Many people have heard of the European Green Deal, whose objectives cover a wide range of areas of public life. But not everyone is aware of its impact on business. Under a new EU directive, many companies will have to submit their first sustainability reports as early as the beginning of 2025 (for 2024) – there is no room for prevarication and false promises.

While consumers welcome this, the challenge for businesses is to be able to produce these reports and incorporate as many sustainable elements as possible into their operations. Sustainability and environmental expert, founder and CEO of SustainPro, Dr. Gintė Jonkutė-Vilkė says that the new Corporate Sustainability Reporting Directive (CSRD) will allow for the harmonization of sustainability reporting standards for EU companies – offering a single set of guidelines for the preparation of sustainability reports and a way to compare the true sustainability of companies with each other.

“Under the new Directive, around 50 thousand companies in the EU (around 320 in Lithuania) will be required to produce annual publicly available sustainability reports certified by independent auditors,” says G. Jonkutė-Vilkė.

The Directive’s requirements will come into force in 4 phases. The following will have to report for the previous financial year:

• In 2025, large public-interest entities with more than 500 employees that have already been subject to non-financial reporting obligations under the Non-Financial Reporting Directive (NFRD).
• In 2026, companies that have not yet reported non-financially and that meet 2 of the 3 criteria of having more than 250 employees, an annual revenue of more than EUR 40 million, and an asset value of more than EUR 20 million.
• In 2027, listed small and medium-sized enterprises (excluding micro-enterprises).
• In 2029, third-country enterprises with a net turnover in the EU exceeding EUR 150 million.

But true sustainability in business is not just about the environment.

According to G. Jonkutė-Vilkė, it is also about social responsibility and ethical and transparent corporate governance, so companies will have to disclose in their sustainability reports a number of specific aspects of sustainability in all three areas: environmental (e.g. greenhouse gas emissions and their reduction targets, adaptation to climate change), social (e.g. gender equality and equal pay, work-life balance), and governance (e.g. anti-corruption solutions, relations with customers and suppliers), etc.

“Every company is unique, so every business has a different path to sustainability. Some aspects of sustainability are more relevant for large manufacturing companies and others for small trading companies. There are no completely sustainable or completely unsustainable businesses – you can identify sustainability-related actions in any business,” says G. Jonkutė-Vilkė.

However, it is true that companies often apply sustainability practices in their operations without knowing it themselves, as, according to G. Jonkutė-Vilkė, the use of the Unified Product, Packaging and Waste Record Keeping Information System (GPAIS), the General Data Protection Regulation (GDPR), and compliance with occupational health and safety requirements are also considered sustainable business practices.

The leaders in sustainability in Lithuania are the large foreign-owned companies, especially those linked to the Scandinavian market. There are also public interest companies that are actively committed to sustainability, some of the most active in the energy sector.

However, despite several examples of good practices, many business leaders have misconceptions about investing in sustainability.

To be sustainable ≠ a lot of large short-term investments and declining profits.

“Sustainability is wrongly perceived as spending only on environmental and social initiatives. It is important to recall here that financial sustainability is an equally important and integral part of business sustainability. It is crucial for companies, especially small businesses, to properly assess the most significant sustainability risks they face, which sustainability aspects are most relevant to them, and to thoughtfully and progressively target investments where they will add the most value,” says G. Jonkutė-Vilkė.

The expert says that significant financial returns can be achieved by investing in upgrading technological equipment, raw material efficiency and closed-loop solutions, and renewable energy sources.

“The return on investment in the social aspects of sustainability is usually less obvious and less immediate, but in the longer term it provides a competitive advantage and a good reputation for attracting and retaining new customers and talent,” says G. Jonkutė-Vilkė.

It has been noted that more and more consumers are paying attention to the environmental impact of the products or services they buy, and often choose to dedicate their loyalty to businesses whose values align with their principles.

“In the near future, sustainability will no longer be a competitive advantage for companies, but simply a necessity to survive in the market. Even those businesses that are not directly affected by the new directives will inevitably face strong pressure to take sustainability actions from suppliers, partners and customers, as each business is part of a larger value chain,” says G. Jonkutė-Vilkė.

The need for sustainability professionals is growing.

G. Jonkutė-Vilkė says that there has been a significant increase in the demand for sustainability professionals recently. They are mainly sought after by large and foreign-owned companies as they prepare for the upcoming mandatory sustainability reporting.

“The main problem companies face is not knowing what skills and experience they need, as there are hardly any experts in the relatively new field of sustainability. A professional sustainability practitioner needs a diverse and highly complex experience, from data analysis and engineering to business analytics, project management, and educational skills,” she says.

However, there is no obligation for companies to have an in-house sustainability specialist, and it would be financially irrational for a small business to have one or more of such staff, so professional external support from sustainability experts is becoming increasingly important. From consulting and training for company staff, to helping them to identify the most significant aspects of a company’s sustainability performance, through to the preparation of the sustainability reports and the initial internal auditing of these reports.

Mandatory sustainability reporting is expected to have an impact on brand communication.

After all, what business wouldn’t want to boast about its performance in this area? Especially if it is one of the criteria consumers use when choosing which brands to spend their hard-earned money on.

One of the most important components of branding is a strategy that can reflect the sustainability of the brand, if the company is truly sustainable and wants to communicate this both internally and externally. However, it is worth being careful and assessing to what extent and in what specific areas the company is actually sustainable and communicating this transparently.

It may be better for a company to communicate completely different brand strengths in order to stand out from the dumpster fire of sustainability communication that occurs when companies race to praise themselves just because it is popular now.

Therefore, it is not worth chasing sustainability trends if there is little to no sustainability in business. But if these efforts are integral to your brand, don’t forget to include them in your brand strategy.

And if you need assistance with that, andunicorns is here to help.