In the first article we saw how the CSRD works, and in the second, the criticisms that can be levelled at the system. In this article, we look at the points to bear in mind to guarantee best practice in CSR strategy, as required by the CSRD.
The criticisms in the second article were mostly drawn from English-language articles that look at the European CSRD with curiosity and wonder whether this approach is really the most effective (all the sources are in our article The CSRD, its critics and the risks of greenwashing).
In France, CSR professionals seem won over by this regulation, notably because of the transparency mechanisms that have been designed. These should also allow the financial sector and economic players to guarantee the viability of a business ad vitam aeternam. Indeed, 40% of funded companies fail within 5 years, rising to 80% for start-ups, a high-value-added sector that could allow France to make up a strategic and economic lag.
The ambition of the CSRD and its comprehensive framework deserve to be highlighted, because they not only strengthen management's strategic priorities but also help prevent risks coming from all sides.
On the other hand, because of its complexity and a troubled economic and political context, 3 aspects overlooked by the regulation need to be taken into account if a CSR strategy is to strengthen company performance:
· Simplifying the principles and getting as many people as possible to adopt them
· The importance of competence, authenticity and integrity
· Communicating, promoting and "influencing" through CSR initiatives
1. Simplifying CSR principles and getting as many people as possible to adopt them
If trends catch on, it is above all because the principles are simple and easy to adopt. What made digital technology a success and brought it into people's homes was the appearance of the desktop and the mouse in 1984. An ultra-fast, ultra-playful adoption that revolutionised the perception of the computer, to the point of pushing Microsoft to do the unforgivable and steal the concept from its former ally.
An immediate success, despite the fact that at the time, typing a text on a computer took longer than writing it by hand.
But the enthusiasm for this emblem of modernity, financially accessible to all, quickly paid for the improvements. It was accessibility, and the associated values that came with it, that changed the way most people lived. In the 1980s, the general public was hungry for technology and inventions, as shown by the success of Back to the Future and Blade Runner. A few decades later, access to the personal computer made it possible to create new economic principles such as online sales, streaming and video game platforms, social media, and so on.
Another example of ease of use serving the economy is found in online ratings. According to a joint study by the Ningbo School of Business (China) and the University of Sydney (Australia), the principle initiated by eBay and other smaller sites now influences 93% of purchasing behaviour. Moreover, a study by Oxford Economics and TripAdvisor estimated the platform's contribution to the tourism industry at more than 500 billion dollars, not counting the considerable improvements in the sector since the experience-sharing site appeared. Thanks to this live feedback, people are no longer afraid to book an unknown hotel in an unknown place. The offer has grown, paving the way for new solutions such as Airbnb. The wealth created is considerable.
Simplifying methods therefore makes it possible to engage as many people as possible in your strategy. The idea is to convince people to adopt the simplest principles so that new virtuous practices can be imagined quickly. The more people are convinced, the greater the chances of finding new processes. To get the best results from your CSR strategies, both in terms of innovation and economic impact, it therefore pays to simplify the approach as much as possible and to engage all your stakeholders.
2. CSR strategies require competence, authenticity and integrity
The CSRD was designed by the "big four" to prevent social, economic and environmental impacts. While risk management is at the heart of this regulation, the idea of using CSR as a driver of growth was not considered in this framework. Yet this principle is very much part of the fundamentals of the approach, acting as a real engine for improving practices. We will look at the mechanisms in the next two points.
Moreover, the CSRD's technical committees themselves admit the lack of tools and the supposed experts' lack of knowledge of the subject. Indeed, the statutory auditors responsible for verifying the data in the non-financial report are now required to complete 90 hours of training on these principles.
On the other hand, what the CSRD teaches us is that sustainability ambitions require deep knowledge of the company, but also knowledge of economic, social and environmental contexts. That knowledge demands total commitment that cannot be replaced by a magic "all-in-one" tool.
Identifying the right tools under the CSRD so as not to penalise the company
In France, the lack of CSR knowledge and skills is being addressed by schools. For several years now, they have been specialising in teaching this discipline, or now offer a few modules to cover the basics. It is a safe bet that within 10 years, the expertise will be widespread, but in the meantime this leaves an open road for economic players who see CSR principles as just another market for generating quick revenue.
Those who went into CSR out of conviction saw a wave of entrepreneurs arrive in 2020, attracted by the new market created by the 2019 Energy and Climate Act and the obligation to publish carbon emissions reports. Logic would have dictated that these newcomers partner with the experts before getting started. But the lack of knowledge among professionals and the general public, the sudden obligations around measuring carbon emissions and the public subsidy envelope of several billion euros persuaded them to go it alone.
