EcoSkills Team
The Omnibus Proposal emerged in late February with the intention to reduce the compliance burden and is causing ongoing disruption within the sustainability communities. After long-time efforts to prepare for a unified sustainability reporting framework that would make companies more accountable, many supporters of CSRD now believe that leaving most organizations out of the mandate could greatly lower their responsibility and give them more time to get away with impunity.
So, the concern raised is whether companies outside the threshold can embrace the opportunity of proactive disclosure and still stand out in sustainability while staying competitive. An ambitious view, in fact adopted by numerous committed organizations, is that voluntary reporting in sustainability with frameworks like EFRAG can help them maintain themselves at the forefront of sustainable practices and nurture trust while gaining access to sustainable finance and market opportunities. By choosing the right frameworks and effectively communicating their sustainability journey to stakeholders, companies can still demonstrate sustainability leadership and prepare for when compliance will be on the table.
The Omnibus Package is still just a legislative proposal and can be modified or negotiated by the European Council and the European Parliament. It includes amendments to several regulations as well as delays for the CSRD and CSDDD reporting requirements and transposition deadlines. Nonetheless, the number of organizations that are no longer within the scope of requirements is limited by 80%, US companies included. So what does that mean for the rest and the small and midsized companies? Indeed, ESG data disclosure is not legally required, and therefore these companies are not burdened with expenditures to be compliant; even so, there is market pressure from investors, consumers, and larger supply chain partners that demand some kind of report.
In that context, organizations holding second thoughts might be dealing with the risk of being considered late movers compared with competition that steps in with reporting voluntarily.
At the outset, despite the regulatory expansion, there was still a notable gap between minimum compliance and strategic leadership. According to KPMG research, 77% of the world’s 250 largest companies used Global Reporting Initiative standards, exceeding mandatory requirements to gain competitive advantages.
Voluntary standards prove preferable if the policy objective is to help efficient firms become more sustainable. As such, especially with the recent status quo, there is space and time for companies to orient towards comprehensive voluntary disclosure.
Looking at the competitive advantages for companies that report voluntarily ahead of regulations, it is seen that these companies can be trailblazers in terms of operational efficiency and market differentiation. They can also avoid some of the pressure that comes from stakeholders regarding sustainability issues. Clearly, the early adopters not only have managed to attract more talent that recognizes their commitment to sustainability, but they have also documented reduced costs.
Industry shifts have always happened and will never cease happening. Organizations that are not questioning the process and going beyond compliance are recipients of valuable experience with sustainability frameworks, strengthen stakeholder relationships, and demonstrate forward-thinking leadership. They gain a “sustainability head” start by establishing the essential processes, skills, and data collection systems further along than their competitors, who will be eventually pressed for time to meet regulatory deadlines.
Trust forms the foundation of successful business relationships, particularly when it comes to ESG performance and sustainability initiatives. Transparency in voluntary reporting has emerged as a powerful tool and serves as a cornerstone for building that trust with all stakeholders.
According to research, businesses that strive to provide as much as clear, verifiable information about their ESG performance make customers feel more confident in their choices. Additionally, when organizations openly share their sustainability challenges alongside achievements, they demonstrate accountability that enhances trust and loyalty. This openness has shown that it helps stakeholders to compare companies and choose those that align with their values.
Beyond customers, transparent reporting builds stronger relationships with all stakeholders, including local communities, suppliers, regulators, and investors. By disclosing credible sustainability information, companies simultaneously meet growing regulatory requirements and stakeholder expectations.
The relationship between transparency and reputation is increasingly measurable. Studies indicate companies with strong sustainability profiles have outperformed the general stock market. Furthermore, organizations that commit to transparency and accountability typically see improvements in their sustainability performance. When businesses provide more detailed ESG disclosures, they reassure customers, investors, employees, and other stakeholders about long-term viability. Especially when emotional connections are involved, satisfied customers can effortlessly turn into brand ambassadors who actively promote the company.
For maximum impact, transparency must stem from the sustainability strategy itself, which should align with broader business objectives. Through this strategic alignment, voluntary reporting becomes not just a disclosure exercise but a powerful tool for building lasting trust and competitive advantage.
