Following on from our CSRD podcasts outlining how to prepare for the CSRD, today Catherine Beare - Regional Director for Business Assurance in the UK and Iberia meets with Calin Moldovean President of Business Assurance to discuss the legal and reputational implications of not complying with the CSRD and how to go about mitigating associated risks.
Job title of speakers:
Follow us on- Intertek's Assurance In Action || Twitter || LinkedIn.
Following on from our CSRD podcasts outlining how to prepare for the CSRD, today Catherine Beare - Regional Director for Business Assurance in the UK and Iberia meets with Calin Moldovean President of Business Assurance to discuss the legal and reputational implications of not complying with the CSRD and how to go about mitigating associated risks.
Job title of speakers:
Follow us on- Intertek's Assurance In Action || Twitter || LinkedIn.
00:11 Catherine Beare
Hello and welcome to the 10th in our series of podcasts dedicated to the EU Corporate Sustainability Reporting Directive, CSRD. I'm Catherine Beare, the regional director for business assurance in the UK and Iberia. And I am lucky to be joined today by Calin Moldovean, president of Business Assurance, Food and Assurance in Intertek.
I wanted to use Calin’s experience in leading our assurance activities in Intertek and his early auditing days to get into the impacts of not complying with the CSRD reporting criteria.
Calin has been with Intertek for over 15 years now and has spent over 30 years in the testing, inspection and certification industry. He started his career as a test engineer and a quality systems auditor, and since then has been through many different roles. And now, as I mentioned, leading our assurance business in Intertek.
Hi Calin thanks for joining me today. Our series on CSRD has so far focused more on what it is about what you need to know and how you can get ready. But today I wanted to explore with you the implications of not complying or not taking it seriously. So would you mind kicking us off and can you share what is the actual implications for not complying with CSRD?
01:52 Calin Moldovean
Thank you, Catherine, for your kind introduction. As you know, our team at Intertek plays an important role to support, guide and assure companies on their sustainability journeys. So I certainly hope we can work with all our customers to ensure they are CSRD ready
However, I do agree it's important to clarify the implications of not complying with the CSRD.
Companies that provide poor or inaccurate corporate social responsibility disclosure reports or fail to report against the directive face legal implications and consequences depending on the jurisdiction and the severity of the issues.
Such legal actions and consequences can include regulatory fines and penalties in many jurisdictions.
There are laws and regulations that mandate the disclosure of CSR information and failure to comply with these regulations can result in fines and penalties.
By the way, this is not just in the EU.
For example, the US security has changed Commission.
The SEC requires public companies to disclose certain CSR related information and violations can also lead to regulatory actions.
Another aspect to consider is that shareholders may bring lawsuits against the company and its executives if they believe that the company’s CSRD reports contained false or misleading information that influenced investment decisions.
Such potential lawsuits can allege securities fraud or breach of fiduciary duty.
Regulatory bodies may also launch investigations into companies CSRD reporting practices if they are allegations of non compliance or fraudulent reporting. Needless to say that these investigations can be time consuming and costly.
I would also highlight another potential implication of non compliance with the CSRD requirements, and that is reputational damage, poor or incomplete CSRD reporting can damage a company's reputation which can lead to decreased consumer trust and investor confidence.
The long term financial impact of a damaged reputation can be significant.
It may also affect a company's ability to access other markets or participate in government procurement processes, especially if government agencies prioritize CSU criteria and their procurement decisions.
So let's not forget about contractual violations.
The company's contraction would agreements, includes specific ESG commitments.
Failing to meet these commitments in CSRD reports can lead to contractual disputes and legal actions.
04:39 Catherine Beare
Thanks Calin, that's clear. I know you spend a lot of time with our customers and talking about many of these points. So do you have any customer insights, for example on the impact side of not striving to improve against the CSRD KPIs?
05:01 Calin Moldovean
The absolutely it's the question is, has already mentioned in previous podcasts implementing effective KPI for CSRD could be challenging for these companies that are still new on their sustainability journey.
I suggest we first look at some key advantages around meeting the CSRD KPIs and their importance on achieving sustainability excellence.
The first section, ESL, has one, highlights the need of accountability.
Establishing KPIs creates accountability within the organization.
When ESG goals are tied to specific metrics, individuals and teams are more likely to take responsibility for achieving them.
If not meeting this ESG goals is less likely to happen.