International pressure has France in a vice, and CSR criteria are appearing in calls for tender even though the contracting authorities have never heard of the subject. From carbon measurement to training and labels, these businesspeople manage to get recommended by Bpifrance or public buyers despite the alarm bells rung by experts, who denounce the risks linked to these newcomers' lack of qualifications.
In her article Competition heats up between carbon footprint start-ups, the journalist echoes what carbon accounting experts say about the solutions offered by Greenly or EcoVadis. In her paragraph Purists versus clickbait? the article even mentions unfair practices used to win contracts. When you operate in the ethics sector and know its foundations, such methods are completely out of bounds because of their harmful economic effects in the medium term. In its more recent article: Carbon audit: the happy "mistake" that allowed Greenly to inflate its revenue, the outlet writes that the start-up recorded 14.3 million euros in losses in 2023, while a former Greenly employee describes a very aggressive sales strategy with heavy pressure on the sales team.
With the appearance of CSR criteria in public calls for tender, another newcomer was quickly promoted by Bpifrance from 2020. By borrowing the 3 stars of AFNOR's visual, B Corp's frameworks, Rate A Company's stakeholder approach and other competitors' know-how, and later EcoVadis's platform side, this player offers a solution that aggregates the expertise of others. In our article Can I copy my competitors' CSR approach? we analysed the risks of this kind of practice. Actively marketing a product or service you do not master leads to fatal errors. In this case, quite apart from the immorality, experts denounce this new label's misleading marketing. By declaring itself the "official CSR label in France" when it does not comply with French regulations on the matter, then declaring itself the "official European CSR label" when the French authorities expressly refused that harmonisation, the label wins over leaders with its aggressive marketing but makes those in the know wince. Especially since this hotchpotch of methodologies has resulted in a system incompatible with the recommendations of public specialists on the subject.
With the 2023 regulatory obligation, a number of these newcomers to the carbon footprint market are positioning themselves on the CSRD, a regulation that was nevertheless meant to democratise good practice, the only guarantee of sustainability. Seeing the funding granted, another wave of curious players is also entering the sector, sometimes with fine promises. The question to ask, ultimately, is: if the prices are attractive, what legitimacy does the method have, and what are the benefits for a company leader who buys these services to meet the CSRD's obligations?
The legislation was drafted by the "big four" firms so that their consulting arms could do real in-depth work on these subjects in-house.
The CSRD calls for the search for relevant information, conscientious methodologies and pragmatic, indisputable tools. Given how the CSRD was designed, it therefore seems inconceivable to delegate the task to an outside company that has only been operating in the field for a very short time. This solution has very little chance of producing an authentic and beneficial CSR strategy, even less so if it is an "all-in-one" solution. But how can a CSR manager read the offer presented to them clearly? How can they convince their CEO to allocate resources to the CSRD? All the more so if no positive impact on company performance is seen quickly? It is a vicious circle.
The importance of choosing authentic players for your approach
Everything always comes out in the end.
A principle that drives the best-performing and most sustainable companies to work on their reputation as much as on the quality of their product or service.
The CSRD requires gains to be measured over the long term against risks and expenditure. Yet according to a 2020 PwC survey, unethical behaviour cost 5,000 companies 42 billion dollars. Only 26% of these hidden costs stem from management decisions. Most fraud comes from the cascade effect of customers, employees and other stakeholders who feel justified in behaving badly in return. How will stakeholders react if they are not convinced of the company's sincerity when it obtains a CSR label, or when they read a non-financial report signed off by questionable brands?
Other international studies show that, conversely, players in the value chain are 8 times more likely to act ethically if they feel the company's governance is ethical. It therefore seems essential to surround yourself with irreproachable sustainability players in order to trigger productive reactions from stakeholders.
The Harvard Business Review article Your CSR Strategy Needs to Be Goal Driven, Achievable, and Authentic recalls the CSR strategies of major groups, and in particular Apple's 200 million dollar investment to achieve racial equity and justice. The article explains that these forms of commitment are essential because big problems such as climate change or inequality call for big measures and systemic solutions, and that consumers and investors alike are now demanding change.
To bear fruit, CSR strategies must bring about deep change. Such an example of leadership requires expert skills but also authentic commitment. According to EY, 92% of Gen Z are looking for authenticity, and according to the Forbes article, this principle of authenticity implies, among other things, strong moral integrity, strong creativity and leadership in a field.
This commitment and authenticity must be reflected in the company's actions, including in the choice of the CSR tools and partners that will serve as its showcase. Choosing a slapdash solution could, in the medium term, not only lose the advantage of an efficient CSR strategy, but also generate additional risks in terms of reputation, and within the transparency framework defined by the CSRD.
