Insights: April 2024
In this newsletter I will briefly touch upon the Corporate Sustainability Reporting Directive (CSRD), the Nature Restoration Law, the latest Human Development Report, the latest on the EU due diligence legislation (often referred to as CSDDD) and a new book on obsessive measurement versus pragmatism. I think all of the above is relevant and important, both in business and in other walks of life.
The (landmark) EU Nature Restoration Law – postponed
Some 80% of European habitats (like forests, grasslands and wetlands, rivers, lakes and coral beds) are considered to be in poor shape. After lengthy discussions the European Parliament has adopted a new law which is meant to restore 20% of EU’s land and sea. To reach the overall EU targets, member states must restore at least 30% of habitats covered by the new law from poor to good conditions by 2030, increasing to 60% by 2040, and 90% by 2050. Member states will also have to adopt national restoration plans detailing how they intend to achieve these targets. However, though the law was expected to pass through the European council as a last formal step before coming into force, the Belgian presidency decided to withdraw it from the agenda late March. Hungary, the Netherlands, Italy and Sweden are allegedly among the countries resisting the law. (Read more here and in Swedish here). The discussions will for sure continue.
Comment: this is an important law not only from a biodiversity perspective. It will also have consequences for industries and livelihoods, not least agriculture and forestry. I think the law is an enabler for a healthier nature and sounder economies. And we need more enablers. At the same time, the proposed law highlights the difficulty with looking at all contexts from the same (or a similar) lens. One size doesn’t fit all and conditions in the very north of Europe may need different solutions from the very south of Europe. Therefore, I understand that there is some resistance, but I also think that the countries (and industries) blocking the law have a special responsibility to ensure that we can get something across soon, which doesn’t imply watering down the intention of the law makers: the restoration of our damaged nature.
Corporate Sustainability Reporting Directive – CSRD
Affected companies in the EU are now in full swing, preparing for disclosing their sustainability impact in accordance with the Corporate Sustainability Reporting Directive (read more here or refer to my previous newsletters). As this is a new law with far reaching consequences, there are still uncertainties on the actual application and how both auditors and authorities will interpret some of the disclosure requirements. In Sweden, introduction of the law is expected to be delayed for six months and, unlike the previous reporting directive, the Swedish law is not expected to go further than the EU Directive requires.
Comment: the new directive will certainly imply more work and new procedures for most large companies in Europe, and I also notice signs of smaller companies adapting to the new directive. There are several reason why smaller companies are interested in reporting at least partially in line with the directive, even if not obliged to (yet):
- For some companies it is a matter of staying ahead of the curve and prepare for the future,
- Some assume that they will be expected to report on some of the issues to their customers/business partners anyhow, and
- a third reason is that the Directive also provides an opportunity to speed up and report transparently on the sustainability achievements of the company.
The delay in Sweden, I believe, will not make any major difference. The worry I have, is that the directive will take so much energy measuring all sorts of indicators, that there will be little energy left for thinking and acting on impact and purpose.
The Corporate Sustainability Due Diligence Directive (CSDDD)
The European Council has (finally) reached an agreement on the human rights and environmental due diligence directive. Though watered down in relation to previous compromises, it is never the less considered a “fundamental piece of legislation to tackle forced labour worldwide and ensure EU companies promote social rights and good working conditions worldwide”. The directive is expected to apply from January 2026, for the largest companies.
Comment: just as with the CSRD, this legislation will imply more work for many companies, and it will also indirectly impact smaller companies not directly bound by the legislation. However, wisely used it is likely to be a tool for greater care and better dialogue in supply chains all over the world. Complying with the general idea behind the directive is hopefully something most companies already do, and it is largely expected by customers and hence also a comparative advantage.
Human Development Report: It’s getting better. At least for some
The Human Development Report, published by UNDP, is a good source of information for those who wish to know more about the world as well as for those of us who are interested in trendspotting:
“Looking ahead, there will only be more globally shared opportunities and challenges. Besides the high economic interdependence, two main drivers of interdependence are likely to shape our future in the decades to come. First, the dangerous planetary changes of the Anthropocene are deepening the global connections among societies, economies and ecosystems: viruses, microplastics in our oceans and forest fires do not care much for national borders. As the Report argues, we may choose to deglobalize, but we cannot “deplanetize.” Second, an unfolding Digital Revolution has led to a dizzying increase in the sharing of data, ideas and culture across societies” –Achim Steiner in the HDR foreword
The report concludes that all 38 OECD countries (i.e. rich countries) seem to have recovered from the slow-down during the pandemic and are now increasing their human development, which is not the case for more than half of the 38 least developed counties who have not yet reached their 2019 levels. The report also identifies an emerging ‘democracy paradox’. While 9 in 10 people support democracy, over half of global survey respondents express support for leaders that may undermine democracy. As usual, the report comes up with suggestions on how (some of) the identified challenges may be tackled – there is still time. Read the report – it will make you more knowledgeable – here.
Do we measure too much?
In a recent book, the two researchers Susanna Alexius and Janet Vähämäki examine if there is too much measurement going on. In the book, Obsessive Measurement Disorder or Pragmatic Bureaucracy? , they look at how bureaucracies (and individuals in these organizations) have dealt with performance measurement, uncertainties and complexity in development aid contexts. Obsessive measurement disorder (OMD) is when excessive use of performance management and control seeking, lead to unintended, perverse or even counterproductive outcomes – or that decision makers loose contact with the very purpose of the activities.
Their (preliminary?) conclusion is that it is not the number of regulations or measurements that explains obsessive measurement disorder. It’s rather an individual experience of perceived over regulation. The important thing is not the number of regulations; at times even, extensive regulation can be meaningful, they argue. What is important, however, is sensemaking. As an “antidote” to OMD, they introduce the concept of “pragmatic bureaucracy”.
Comment: In general, I believe measurement makes follow-up easier which is necessary if you wish to improve. But sometimes we measure the wrong things, or we start confusing indicators with goals. This happens in business, the public sector as well as in the civil society. In my view, the questions raised and at least some of the conclusions appear to be valid not only for aid and development in chaotic environments, but also in many business contexts including in the Nordic region. Many companies are now faced with new regulations related to sustainability, and there are new functions like “sustainability controllers” being created. This is probably a good thing. We need to follow-up and measure more. But at the same time, we must not loose sight of why we measure and follow-up. If we do, we may make irrelevant (or even counter productive) decisions – and we don’t have time for that.