Green or False? Business Sustainability Under the Microscope: Unraveling the New Rules and Requirements

Business sustainability has ceased to be an option and has become an obligation. The recent European CSRD directive and its transposition in Spain are revolutionizing the landscape, imposing new and more demanding information requirements on companies.

What does this mean in practice?

In a joint statement, the CNMV and the ICAC have put forward the first guidelines for entities subject to this new regulation. The main novelty is the recommendation to use the European ESRS standards for non-financial information starting in 2025, provided that it complies with Law 11/2018.

Is everything clear?

Not exactly. Law 11/2018 and the ESRS present certain discrepancies, generating uncertainty among companies. Additionally, the question arises of how to verify the truthfulness of sustainability information. This is where the ISSA 5000 and COESA guidelines come into play, which establish criteria for high-quality independent verification.

Why is all this important?

Harmonization with European regulations and ensuring the quality of information are fundamental to promoting sustainable investment and avoiding “greenwashing.” But how do you navigate this complex regulatory framework? How do you ensure that your company complies with all the requirements and communicates its commitment to sustainability transparently?

In this post, we will explain:

• What the ISSA 5000 and COESA guidelines are and why they are relevant.
• The main differences between Law 11/2018 and the ESRS.
• How to prepare your company for the new regulation.
• The challenges and opportunities presented by business sustainability.

ISSA 5000 and COESA Guidelines:

The ISSA 5000 is an international standard that establishes criteria for the independent verification of sustainability information. This standard, developed by the IAASB (International Auditing and Assurance Standards Board), provides a reference framework for auditors to issue an opinion on the reliability of companies’ sustainability reports.

On the other hand, the COESA (Commission of European Audit Oversight Bodies) guidelines offer complementary guidance to the ISSA 5000, adapted to the Spanish context. These guidelines delve into specific aspects of sustainability information verification in our country, such as materiality or stakeholder involvement.

The Main Differences Between Law 11/2018 and the ESRS

Law 11/2018, although pioneering at the time, has become somewhat obsolete in the face of the growing demand for transparency and detail in sustainability matters. The ESRS (European Sustainability Reporting Standards) represent a qualitative leap, introducing a series of significant innovations:

1. Greater specificity: The ESRS establish much more detailed and specific indicators and metrics for each aspect of sustainability, allowing for greater comparability between companies and sectors.
2. Double materiality focus: The ESRS consider both financial and non-financial materiality, meaning companies must identify and report on aspects that have a significant impact on their business and society.
3. Greater relevance for investors: The ESRS are designed to provide investors with the information they need to make more sustainable investment decisions.
4. Alignability with the European taxonomy: The ESRS are aligned with the European taxonomy, facilitating the classification of economic activities as sustainable or non-sustainable.
5. In summary, the ESRS offer a more complete and demanding framework for non-financial information, overcoming the limitations of Law 11/2018.

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How to Prepare Your Company for the New Regulation

The transition to the new regulation requires careful planning and adaptation of internal processes. Here are some recommendations:

1. Conduct a materiality assessment: Identify the most relevant sustainability aspects for your company, from both a financial and non-financial perspective.
2. Collect and analyze data: Ensure you have the necessary data to prepare sustainability reports, including information on environmental, social, and governance performance.
3. Adapt information systems: Implement or update information systems to efficiently collect, store, and analyze sustainability data.
4. Train staff: Train employees on the new requirements and the tools needed to prepare sustainability reports.
5. Collaborate with auditors and advisors: Rely on expert support to ensure the quality and reliability of the information.
6. Communicate the sustainability strategy: Clearly and concisely convey the company’s sustainability strategy to all stakeholders.

The Challenges and Opportunities Presented by Business Sustainability

The transition to a more sustainable economy presents both challenges and opportunities for companies:

• Challenges:

  • Implementation costs: Adapting to the new regulation can generate significant costs, especially for small and medium-sized enterprises.
  • Complexity: Information requirements are becoming increasingly complex and demanding.
  • Talent shortage: It may be difficult to find professionals with the necessary skills to manage sustainability.

• Opportunities:

  • Innovation: Sustainability can drive innovation and the development of new products and services.
  • Reputation improvement: Companies that demonstrate a genuine commitment to sustainability can improve their reputation and attract new customers and investors.
  • Access to new markets: Consumers and investors are increasingly demanding sustainable products and services.
  • Cost reduction: Energy efficiency measures and waste management can generate significant savings.

In conclusion, business sustainability is a journey that requires long-term commitment. Although the challenges are significant, the opportunities are even greater. Companies that adapt to the new regulation and adopt sustainable practices will be better positioned for the future.

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