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How proactive CEOs build long-term sustainability strategies

Written by
Camille Charluet
June 20, 2024
6
min read

With the Corporate Sustainability Reporting Directive (CSRD) compliance deadline approaching fast, CEOs of mid-market companies are quickly realizing that sustainability isn't just another box to tick—it's essential for long-term success. 

It’s no longer just about avoiding fines or complying with new regulations. It’s about embracing a responsibility that can create greater business value in the long run. In fact, a survey by McKinsey revealed 40% of companies surveyed anticipate their sustainability programs will produce significant value within the next five years.

In this article, we'll explore what it really means to build a long-term sustainability strategy that aligns with the upcoming EU CSRD. We’ll break down the benefits of getting it right and discuss the key role CEOs play in this journey. Plus, we'll share some practical tips to help you face the future with confidence.

Understanding long-term corporate sustainability

Before we dive into the details of long-term sustainability strategies, it’s important to break down what corporate sustainability is in the first place. 

Corporate sustainability is all about striking a balance between your company’s core operations and its impact on people and the planet. It means conducting business in a way that’s ethical and responsible, while also achieving economic success and contributing positively to the environment and society. 

Ultimately, it’s about ensuring your business can continue running indefinitely without compromising the environment or future generations. 

What is a long-term sustainability plan in business?

To achieve this in the long-term, CEOs must integrate sustainability into their core business strategies—and a long-term sustainability plan is your roadmap to do just that. 

It outlines the specific sustainability-related goals that will allow your business to continue operating in a way that ensures future generations can also meet their needs. It helps you create value that extends beyond financial profits, considering the broader impacts of your business decisions.

The 3 pillars of corporate sustainability

Long-term sustainability plans typically include initiatives from three distinct pillars: environment, social, and economic. Let’s look at each in more detail.

1. Environmental

The environmental pillar is all about minimizing your company’s impact on the planet. This involves practices like minimizing waste, switching to renewable energy sources, or limiting corporate air travel. The goal is to decrease your overall carbon footprint, ensuring sustainable operations that support planetary health.

2. Social

The social pillar refers to your company’s initiatives to ensure the well-being of its stakeholders—whether that’s its customers, employees, or broader society. This means paying employees fair wages and creating a safe work environment with opportunities to grow.

The commitment also extends to the supply chain, making sure your suppliers, too, uphold ethical labor practices. 

3. Economic

The economic pillar focuses on ensuring your company’s financial stability and long-term viability. For your company to be sustainable from an economic standpoint, it must maintain profitability, continue to operate, and consistently deliver value to its stakeholders. 

At the core of this pillar is strategic risk management. This means thoroughly understanding the potential impacts of your financial decisions and investments, and ensuring they support your company's long-term growth objectives.

Considering all three pillars within your overall business strategy is crucial to achieve long-term corporate sustainability. 

Besides the obvious environmental imperative, doing so can help your business attract and retain customers, employees, investors, and other stakeholders who increasingly factor sustainability into their decision-making.

It also helps you stay ahead and comply with emerging regulatory requirements impacting mid-market companies like the EU’s CSRD. 

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The short term: the upcoming EU CSRD and its consequences

The EU’s CSRD is a new climate regulation that requires businesses to report on their environmental and social impact. 

This new regulation is a key element of the EU's plan to combat climate change. It builds upon the European Green Deal that aims to make Europe the first climate-neutral continent by 2050 and cap global warming at 1.5°C in line with the Paris Agreement.

The directive comes as an improvement over the older Non-Financial Reporting Directive (NFRD). It broadens its scope and standardizes requirements, enhancing the clarity and quality of reports so that stakeholders get a better view of a company's sustainability efforts and outcomes.

While around 11,700 companies fell under scope of the NFRD, that number jumps to around 50,000 under the CSRD—including many mid-market companies like yours.

To comply with the CSRD, companies must adhere to the European Sustainability Reporting Standards (ESRS). This detailed framework ensures that sustainability reports are consistent and high-quality across different sectors and sizes of businesses.

