEs receive the necessary support, both in the form of financial resources and training, to address these challenges. success this challenge and contribute to the broader goal of corporate sustainability.

The Proposed Solution: Exemptions and Sanatoriums

Faced with this situation, many voices propose the idea of ​​generalized exemptions or amnesties. This means that, rather than actually committing to sustainability, many companies could simply be exempted from regulatory compliance. This approach, although understandable given the complexity of the directive, goes against the very spirit of sustainability.

The Necessary Analysis

To understand how we got to this point, it is important to examine the intrinsic characteristics of the requirements required by companies and the culture of the professional community responsible for implementing the regulation.

Much of this has been shaped by the global financial community. Financial investors have placed greater emphasis on specific aspects of sustainability, known as ESG (Environmental, Social, Governance). These standards have been set by entities with strong financial ties.

Sustainability Reduced to Standard

Sustainability, which should be a commitment and a responsibility towards the future, has been reduced to what is useful to financial investors. ESG indicators become a tool to manage investment risk, but this reductive vision of sustainability goes against its true purpose.

The Power of Accountability: Definition and Implications

The power of accountants within the context of corporate sustainability is a crucial element to examine. Accountants are the professionals responsible for verifying and ensuring the reliability of financial records and, increasingly, sustainability information of companies. However, this specific role can have important implications and limitations when it comes to fostering a true culture of sustainability.

1. Distrust and Control: One of the key characteristics of accountants is their distrust. Operating under a presumption of distrust, they focus on complying with predefined rules rather than understanding the consistency between the company's actions and the records. This approach is suitable for financial accounting, but can be problematic when it comes to assessing sustainability, which requires a broader, action-oriented view. Sustainability is not just about following the rules, but also about actively engaging in sustainable behavior.
2. The Conflict between Cartesian Vision and Sustainability: The Cartesian view typical of accountants is based on the external observation of a corporate world that is described according to universal rules. This approach works well for traditional accounting, but does not take into account the complexity and variety of corporate actions aimed at sustainability. Sustainability is a multi-factor objective that requires an integrated approach, which goes beyond predefined rules.
3. Standardization and Limitations: In the field of sustainability, materiality analysis has become a key concept. However, this analysis is often based on predefined standards and a list of sustainable behaviors. This standardization can limit a company's ability to be truly innovative and adopt customized approaches to sustainability. This can lead to the risk of conformity rather than active promotion of sustainability.
4. The Role of Accountants in Enforcing Financial Community Rules: The global financial community has a huge influence on companies through financial investors. These investors, in turn, impose specific rules and standards that companies must comply with. The role of accountants is to ensure that companies comply with these rules, but this may not always be aligned with the goal of sustainability, which should go beyond simply complying with financial rules.

While accountants play a critical role in ensuring the reliability of companies’ financial and, increasingly, sustainability information, it is important to recognize that their control- and compliance-based approach can present challenges when it comes to fostering a true culture of sustainability. Relying solely on accountants to drive the sustainability agenda can limit the innovation and flexibility needed to address evolving environmental and social challenges. It is therefore essential that companies take a broader approach and engage the entire organization in driving sustainability rather than relegating this responsibility to accountants alone. In this sense, sustainability should become an integrated commitment across the company, driven by the awareness of responsible citizens working within companies themselves.

The Active Citizens Perspective: A Vision of Sustainability

The active citizen perspective represents an alternative and highly desirable approach to promoting corporate sustainability. In this context, active citizens are understood as individuals who not only exercise their role within a company but who, beyond their professional functions, maintain a commitment to sustainable actions both inside and outside the organization. This view of sustainability contrasts with the traditional approach of accountants, who tend to focus on compliance with predefined rules.

1. Individual and Collective Responsibility: From the perspective of active citizens, sustainability is not just a task assigned to a specific department or professional, but a responsibility shared by everyone within the company. This means that every individual within the organization recognizes the importance of sustainability and actively works to promote it in their daily actions.
2. Personal Commitment and Values: Active citizens are driven by personal values ​​related to sustainability. This personal commitment may include sustainable lifestyle choices outside of the workplace, such as reducing resource consumption, actively participating in environmental or social initiatives, or adopting greener lifestyles. These values ​​also influence the individual's actions within the company, pushing them to promote sustainability.
3. Creativity and Innovation: The active citizen perspective promotes creativity and innovation as key elements to address sustainability challenges. Individuals are encouraged to develop new solutions, adopt sustainable practices, and propose initiatives that can contribute to the advancement of corporate sustainability. This innovative mindset is essential to address complex sustainability issues.
4. Community of Practice: Within the company, active citizens can form a community of practice dedicated to sustainability. This community provides a space where individuals can share ideas, knowledge and experiences related to sustainability. This sharing fosters collaboration and continuous learning within the organization.
5. External Involvement: Active citizens do not limit their sustainability efforts to just within the company. They actively participate in external initiatives, groups, and communities that promote sustainability. This external involvement can help build positive relationships between the company and external stakeholders, such as the local community, suppliers, and customers.
6. Sustainability As Culture: Overall, the active citizen perspective aims to transform sustainability from a task to a corporate culture. Sustainability becomes an integral part of the organization's identity and values, influencing business decisions, strategy, and relationship with the outside world.

The active citizen perspective represents a more inclusive and action-oriented approach to promoting corporate sustainability. This approach goes beyond simply adhering to predefined rules and standards, but encourages innovation, creativity, and the adoption of personal values ​​related to sustainability. In this way, sustainability becomes an essential part of the corporate culture, guiding the decisions and actions of all individuals within the organization. The active citizen perspective can significantly contribute to the advancement of corporate sustainability and its integration into long-term business strategies.

The new directive on sustainability reporting has the merit of highlighting the importance of corporate and professional sustainability.

However, its implementation has raised important questions about complexity, costs and effectiveness. To address these challenges, it is necessary to rethink the role of professionals and embrace an active citizenship perspective, where every individual and every company concretely commits to improving sustainability, beyond regulatory compliance. Only then can sustainability become a reality rather than a mere bureaucratic procedure.

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