In our article on CSRD, we present the main measures of this European regulation and the companies involved. Nevertheless, it seems important to present the aspects of the CSRD that may attract criticism from civil society.
1. Technocratization undermines the foundations of CSR
The CSRD of 2023 replaces the obligation for the largest companies to publish a non-financial report, mandatory in France since 2017 for sales or balance sheets exceeding 100 million and/or a payroll exceeding 500 employees. This French ordinance adopted in the summer of 2017 transposed the European CSR (Corporate Social Responsibility) Directive.
The aim of the Non Financial Reporting Directive - the NFRD - was to force more companies to publish information regarding their environmental, social and governance data, as required by regulations since the Grenelle 2 law (2015).
The CSRD and its technical constraints addressed to certain categories of companies therefore seem to backtrack on the French PACTE law of 2019. This law added a paragraph to Article 1833 of the French Civil Code to describe simply that “the company is managed in its social interest, taking into consideration the social and environmental issues of its activity”. Considering these issues in a universal perspective suggested a profound cultural shift regarding the notion of responsility.
It's important to remember that the non-financial reporting, like many economic trends, originated in the United States. The addition of information related to social commitment was already taking place in the 90s, but became more popular after the 2007 financial crisis. American managements, very concerned about their image as they are often listed on the stock market, wanted to send reassuring, engaging messages to differentiate themselves in a positive way. A moral cultural heritage that began with the progressive era of the early 1900s in the United States, and which would nourish the principles of Anglo-Saxon CSR throughout the 20th century. This information was voluntary and reflected the moral intentions of a company that had strong shared values. While their aim was to seduce, there was no question of pretending. With the economic stakes linked to societal expectations, CSR intentions are being hijacked and increasingly perceived with cynicism by employees.
According to a Harvard Business Review article, "51% of leaders reported that they were willing to trade off short-term financial performance to their achieve long-term sustainability goals. But 58% report their organizations are unable to agree on what the tradeoffs should be.(...) The problem is lack of alignment — with external stakeholders and within the leadership team."
The emphasis on technical documentation risks distracting from the fundamentals of CSR: namely, finding the means to convince and mobilize the whole of its ecosystem around its performance objectives, whether financial or sustainable.
2. The CSRD would encourage Greenwashing
Non-financial reporting will arrive in Europe 10 years later. The problem is that between spontaneous measures and regulatory constraints, the intention is not the same. To sum up: which bouquet of flowers do you think would be the most successful? The one coming from a person seeking to please, or the one coming from a person forced to bring flowers?
These non-financial declarations, which are supposed to initiate CSR initiatives, no longer come from a coordinated management, but, due to their technical nature, are the fruit of in-house accounting teams or large consulting firms. These mandatory reports lose their substance, and are devoid of impactful measures or sincere initiative. What's even more worrying is that this regulatory technicality, without having provided CSR tools, skills and cultural appetence, risks encouraging greenwashing without even realizing it.
Without any premeditation in particular, it is therefore very possible that teams share the wrong information or put the cursor in the wrong place. This lack of enthusiasm, despite the regulations, is echoed by a few figures compiled by the national MEDEF in collaboration with EY and Deloitte. In 2023, out of 100 companies concerned by the DPEF and the consequences of their activities on society :
- 69 companies published ONLY their management report
- only 14 have measured their impact on the living world (double materiality)
- 51 companies have published targets for staying below 1.5° global warming
- 46 companies have measured and quantified the impact of climate risks
- 53 companies have published their gender pay gap figures
- 8 companies have compared their lowest wages with decent wages
- 13 companies have studied their impact on biodiversity
- 1 company only worked on its value chain
- 51 companies have declared waste management objectives
- 30 have committed to the circularity of products and/or packaging
- 30 have published targets for the purchase of recycled or biobased materials
- 7 have committed to reducing their use of virgin raw materials
- 31 have published targets for reducing water consumption
- Fewer than 10 have committed to reducing pollution (air, water, soil, etc.)
According to Harvard Business Review, in addition to competence, regulation and bureaucracy seem to weigh down improvement and innovation. With this new report, which is much more restrictive in terms of drafting, we have every right to wonder about the incentive effect on company directors. Indeed, many fear that the time and money allocated to drafting these reports will deplete budgets dedicated to initiatives with real impact.
What's more, these regulations ignore the human and cultural dimensions of project management: vision, the quest for meaning, the role of each individual, communication, cohesion and respect? These aspects are essential if we are to bring about in-depth, seamless societal change.
3. Difficulties in understanding CSRD
The sobriety of the information available on the online encyclopedia contrasts with the EFRAG website. The site, exclusively in English, presents a maze of poorly indexed, poorly named or non-functioning pages. To prepare the article on the CSRD, it took days of browsing through pdf files, official legal texts, press releases... In terms of SEO, it's impossible for Google to see clearly either.
