The CSRD Directive: the challenges of identifying significant areas in a market context

The recently enforced CSRD directive not only disrupts established principles of business development but also compels businesses to approach their activities in a more accountable and responsible manner. One of the key questions it poses is, “Which aspects of sustainability are most crucial for my business, and what actions can be taken?”. The CSRD directive mandates businesses to conduct double materiality assessments, helping identify areas of the greatest influence and those with the most impact on business development.

“Most aspects of good governance, such as business ethics, transparency or risk management, are among the most significant areas of corporate activity for companies in various sectors. Meanwhile, the significance of the areas of environmental protection and social responsibility mainly depends on the specifics of the company’s activities and the attitude towards its employees.

The identification of significant areas is important because it allows you to understand the areas of greatest impact and to formulate a targeted plan to reduce the impact, thus creating the greatest value for both the environment and the business. Human and financial resources allocated to achieving sustainability goals bring more value and results in the long term when we concentrate them in the most significant areas, rather than distributing them in order to answer all questions related to sustainability.” – Loreta Dainytė, head of the sustainability and quality department, shares her insights.

Loreta observes that in the evolving landscape of sustainable transformation, the market is proactively integrating sustainability not only into internal processes but also throughout the entire supply chain. This integration often requires disclosing efforts and results in sustainability areas crucial to customers, creditors, partners, or other stakeholders, even if those aspects might not be as relevant to participants in the supply chain, such as suppliers. Such obligations pose additional sustainability-related challenges, because in order to achieve successful cooperation, they foresee the need to integrate additional areas of sustainability into their activities, the significance of which is relatively lower for the supplier of the service or product.

Therefore, at the same time that we strive to refine the most significant areas of sustainability and achieve targeted results, we face pressure to meet the expectations of market participants who are important to us. As we navigate between our sustainability goals and the expectations of other stakeholders for us, we hope that the immediate future, with the CSRD directive at the fore, will bring more clarity and purpose to our sustainability implementation in our efforts to reduce negative impacts and create positive outcomes.