Regulation consistently drives sustainability
Anticipating, adapting, acting
Regulation paves the way to climate goals, with ever more stringent standards being adopted in the US,2,3 Europe, and all over the world. In 2024, 69% of executives (compared to 57% in 2023) said that adapting to stricter regulations is a key motivator for implementing sustainability initiatives. Most executives across industries (ranging from 62% in the automative sector to 84% in telecom) agree that such standards will guide their companies toward their climate targets.
New standards also accelerate measurement and tracking. The CSRD requires all large and listed small- and medium-sized organizations operating in the EU to report regularly on their environmental and social impacts. We found that the majority (73%) of executives agree that the CSRD is driving companies to improve their sustainability measurement practices.
2 US SEC, “SEC adopts rules to enhance and standardize climate-related disclosures for investors,” March 2024.3 US SEC, “SEC adopts rules to enhance and standardize climate-related disclosures for investors,” March 2024.
Nearly three quarters of executives believe the CSRD hones measurement and tracking
Source: Capgemini Research Institute, Sustainability transformation trends survey, June–July 2024, N = 2,152 executives.
Unfortunately, many organizations are unprepared for Scope 3 emissions disclosures. Even as the CSRD takes effect, of the organizations in our survey that will be required by the CSRD to report in 2025, only 38% of respondents are prepared to disclose Scope 3 downstream emissions. Compare this to the 86% of companies that say they are ready to report Scope 1 emissions in 2025 for CSRD. The vast majority of companies that will need to report in 2025 (93%) say they will increase their investments into carbon credits in the coming 12-18 months.
Less than 40% of organizations that will need to report for CSRD in 2025 are prepared for Scope 3 downstream emissions
Source: Capgemini Research Institute, Sustainability transformation trends survey, June–July 2024, N = 316 organizations required to report for CSRD in 2025, based on 2024 data.
To anticipate ever tighter regulations, executives could frame sustainability as a driving force for innovation and business value. This shift will require the entire organization working together.
To address emissions across the supply chain, executives could consider ESG ratings, environmental pledges, and Science-Based Targets initiative (SBTi) criteria when selecting suppliers. Already, 61% of sustainability frontrunners report being able to measure and collect Scope 3 emissions data, compared to only 49% of beginners.
Three-quarters of frontrunners also rely on third-party agencies to ensure the objectivity, accuracy, and reliability of their sustainability reporting. As the CSRD will require companies to seek third-party verification, executives can lead the search for external partners today.4
Regulations, transparency, and standards are critical, allowing everyone to talk a common language. The possibility of over-reporting does concern me, however. For example, designing vehicles for European or US safety standards sometimes influences design choice without directly benefiting the customer. One set of standards is not better, they are just different. If there were more consistency across countries, we could spend more time working on outcomes.
4 Official Journal of the European Union, “Directive (EU) 2022/2464 of the European Parliament and of the Council,” December 2022.