In both ESRS one and ESRS 2, we also see a lot of KPI's on risk management.
Management, is that because identifying and monitoring ESG KP, I can help companies proactively manage ESG related risks by tracking issues such as environmental impact or labour practices, companies can address potential problems before they escalate.
A lot of the work we do in business assurance as a leading social compliance provider is exactly focused on supply chain, social risk management time and time.
Again, we see companies struggling to get even get data or knowing who are their suppliers beyond tier one.
Never mind tracking human rights with KPIs, so I really hope that this drive to report will help companies seek the support they need to understand their true supply chain impact.
There is no doubt that this will be one of the more challenging areas and companies need to appreciate the potential negative impact of ignoring these supply chain risk required.
I talked earlier about company reputation.
We have all seen examples of how companies could be negatively impacted by human rights abuses taking place in their value.
I would also remind ourselves to consider the corporate sustainability due diligence directive, which also places a strong focus on such maps.
One of the advantages of improving the CSRD KPI is quite simple.
They're actually good for the bottom line and can help drive cost saving.
Why?
Because many ESG initiatives, such as energy efficiency or waste reduction can lead to significant long term cost savings which we can track and improve using these KPI further focusing on ESG goals can drive innovation within a company and setting relevant KPI
I can encourage teams to find creative solutions to ESG challenges, which leads me on another important point.
The benefits to employee engagement?
It has been well documented that employees take pride in working for a company with social responsible tracking and achieving the CSRD kpia can also boost employee morale and engagement.
8:06 Catherine Beare Intertek
Yeah, it's really, really good point.
And so how do companies, I guess like coming back to you know, how we can help companies think about this? How do they go about mitigating these legal and reputational impacts?
8:25 Calin Moldovean Intertek
To mitigate legal or reputational risks related to CSRD, companies should start by taking the first step to understand what gaps they have against the CSRD link APIs we heard in Alessandro Podcast.
More about Intertek's approach to gap assessment and conducting a thorough materiality assessment.
I think this is really a strong place to start.
Same time if I put my old management system auditor hat on, I would always bring us back to plan.
Do check act plan.
Make sure you understand your reporting timeframes.
Plan.
Who needs to be involved?
What role they hold and document a very detailed plan of action for disclosure delivery, we strongly advise conducting a gap ASSESSMENTS so you know where to get started and where to focus.
Two implement strong governance, establish robust internal structures and processes for CSRD reporting to minimize the risk of inaccuracies and misrepresentations.
Minutes also thoroughly review and verify the accuracy of all ESG related information before publishing reports.
Communicate proactively with stakeholders, including shareholders about any issues or challenges related to Csrd report.
Check that you comply with your regulations.
Stay up to date with.
CSR at the reporting regulations and all relevant jurisdictions and ensure compliance, engage legal counsel to seek legal advice from experts in corporate and securities law to ensure compliance with all relevant regulations and address any potential legal risks.
And finally, act continuously improve your sustainability efforts, working towards more sustainably excellent.
Make sure your CSRD reporting processes and data collection methods are improved to enhance accuracy and transparency.
I think taking this precautions can help companies reduce the risk and negative impacts associated with poor CSRD reporting and maintain the trust of their stakeholders.
10:37 Catherine Beare Intertek
Really great way to end and I knew with your old auditor hat on you would have some good checkpoints for us.
Thank you, Calin
That was very insightful and I think very important one, because the reality needs to be stated around the impacts of not taking this seriously. So thank you.
As a reminder, on how Intertek can help on CSRD there are four different ways:
To understand your current CSRD readiness we can help you to undertake a gap analysis to ensure you have a clear view of your organization's current readiness and will work with you to define clear action plans to address any gaps to prepare you for your first submission
2) Through training to ensure everyone understands what's required to prepare for your submission.
This can be delivered to a range of different teams and functions across your organization and will be bespoke to best fit your requirements.
3) We also provide auditing solutions. In some markets, we will also be able to act as the auditor of your CSR Directive reports as one single provider supporting you from your early preparations through to audit submission.
And finally, we have also partnered with ESG Playbook. A leading SaaS reporting and solution provider bringing in one tool all required data collection, aggregation, tracking and reporting for ESG.
For more information, visit www.com/assurance/EU-CSRD.
So this concludes today's podcast.
Thank you for listening.
Watch out for further episodes to help with your journey to compliance.