Helping clients tackle European sustainability legislation

Gone are the days when sustainability was a matter of “take it or leave it”. The European Commission has now set out which activities contribute to a climate-neutral economy and may rightly be called ‘sustainable’. Known as the EU taxonomy for sustainable activities, this list serves as a guide to investments in sustainability. The European Commission’s Corporate Sustainability Reporting Directive (CSRD) additionally requires larger firms to report on the progress they’re making when it comes to sustainability.

“Companies know that more and more transparency will be demanded of them in terms of their impact,” says Carolien Peeters of ABN AMRO’s Sustainability Expertise Department serving business clients. “But these companies still have a lot of unanswered questions like, do these requirements apply to us, too, and if so, starting when? What do they mean for our business, and what data should we be collecting?”

Just big companies?

“While many of these firms have heard of the CSRD, they often think the legislation doesn’t pertain to them,” adds Claire Gillig-Brouwer, director of Sustainability Expertise. “And that may be true – for now, at any rate. Legislation mainly targets larger companies at the moment, companies meeting at least two of the following criteria: they have over 250 employees, EUR 40 million in turnover, or EUR 20 million on their balance sheet. But even those companies that do not meet these criteria will also be affected by legislation because of the questions their banks and lenders are likely to be asking them.”

Advisory processes

In order to help clients meet the new requirements head-on, ABN AMRO recently started to offer so-called advisory processes in which advisers from the Sustainability Expertise Department sit down with a client to discuss relevant sustainability-related and regulatory developments. The sessions are tailored specifically to the company in question. At the end of the process, the client is provided with a tailored advisory report listing concrete actions for developing or improving their sustainability strategy and reporting.

The very first advisory process was recently completed over a series of five sessions with a client in the mobility sector. Carolien says, “In the sessions, we guided the client through the details of regulations in the pipeline that are relevant to them, and discussed strategies for making preparations. We also shared tools to help the client identify and address material sustainability issues in their strategy.”

She continues, “It’s hard for a company to know something it doesn’t know. That’s where the danger lies. This particular firm had yet to formulate a strategy and is now acutely aware of the urgency of the situation. And they now have specific advice on how to proceed.”

Material issues

Carolien says the sessions weren’t just about collecting data, but also about helping the client identify material issues – those most important to the company. These relate to the impact the company itself has on people and the planet as reflected in carbon emissions, human rights and biodiversity, for example. But the new regulations also require that businesses understand developments in sustainability that could lead to them incurring financial risk.

“While direct risk for certain companies may be negligible, they are exposed through their supply chain and the risks it poses,” Carolien explains. “Once material issues have been identified, a company can get to work on creating the infrastructure needed to collect data. These data provide insight into things like current energy consumption, allowing it to then set improvement targets.”

A first step

Claire says, “We know exactly what companies have to report on and what they’ll be assessed on. This particular advisory process proved to be a meaningful journey – and a huge eye-opener for the client. They were a bit overwhelmed when they realised how much there was to do, but at least they can now take the next step following the specific recommendations we were able to give them.”

An advisory process is a great first step for companies looking to get a clear picture of the challenges ahead. “New legislation is coming, and it takes time to implement new processes,” Claire stresses. “If you have to publish data in 2024, now is really the time to make a start. And we’re excited about helping our clients get the ball rolling.”