Navigating This Wave of Regulatory Complexity: Future-Proofing Tactics from Sustainability Professionals

According to findings from a poll conducted during a Nasdaq webinar that delved into the current status of the Omnibus Package, 77% respondents indicated that regulatory compliance is the biggest driver of sustainability at their company. Yet, 51% are either concerned or very concerned about their ability to meet regulatory requirements. These findings highlight an opportunity for companies to enhance their regulatory readiness and build a more resilient reporting foundation. Is your company prepared?

The Omnibus Package by the European Commission has the potential to simplify sustainability reporting requirements for companies. It outlines changes that could be made to the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), and Carbon Border Adjustment Mechanism (CBAM) – all with the aim of reducing the burden on companies that are required to report across sustainability metrics. The Omnibus Package also seeks to align different legislations for companies in scope.

While the Omnibus Package is intended to “cut red tape” and “simplify EU rules for citizens and businesses,” uncertainty still looms over what exactly will be modified, and for whom, and when those changes may go into effect. Apprehension around compliance was echoed in a poll conducted by Nasdaq during a recent webinar, A Strategic View to Navigating Complexity in an Age of Regulatory Uncertainty . 77% of poll respondents indicated that regulatory compliance is the biggest driver of sustainability at their company, second only to long term value creation at 54%. Yet, over half of respondents (51%) said they are ‘very concerned’ or ‘concerned’ about their ability to meet regulatory requirements. This incongruency reveals the imperative that companies should do what they can in advance of the Omnibus Package approval to remain compliant with requirements – and help meet their strategic sustainability objectives. They can use the Stop the Clock proposal as a window of opportunity to do a dry run of the double materiality assessment (DMA), and then evaluate the results and their implications for strategy, value chain, and reporting.

Sustainability Reporting Challenges and Areas of Opportunity

While the scope and timeline of the full  Omnibus Package can’t be predicted, there is opportunity in action. In the same Nasdaq webinar, panelist Anna Nova, Sr. Manager, Sustainability & Corporate Responsibility Regulated Reporting at Kellanova, stated “Stopping and restarting CSRD readiness later can actually be more costly and more difficult than maintaining a steady effort.” She further explained, “Halting all preparation now could expose a company to legal and compliance risk should transposition not occur before that required deadline.” 

The current two-year delay in CSRD reporting means Wave 2 and Wave 3 companies have a longer runway to optimize their reporting processes and technologies to be as prepared as possible for when the new requirements are finalized. Investors, lenders, customers, and other stakeholders are still using sustainability information in their decision-making, according to Nova. Companies need to be ready for potential regulatory changes to come. 

In addition to continuously monitoring and ensuring compliance with the evolving regulatory landscape, companies may consider how conducting a DMA and investing in sustainability software can help.

Embracing Double Materiality  

For companies or subsidiaries in the waves of regulatory reporting, a DMA might be a good place to begin gathering data that will be relevant for current sustainability initiatives and future compliance needs. DMAs provide companies with a method to analyze the positive and negative implications of their operations, productions, and other activities, as well as how those actions could affect them financially – both in terms of risks and areas of opportunity. DMAs are best done as a team effort and require internal and external collaboration to gather the necessary feedback to conduct them. By incorporating diverse inputs, DMAs offer utility beyond what’s required for action and reporting – they can also be viewed as a strategic opportunity to shape a company’s overall strategy. 

Another webinar panelist Anne Gadegaard, Director of Sustainability, Data, Assurance, and Controlling at Pandora (a Wave 1 company), shared how performing a DMA helped the company identify areas that may have otherwise not been identified and prioritized. As part of the preparations for reporting on the Impacts, Risks and Opportunities (IROs) identified in the DMA, the team introduced a threshold that was inspired by the threshold applied to the annual reporting of financial risks, helping them zoom in on what was most financially material to Pandora and provide more tactical guidance to investors. 

Concretely, the DMA revealed that one of the material IROs was adequate wage in its own operation. Gadegaard said, “...building the data, doing the assessment, understanding if and where do we have a gap, and what we will do to close that gap, and what does it mean for how we remunerate our employees going forward” became more than just a reporting exercise. Conducting this assessment and analyzing its results, combined with engaging senior management in the conversation, has allowed Pandora to make more informed, strategic decisions on specific topics.

Investing in Sustainability Software

The Omnibus Package presents an opportunity for companies to level up their sustainability reporting. Moreover, the delay gives Wave 2 and Wave 3 companies time to evaluate if their current tech stack is meeting their reporting needs. Consider an end-to-end solution, like Nasdaq Metrio™, that’s a one-stop-shop for sustainability data management, reporting, and disclosures. Nasdaq Metrio helps companies collect granular sustainability data, automate survey workflows, manage compliance with multinational taxonomies, and more. 

Additionally, companies may want to assess how an intelligent AI assistant, like Nasdaq Sustainable Lens®, can help them simplify and fast track crucial reporting tasks. Sustainable Lens helps expedite decision-making with on-demand data, optimize manual tasks like researching, benchmarking, and drafting to boost productivity, as well as strengthen credibility by rooting a company's sustainability program and reporting with evidence-based approaches. 

Investing in sustainability software can help ensure companies are prepared to navigate this wave of regulatory complexity – and the next.

Nasdaq offers a suite of tools and advisory services to support double materiality assessments and sustainability reporting. To find out how Nasdaq Sustainability Solutions can best support your company throughout its sustainability journey, visit our website or get in touch today.