Navigating the complex landscape of sustainability reporting can be overwhelming since there are over 600 ESG frameworks and standards available worldwide. Understanding which voluntary reporting frameworks best suit your organization requires careful consideration of several factors.
The sustainability reporting ecosystem includes major frameworks, each serving distinct purposes like the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), Task Force on Climate-related Financial Disclosures (TCFD), and UN Sustainable Development Goals (SDGs). EFRAG (European Financial Reporting Advisory Group) is an independent advisory body that provides technical expertise and recommendations to the European Commission on financial reporting standards. More specifically, EFRAG is exploring simplified or sector-specific frameworks for organizations that want to report sustainability impacts, risks, and opportunities voluntarily with the Voluntary Sustainability Reporting Standards (VSRS).
It is also working on voluntary sustainability reporting guidelines for SMEs that are not required to follow the full ESRS under CSRD but still want to disclose relevant information to stakeholders. As far as international frameworks, EFRAG ensures that voluntary reporting aligns with existing frameworks like the ISSB, GRI, and TCFD.
Positively, the Omnibus Package does not touch the double materiality concept, which is central to CSRD. Covered entities still have to report on both the possible financial effects of sustainability issues and the external impacts of their business on stakeholders, including communities and the planet. However, EFRAG also encourages companies that opt in to report voluntarily to use the double materiality approach. Pursuing double materiality assessments is critical for all entities involved in the reporting process, even if CSRD extended time plans are finalized or the scope of reporting is streamlined.
It’s crucial to distinguish between frameworks and standards. Frameworks provide principles-based guidance on information structure and broad topics, whereas standards offer specific, detailed requirements for what should be reported for each topic, including metrics. This distinction helps organizations develop systematic reporting approaches aligned with recognized methodologies.
It is often seen in companies to implement a mix of frameworks since they were designed for different purposes. This strategic approach allows companies to deliver comprehensive ESG information tailored to diverse stakeholders, yielding excellent results. Indeed, hybrid approaches integrate strengths while minimizing limitations of individual standards. This integration helps organizations avoid duplicative reporting efforts while ensuring compliance across jurisdictions.
Ultimately, effective voluntary reporting transcends simply compliance; it involves utilizing information to create added business value. By understanding and strategically combining appropriate frameworks, companies position themselves favorably in an increasingly sustainability-conscious marketplace.
Collecting sustainability data is only half the battle. What’s the point of all that effort of gathering information if it isn’t adequately communicated to inspire and differentiate between complying and engaging stakeholders? The most successful organizations understand that voluntary reporting requires thoughtful storytelling to maximize its impact. Effective sustainability storytelling converts complex metrics into relatable, emotional narratives that resonate with audiences. Research indicates that people retain stories up to 22 times better than just facts. By translating technical sustainability data into human-centered stories, companies can persuade stakeholders to embrace sustainability not as an abstruse concept but as a tangible mission. That should be the ultimate purpose of corporate sustainability.
Taking complex information and simplifying it through visual aids, clear and jargon-free language, or highlighting real-world impacts rather than ticking abstract goals are a few of the storytelling techniques that work. Each stakeholder group is motivated by different aspects of sustainability; therefore, communication should be customized accordingly. Investors, for instance, are attentive to financial risks and opportunities; customers emphasize ethical products, whereas employees highlight company values and individual roles.
Taking time to devote to what each group’s priorities, concerns, and preferred communication styles are is a factor of success for organizations. Moreover, strategic segmentation allows for resource optimization, ensuring communication efforts create maximum impact.
Companies find themselves in a pivotal position as sustainability regulations continue to evolve: either wait for mandates or take the lead through voluntary reporting. The Omnibus Proposal has shifted regulatory timelines and requirements; nevertheless, proactive disclosure can give a competitive edge. Organizations that embrace sustainability and voluntary reporting position themselves ahead of the curve, gaining trust, market differentiation, and operational efficiencies that late adopters may struggle to achieve.
By strategically selecting the right frameworks, aligning sustainability narratives with business goals, and fostering transparency, companies can build lasting stakeholder confidence. The businesses that act now will not only mitigate future compliance risks but also unlock new investment and partnership opportunities.
