As a chief executive, you’re no stranger to leading your company through regulatory shifts and changing market dynamics. The coming Corporate Sustainability Reporting Directive (CSRD) may soon present another major shift for your business — making sustainability disclosures not simply another box to check, but a major business requirement.

Starting next year, this sweeping regulation will require thousands of companies that do business in the European Union to release comprehensive data about their environmental, social, and governance (ESG) practices.

The Worldly sustainability and data science teams have undertaken an extensive review of CSRD, and we’ve put together the following takeaways to help CEOs ready their teams.

Knowing your impact is now a legal requirement. 

You are now in a regulated industry where managing and reporting on environmental and social impact is a legal necessity. Non-compliance may lead to fines of up to 10 million Euros or 5% of your annual revenue. In addition, public scrutiny and other business risks can arise from incorrect or inconsistent reporting. No longer can companies select a few choice sustainability stats for their annual reports.

Furthermore, comprehensive sustainability reporting is not only a requirement in the EU — legislation increasingly is being passed around the world. While each law has its own emphasis, California’s recently passed Climate Corporate Data Accountability and Climate-Related Financial Risk Disclosure Acts will demand climate-based reporting from large companies operating in the state, and the forthcoming French environmental labeling requirements will require product level impact disclosure. 

Together, these laws and regulations will mean that your fashion, apparel, and footwear business must operationalize sustainability reporting on a new scale.

Sustainability will be a competitive variable. 

Because of the public nature of disclosure under CSRD, your environmental and social impact will become a measure for competitive differentiation. Beyond financial penalties, non-compliance or inconsistent reporting will risk damaging reputation. Stakeholders may raise concerns, customer trust can erode, competitors may call you out, and negative coverage can emerge. 

At a basic level, your business now faces a new brand risk if the level of detail and primary data reported is lesser than that of your peers and competitors. By the same token, those who can account for their impact and document their plans for improvement will be seen as leaders. 

This is the time to operationalize your response. 

Today, CEOs should be aligning their sustainability, legal/compliance, sourcing, and data teams on what will be required: making sure they are educated as to the substance of CSRD, and ensuring there is a coordinated approach to gathering data from your extended network of Tier 1, Tier 2, and even Tier 3 facilities and reporting the data. 

While the first year for reporting is not until 2025, these disclosures will require 2024 data from across your value chain. Though businesses will only be required to disclose on topical standards that they deem to be material, the threshold for not disclosing can be high, especially for climate change. Your team needs to be proactive now: determining which sustainability metrics are material for your business, and developing a plan for gathering that information in a consistent, comparable, and verifiable way. 

This is where Worldly can help. Built by industry experts and relied on by market-leading brands and manufacturers, Worldly provides businesses with primary data across your entire value chain needed for impact improvement, as well as to support compliance and disclosure strategies. 

Get in touch today and learn how Worldly can support your CSRD compliance efforts.