EU sustainability policy: a choice between spreadsheet stagnation and climate leadership

CSRD, CSDDD, CBAM, ESRS, DPP: the soup of sustainability consonants that will either make Europe a global climate superpower or result in the most expensive set of PDF files in the world. I implore colleagues from the EU to sit down and try to design a product, or fictional company, compliant with their own regulations. I am happy to host a workshop and give them the tools and artificial data to do it. When we design policy, we often look at the ‘big picture’- the overall goals and ambitions. After many, many rounds of stakeholder engagement and discussions, legal teams sit down and craft the legal text. This process is often conducted strategically to obtain broad bureaucratic (Directorate-General) and political (Members of the European Parliament) support.

However, the true barometre of whether or not a policy is successful is what actually happens on the ground. The role of national regulators will define whether Europe remains a global climate leader. President Trump’s recent election is the most likely prompt for the European Commission President von der Leyen to announce a consolidation of sustainability policies. If the US goes in all guns blazing, which it almost certainly will, the EU has the hard task of selling sustainability to increasingly nationalist modus operandi European citizens and business leaders. Italy transposed CSRD with a maximum fine of €150,000, whereas Germany has not transposed it yet, but is considering fines up to €10,000,000 or 5% of turnover. Guess what will happen if the German regulator imposes a big fine, or no fines whatsoever? Either decision will have historic consequences.

I therefore have a simple policy recommendation stemming from the transformational work on UK energy regulations and digitalisation: the ‘report it once principle’.

Whether a company is reporting against CSRD, CSDDD, CBAM or ESPR – they could be using the same underlying data with variations of meta-data transforming it. A lot of commentators wrongly claim that the Draghi report argues against sustainability reporting- it does not quite do that. The 25% recommendation of reducing reporting is the sheer volume of data required by various EU policies and regulators. Through the ‘report it once principle’, this reduction should be achievable. Why should a company not be able to report its data using one solution and set of principles? Instead, one has to have a data management degree, engineering degree and a legal PhD just to understand what they are supposed to do to comply – let alone leverage those regulations.

The Draghi report rightly places decarbonisation front and centre. If the EU wants to cut regulatory burden, it should leverage AI tools to make policy more understandable. Consultancies existing solely for the purpose of explaining what policy means to companies should not exist. Good policy should be understandable, pragmatic and clear if the aim is to inspire growth. This allows agile startups to rapidly build solutions, companies to quickly adopt them and CEOs to enable sustainable decisions as a default in companies.

We currently face a stakeholder communication problem. CSRD, CSDDD and DPP could be transformational cost discovery exercises promoting growth. However, a lot of companies may merely see these policies as a ‘reporting burden’. How can a company make sense of ESG as a whole unless it is simplified and clear as to what we are trying to achieve? Imagine you are a sustainability lead at a company:

Supplier A is based in Lebanon and Supplier B in the UK.

Supplier A has 12% less emissions, 18% lower cost and uses 15% less water than Supplier B. Supplier A is founded by a social entrepreneur employing former prisoners of war.

Supplier B has a 13% lower pay gap, emits 43% less air pollutants and has a 28% less ecological impact. They are an SME in Wales employing 12% of the population in a small village.

Do you need all that information to make a decision on who to choose to supply you with a sweater, car safety bolts or pre-heating boiler parts? Do you want that information to make a decision? What is the actual goal when so many metrics are conflicting? Here is where a manager may likely revert to choosing the lowest cost- especially in times of likely trade wars and tariffs.

If Europe is serious about global climate leadership, the regulatory regime should enable decarbonisation and not emissions gaming that, perversely, only makes Europeans feel better about our ‘greener’ choices.

A final, separate, perhaps pedantic, grudge I have with reporting is our naming convention. Many incredible officials worked to produce the Draghi report- I named it as such in this article because that is how people refer to it. Yet everyone talks as if the man himself locked himself in a dark room with an endless supply of cigars and whiskey, and for two years ‘crunched the numbers’ to singlehandedly write the report. This report is a recognition for all, nameless in the public sense, policy officials who contributed to it. I know your work is hard, but it is incredibly impactful.

Take it from a former regulator and enforcer in sustainability policies- no one is rooting more for these policies to succeed than I am. I have spent my entire career enabling businesses and policy-makers to support cross-industry decarbonisation. Let us make sure policies help Europe prosper and not just make us feel marginally better about our consumer choices.

The views expressed in this #CriticalThinking article reflect those of the author(s) and not of Friends of Europe.