While consumers favour ethical companies, some studies warn of the possible backlash of being caught red-handed washing. CSR credentials are becoming widespread among the younger generations, as is sharing experiences on social media. So there is no way to keep burying your head in the sand.
3. Communicating, promoting and "influencing" through CSR initiatives as an integral part of the CSR strategy
In the non-financial report, the CSRD requires organisations to think about how to communicate the CSR strategy to all stakeholders and, in ESRS G1, to the organisation's managers.
A power of communication that has been found in Anglo-Saxon management for almost a century. Without any regulatory obligation, the world's leading companies have grasped the opportunity while measuring the associated risk. With identifiable strategies, one or a few "flagship" projects presented with humility, authenticity and resources, some brands manage to stand out from the competition thanks to their ingenuity and their ability to rally people around their boldness.
This practice is neither recent nor limited to the culture across the Atlantic. It was the strategy of the artist Oliviero Toscani for the Italian brand Benetton in the 1980s. By taking a stand against racism and injustice in its campaigns and messages, the brand enjoyed dazzling international commercial success.
A recent example is Apple and its programme against racial injustice, REJI, launched in 2020. It has gone well beyond its national scope to extend to the United Kingdom, Mexico, Australia and, recently, New Zealand. While a sum of 100 million had been announced, the budget has already doubled to provide ethnic minorities with real support in access to education, help setting up businesses and access to digital equipment. Nearly 160,000 people from minority backgrounds have benefited from these grants and schemes to encourage innovation and entrepreneurship in underestimated communities.
The Forbes article on this CSR strategy explains that REJI helps strengthen local communities' efforts to coordinate the indirect players who could support people of colour, that it also promotes data-driven guidelines and initiatives in legal affairs, health and parenthood, and that Apple's decision to invest more money reflects a desire to address these issues in depth while setting an example for everyone else to follow.
From the CSRD's point of view, Apple's double materiality analysis would surely have highlighted the problem of the circular economy and raw material sourcing. While second-hand, reuse and eco-design must be absolute priorities for any computer manufacturer, this work across the whole value chain will take time. But there is no question of risking losing its fans or distorting its image as an innovative company while waiting to develop the miracle solution for the circular economy.
With the "Black Lives Matter" movement, Apple's teams realised, on the other hand, that ethnic communities in the USA did not have the same economic and social opportunities as others.
A premium brand, Apple built its success by winning over students at top American colleges and universities, who remain loyal to this reliable, easy-to-use interface. More expensive than the Microsoft version, Apple products have also gradually become a marker of a certain social status. By funding education, incubation and equipment for these modest, deserving profiles from minority backgrounds, Apple hopes not only to fight social prejudice but also to fight the hidden costs weighing on public revenue and on the judicial and prison system of a population weary of no longer having access to social mobility. The idea is to turn a cultural difference into a real economic asset instead of increasing risks in a polarising society.
The genius of Apple's communication is that it encourages its customers and stakeholders to take a fresh look. The goal? To change perceptions and behaviour in depth, and thus become a prominent influencer that its affluent, progressive customers can be proud of. The hoped-for impact? To build customer loyalty and create a new market by turning social injustice into brand ambassadors and consumers.
Apple has no guarantee that this CSR strategy will pay off. And that is the risk to be taken. But it can pay off handsomely if you are authentic and consistent in your strategy. The thing to remember is that if these companies communicate widely about these initiatives, it is because they have taken the time to investigate in detail the partners they work with. This is the famous principle of "due diligence" recalled and recommended by the CSRD. American civil society and associations being particularly vigilant and vocal, taking this ethical stance alongside companies that are not ethical would be highly damaging to this emblem of Silicon Valley.
This example is reminiscent of Bill Gates's visit and donations to universities in India in 1997. That bet allowed the operating system to enjoy a red-carpet welcome in what is now one of the largest markets, while enabling the South Asian country to become a leader in web development today. That is the win-win mechanism of CSR. But according to the mirror effect established earlier, if Microsoft could steal a concept from Apple years before, why would Apple not do the same?
In the success of a CSR strategy, authenticity and leading by example are a real driver of growth. At the very least, they allow you to surround yourself with reliable, motivated and competent stakeholders. Awareness-raising, influence, values and marketing have already shown their beneficial impact on commercial success, provided the company has covered all the risks: whether contextual, as the CSRD reminds us, or arising from the choice of its partners.
In-depth knowledge of the players in the value chain, and ongoing dialogue with them, reduce reputational risks and the bad practices that arise in reaction. Particularly where due diligence has been insufficient or expertise is lacking. Because let us not forget that, after all, it is our emotions that guide our behaviour, whether in our relationships with others or in our relationship with the economy.