CSRD implementation timeline

The CSRD will be phased in gradually based on business size, turnover, and location. Here are the key dates to be aware of:

  • 2024: Large companies already subject to the NFRD must adhere to the CSRD, reporting in 2025.
  • 2025: Large companies meeting two of the following criteria: 250+ employees, €50m+ net turnover, €25m+ total assets, must adhere to the CSRD, reporting in 2026.
  • 2026: Listed mid-market companies meeting two of the following criteria: small-sized (50-249 employees, €10-50m net turnover, €5-25m total assets) or micro-sized (10-49 employees, €900k-10m net turnover, €450k-5m total assets) must adhere to the CSRD, reporting in 2027.
  • 2028: Third-country undertakings with substantial operations or listings in Europe must adhere to the CSRD, reporting in 2029.

What the CSRD means for mid-market companies

As you can see above, the deadlines for CSRD compliance are approaching fast.  Mid-market companies under its scope must start complying by 2026, reporting in the 2027 financial year. 

While this may seem like a while off, the CSRD is a highly complex directive with an intense workload. One sustainability expert estimated it could take about 375 hours just to collect the data to comply with the first set of ESRS. 

Because of this, many proactive organizations are preparing with a 'dry run' to assess their readiness to report in line with these new requirements. Here are some key CSRD impacts mid-market companies must prepare for:

  • Extensive reporting requirements: The CSRD requires that sustainability reports be submitted in XHTML format and “digitally tagged” to ensure data is machine-readable. This means you might need to upgrade your business’s data management systems to handle the new requirements.
  • Auditing requirements: Under the CSRD, sustainability reports must undergo third-party assurance to verify their accuracy. This means mid-market companies must ensure that their reports accurately reflect their sustainability practices and that they are prepared for increased scrutiny from regulators.
  • Penalties for non-compliance: It’s anticipated that the directive will enforce penalties for non-compliance. While exact penalties are yet to be quantified, it’s thought they will be similar to those under the previous NFRD. With fines of up to €10 million in Germany, compliance is not something businesses should take lightly.  
  • Operational adjustments: Implementing CSRD requirements might mean adjusting your operations. This could involve revising procurement policies, investing in new technology for better data collection and reporting, and enhancing internal controls to meet the higher standards of transparency and accountability required.

Benefits of solid long-term sustainability plans

A solid sustainability plan does more than just keep you in line with regulations—it can give your company a real advantage, too. By making your operations more efficient, strengthening stakeholder relationships, and using resources wisely, you're setting up your business for long-term success. Let's take a look at some of the key benefits:

Increase efficiency and reduce costs

Long-term sustainability is intrinsically linked to greater efficiency and reduced costs. By integrating sustainable practices into your operations, you can streamline processes, minimize waste, and optimize resource use. 

This not only enhances overall operational efficiency, but also leads to significant cost savings over time. In fact, a McKinsey study revealed that strong environmental, social, and governance credentials can lower costs by 5-10%. 

Tap into new business models

Solid long-term sustainability plans can also open doors to new markets and business models. From expanding into regions that prioritize green products and services to designing products that can be reused, repaired, or recycled, there are plenty of ways long-term sustainability can create new revenue streams. 

Attract new investment

Sustainability is also increasingly important for investors—even more so than short-term gains. An EY study found that 78% of investors believe businesses should invest in ESG improvements, even if it puts a dent in their short-term profits. 

With 89% of investors considering ESG issues as part of their investment approach, it’s clear that developing a long-term sustainability plan is not just about doing good—it's about attracting investors who prioritize long-term value over immediate returns.

Secure affordable financing

Banks and financial institutions are also increasingly prioritizing ESG factors in their lending decisions. A study by openESG involving 63 German financial institutions revealed that 23% of banks consider ESG criteria when lending to SMEs, and one in eight have declined business with mid-market companies due to sustainability risks. 

This highlights the importance of long-term sustainability plans for mid-market companies to ensure access to affordable financing.

Improve employee satisfaction and retention

Companies committed to sustainability often see higher levels of employee morale and retention. A study by Cone Communications revealed that 64% of millennials won’t even consider working for a company if it doesn’t have a strong CSR policy.