We're a long way from Boileau's famous phrase “What is well conceived is clearly stated, and the words to say it come easily”. Aside from the website's organizational anarchy, the other challenge is to deconstruct the legal and accounting prose to extract its substance.
Given the stakes and the funding involved, it's hard to believe that EFRAG didn't call in a communications firm or even an intern to make navigation smoother and easier to read. The information is well and truly hidden. The newsletters don't help either. 3 emails arrive daily, reporting everything and nothing. It becomes almost impossible to decipher reporting obligations without the help of a contact at one of these audit firms. Fortunately, these firms have in-house documents that make it easier to understand.
4. The origins of CSRD and the expertise of major accounting firms
Non-financial reports were often drafted by the “Big Four” auditing and consulting firms, which charged companies tens of thousands of euros for these services. Whereas CSR used to come from the impetus of management, it gradually became the responsibility of the chartered accountants. With all the goodwill in the world, it is difficult for these experts to influence corporate strategies. Given the recent emergence of the CSR discipline in France, it would even be illusory to expect them to have the skills just taught in sustainable development schools.
Since the CSRD, the Statutory Auditors and ETIs in charge of reviewing these DPEFs have been required to undergo transition training. But what about the people who write them?
It's important to remember that the body responsible for CSRD is EFRAG: the European Financial Reporting Advisory Group. The Chairman of EFRAG, Patrick de Cambourg, is also the former head of Mazars, the 5th largest consulting firm after EY, Deloitte, KPMG and PWC (“Big Four”).
The composition of EFRAG's technical committee, which prepares the legislative texts, is a particular reflection of the accounting world's involvement in sustainability issues. They all come from major auditing and consulting firms. At a time when CSR advocates diversity in performance, it would undoubtedly have been interesting to bring in a variety of profiles on these subjects, which concern us all.
The pages concerning EFRAG change as the information evolves. Nevertheless, when researching the CSRD, we asked chat GPT 3.5 who had funded EFRAG for their regulatory work with the European Commission, out of curiosity. The data available to chat GPT (dating back over 2 years) gave us the following answer:
EFRAG, an acronym for the European Financial Reporting Advisory Group, is funded by voluntary contributions from a number of entities, including listed European companies, audit firms, professional associations and other financial stakeholders. These financial contributions enable EFRAG to carry out its activities relating to the development and assessment of IFRS (International Financial Reporting Standards) at European level.
The French and English Wikipedia pages provide little information, despite the fact that they have been around for several years.
While this lack of transparency can be criticized, it is interesting to look at this approach to CSR. The idea that the “Big Four” have created their own market for extra-financial reporting, while at the same time forcing companies to implement strict measures for the good of future generations, is indeed a “win-win” mechanism, as the foundations of CSR envisage. A way of anticipating the loss of sales associated with automated accounting. Nevertheless, we may well wonder about the impact of this approach on the common good: we're a long way from the principle of CSR, which is based on common sense and universal moral values.
Such administratively onerous measures risk inflaming and swelling the ranks of the 43% of climate sceptics in France, not to mention the lack of real sanctions for this type of scheme.
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Did you know? The Progressive Era breathed morality into business after the meteoric emergence of a class of millionaires. Businessmen like John Rockefeller, Andrew Carnegie and Henry Ford began to earn unprecedented sums. Yet they donated fortunes to universities, libraries and hospitals, because “millionaires must use their fortunes for good”. An ARTE documentary series: Le capitalisme aux Etats-Unis : le Culte de la richesse 1/3 and will certainly have influenced Bill Gates to eventually bequeath his entire fortune and Jeff Bezos to donate a few billion.
Did you know? The pre-Progressive period is a reminder of the entanglement of business circles in the political and legal spheres. Rockefeller himself was particularly involved in passing legislation. It was he who pushed through the 60% tax reduction on donations. It wasn't until the American press (the “Muckrakers”) began denouncing the malpractices and abuses of the ultra-rich that American workers, living in insalubrious conditions, woke up. The inspiration came from German socialist measures of the 1880s. The country, then divided by social tensions (racism, immigration, poverty, etc.), had to organize and unite around common universal values in order to get elected to politics and influence the commitment of these businessmen.
Did you know? Progressives succeeded in passing a federal law in 1938 prohibiting the employment of minors under the age of 14. Under the age of 16, work must be safe and hours must be limited. In France, the legal framework is unclear. A law of 1841 regulated child labor; the Jules Ferry law on compulsory school attendance greatly reduced the practice, but it seems to have been ILO Convention 138, adopted in 1973, which replaced the earlier texts by stipulating that no child may be employed before the age of completion of compulsory schooling.
Did you know? The progressive U.S. Congress also ratified women's suffrage on June 4, 1919. In England, women were granted the right to vote in 1928. In both countries, regulations allowed women to work, although in practice the husband retained influence over this choice. In France, women obtained the right to vote in 1944 and the right to work without their father's or husband's consent in 1965.
