Is transparency still important if sustainability legislation doesn’t demand it?

On February 26th, the European Commission adopted an ‘Omnibus’ package of proposals that aim to simplify EU rules and boost competitiveness. Key is a proposal to amend the CSRD to only apply to EU companies with more than 1,000 employees and either more than €50 million net turnover or a balance sheet above €25 million. For non-EU companies, the EU turnover threshold will be significantly higher at €450 million.

Another proposed change is to postpone CSRD reporting requirements by two years for companies that would be due to start reporting in 2026 and 2027. The European Sustainability Reporting standards – which companies who are subject to the CSRD have to comply with – will also be revised and simplified.

The thinking is that these proposals will reduce complexity, particularly for small businesses who may struggle to meet the administrative requirements of the CSRD. Other reasoning is that larger companies are most likely to have a greater negative sustainability impact, so they will bear the brunt of reporting on this.

If the proposals are adopted, it will reportedly remove about 80% of businesses from the scope of the CSRD.

These Omnibus proposals don’t just create uncertainty about who is legally required to do what by when. They may also change the way that businesses think about sustainability transparency in general. 

Will they still strive for transparency if legislation doesn’t demand it?

Does Transparency Still Have Value?

The answer to that question depends on how you view transparency.

Businesses who solely see being transparent as  the way their business operates and the impact it has as an administrative requirement, may decide not to pursue it without legislation forcing them.

But businesses who see transparency as an opportunity rather than an obligation will continue to find value in this approach.

• Uncovering Financial Improvements

Talk about being transparent in business is heavily focused on sustainability impact, which can make the concept feel negatively weighted. After all, there’s no way to be in business without having some kind of environmental impact.

But transparency has a positive side. Because often the changes that come about through trying to improve your environmental impact have financial benefits as well.

For example, the amount of waste that a business generates will be a sustainability concern. But by identifying and measuring this, that business can look for ways to reduce waste. And by reducing waste, such as identifying underperforming product lines and removing them, they may also save money.

Whether you aim to be sustainable or not, your business will have costs to bear, such as staffing, materials, manufacturing, energy and so on. By taking the time to audit all of these, you can find opportunities to do things better. 

It might be that paying staff a fairer wage reduces your employment bill because you have less staff turnover and training to do. It could be that a more sustainable energy source makes your business more resilient to the fluctuations in the energy market.

• Building Trust

Transparency makes it easier for businesses to be held accountable for their impact and improving it. Essentially, it removes the say-do gap for companies.

That may not be important to you, but it is important to consumer trust. No one wants to be lied to or feel misled and skeletons don’t stay hidden for very long in today’s world. 

Established business practices are regularly thrown out once consumers become aware of them, such as burning unsold products. And without transparency, issues like greenwashing erode trust in all businesses making environmental claims.

Because ultimately that’s what transparency does – it builds trust. It shows that a company knows how it operates, and it can back up any positive claims. This doesn’t mean that it has to be perfect because that’s impossible. What it means is that the business has committed to an open dialogue with consumers and to doing better.

Trust isn’t just important to consumers either. Suppliers may only choose to work with transparent businesses, so that they can trust that they do what they say they do. This is particularly the case if a company is trying to build a sustainable value chain.

Investors may also be looking to work with businesses with strong sustainability credentials. They can only trust in these claims though if they’re backed up by robust, verifiable, transparent data.

• Identifying And Managing Risks

Going through the process of being transparent about the sustainability risks and opportunities to your business – and the impact your business has – puts you in a great position to manage that risk.

Risks could be operational, such as climate change impacting your manufacturing hubs, or legal, such as changes in legislation. They could also be reputational, including consumer backlash against unethical working practices in your supply chain.

These could include risks that you may have overlooked or not identified without going through the process of becoming a transparent business. 

Once you know what the risks are, you can also focus your sustainability activities in those areas and prioritise investment based on impact.

• Legislation Is Always Changing

What the EU Omnibus proposals show is that legislation isn’t a fixed thing. It changes and evolves over time. Sometimes it will be many years between amendments or new legislation. Sometimes the pace of change is quicker.

Nothing is that fast though when it comes to major legislation. The recent Omnibus proposals are proof of that – the amendments still have to be negotiated and approved before being formally adopted. And then there will be a gap before they come into effect while they are transposed into law.

This means that the CSRD still applies at present for companies that fall under the scope of ‘wave 1’. These are large public-interest companies with over 500 employees, who must report in 2025 for the year ended 31 December 2024.

Basically, these companies can’t ignore their transparency obligations. And companies who fall into ‘wave 2’ and ‘wave 3’ may have their reporting deadline pushed back under the Omnibus proposals, but we don’t yet know if those will be adopted.

Businesses may need to prepare for a scenario where the proposals are rejected or negotiated. They may also have other Green Deal regulations they need to comply with, such as the EU Ecodesign for Sustainable Products Regulation.

The easiest way to deal with all of this is to take steps to become a more transparent business. By adopting solid transparency and reporting principles now, it will be easier for companies to comply with whatever comes down the line.

Businesses Want To Do Better

Companies are in business to do business – eg make money. But that doesn’t mean that most businesses don’t also want to do better when it comes to the impact their activities have on people and the environment.

This is particularly the case among smaller businesses – the kinds of companies that may no longer have to comply with the CSRD.

After all, if we look at B Corp certification – which shows that a business is meeting high standards of verified performance, accountability, and transparency – the majority of the 9,500+ B Corps today are small- to medium-sized businesses.

The EU Omnibus proposals will allow companies outside of the scope of the CSRD to still report on their sustainability impact using voluntary standards. These have been developed by the European Financial Reporting Advisory Group (EFRAG) and are the same standards that small businesses will use to share sustainability information with larger companies as part of a value chain.

It may be that many smaller businesses choose – in the same way that they choose to pursue B Corp and other certifications – to self-report their impact for all the reasons listed above.

And if you’re wondering what’s in it for them, consider that B Lab UK reported that small businesses accredited as B Corps outpaced the wider market. They achieved a 23.2% increase in revenues between 2023 and 2024, compared with a national average of 16.8%.

Legislation may or may not force transparency but for many businesses that doesn’t matter. The value is already there.