Employees are also increasingly looking to work with businesses that reflect their personal values. According to Deloitte, 77% of Gen Z workers say it’s important to work for a company whose values align with theirs.

Boost customer loyalty

Consumers are also more loyal to brands that demonstrate ethical practices and concern for the community. A survey by LendingTree found that 55% of consumers would spend more for environmentally responsible products. Another study by the World Economic Forum found that responsible supply chains can boost your brand value by 15-30%.

Reduce your carbon footprint

Whether it's reducing your energy usage, switching to green energy providers, or prioritizing sustainable travel options, all these things can reduce the climate impact of your business activities. Initiatives as simple as choosing eco-friendly laptops that consume less energy can significantly slash operating costs and carbon emissions over time.

Improve biodiversity and ecosystem health

Implementing sustainability initiatives that protect and restore natural habitats can help your business preserve biodiversity. 

Comply with environmental regulations

Whether it’s the UK’s Streamlined Energy and Carbon Reporting (SECR), the EU’s CSRD, or the US’s Securities and Exchange Commission (SEC), climate legislation is impacting more and more mid-market companies.

Addressing sustainability proactively ensures your business stays ahead of these regulations and avoids nasty penalties for non-compliance.

The role and responsibility of CEOs in corporate sustainability 

Given the many benefits, it’s clear sustainability is becoming a non-negotiable part of doing business—and CEOs agree. According to the UN Global Compact and Accenture’s largest ever CEO study on sustainability, 98% of CEOs believe that sustainability is core to their role.

To meet rising stakeholder pressure, CEOs must actively prioritize sustainability, set clear goals, and integrate them into corporate strategies. They should make decisions that prioritize sustainable practices and long-term gains. By taking a public stance on sustainability, CEOs can lead by example and influence the broader industry.

Facing the future with confidence

Corporate sustainability is all about being able to maintain business operations long into the future. CEOs should view sustainability challenges as strategic opportunities to grow and innovate, preparing their businesses for future market shifts and regulatory changes. 

Best practices and actionable tips

Integrating sustainability into the core of your business operations requires commitment and a shift in mindset. Here are some practical ways CEOs can enhance their company's sustainability:

Establish strategic partnerships

Seek and establish collaborations with organizations that can offer complementary strengths and resources. This can boost your company’s resilience and innovation capacity in sustainability efforts. In fact, the UN Global Compact and Accenture study found that 66% of CEOs are engaging in long-term strategic partnerships to build resilience.

Revamp your supply chain

Scope 3 emissions can be responsible for up to 88% of a business’s carbon footprint. Take a proactive role in reconfiguring your supply chain to be more sustainable and robust. Look for opportunities to integrate eco-friendly suppliers and sustainability practices that can enhance operational efficiency and reduce environmental impacts.

Prioritize reskilling your workforce

Invest in training programs that prepare your employees for the future. Focus on skills related to sustainability and emerging technologies to keep your team adaptable and forward-thinking.

Use resources more efficiently

Critically examine how your company uses natural resources. Implement strategies that promote sustainable use, such as reducing waste, recycling materials, and using renewable resources, to minimize your environmental footprint.

Innovation and continuous improvement

Technology also plays a crucial role in driving corporate sustainability forward. According to the UN Global Compact and Accenture’s survey, leading CEOs are already embracing technology to improve sustainability outcomes, from reducing emissions to enhancing resource efficiency.

This includes launching eco-friendly products and services (63%), improving sustainability data collection across their value chains (55%), and increasing the use of renewable energy sources (49%).

Nearly half are moving towards circular business models, and 40% are ramping up investments in research and development to fuel sustainable innovation.

How using the right sustainability compliance software can help 

Understanding and managing corporate sustainability can be complex, but the right tools can make all the difference. By streamlining data collection, ensuring accuracy, and simplifying reporting processes, sustainability compliance software can turn sustainability from a challenging task into a strategic advantage.

As a CEO, you play a crucial role in guiding your company toward sustainable practices, especially with the CSRD deadlines approaching. Ready to make compliance more manageable? Schedule a free demo with a Coolset climate expert today and take the first step towards effortless compliance and enhanced sustainability performance.

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Start building long-term sustainability plans

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