The new EU directive on corporate sustainability reportingCSRD) is a game-changer. It forces large companies to disclose their environmental impact, social responsibility and corporate governance. This creates a domino effect throughout the supply chain. Even smaller companies that supply products or services to these large companies will face increased sustainability requirements.

Loss of sales and competitiveness

Imagine the following scenario: your company supplies components to a large manufacturer subject to CSRD. Under upcoming regulation, this manufacturer must now disclose the environmental impact of its entire supply chain. If your company cannot provide this information, or if your operations do not comply with the sustainability requirements, you risk being rejected as a supplier.

We can also consider a numerical example based on a future scenario that could happen in 2025:

• A company has 30 customers who pay an average of 500 000 SEK for your products annually and your turnover is thus 15 000 000 SEK.
• 10 of these customers are covered by CSRD and their double materiality analysis identifies several areas as material. For several of them, climate impact is the most important (as we show further in the example).
• All customers ask your company to report your CO2 emissions, which are not calculated, and you are forced to reply that you can only state how much money you paid for the energy you bought for your premises.
• Your customers then ask some competitors for their climate data and find a company that can provide emissions for the corresponding products. 5 of these customers consider the risk of buying products that they cannot include in their reporting as too high and choose a competitor.
• 5 customers of 500,000 SEK each results in a loss of income of 2,500,000 SEK per year.

In this case, the risk of not starting with your ESG work costs 2.5 million SEK per year. What could you instead gain from being one of the competitors who have been proactive and started communicating their sustainability work?

To sum up:

• Customers' demands are increasing: Large companies will prioritize suppliers that can demonstrate a strong sustainability profile.
• Competitive advantage: Companies that adapt early to the new requirements will have a clear competitive advantage.
• Reputational risk: Being associated with an unsustainable supply chain can damage your company's reputation.

More than just rules - a changing market

It's not just about meeting legal requirements - consumers and investors are becoming increasingly aware of sustainability issues in general and climate issues in particular. Companies that demonstrate responsibility will attract not only customers and investors, but also employees and partners, while those that ignore these issues risk being left behind.

What can you do?

• Start now: Don't wait to be forced. Start mapping your climate and environmental impact and social responsibility now.
• Transparency: Be open about your sustainability efforts and humble about the journey you have started. Share information with customers and stakeholders.
• Collaborate: Work together with your customers and suppliers to create a sustainable supply chain.
• Training: Invest in training for your employees on sustainability issues.

Conclusion

The cost of inaction is high. In an era of increasing demands for sustainability, companies that do not adapt risk losing sales, competitiveness and reputation. By taking sustainability seriously, you can not only meet legal requirements, but also create a more sustainable and successful business.

ZeroMission offers system support to collect, analyze and report sustainability data in our calculations platform, and our experts are available to help interpret regulations and develop your sustainability strategy. Contact us to get in touch with one of our climate strategists!