A New Paradigm in the Business World
Environmental, Social, and Governance (ESG) stakes have carried a radical transformation in corporate operations, transitioning from long-standing voluntary principles to legal obligations. This upheaval not only redefines the role of companies within society but also metamorphoses their interactions with stakeholders. The emergence of ESG stakes underlines the growing responsibility of corporations towards a myriad of interests, present within regulations linked to Corporate Social Responsibility (CSR).
The Rise of ESG Concerns in CSR-based Regulations
ESG issues, at the heart of CSR-related regulations, extend beyond large corporations to encompass Small and Medium-sized Enterprises (SMEs). In France, the 2019 PACTE law highlights this trend, affording all enterprises the opportunity to become “société à mission” (mission-driven company). This legislation aligned well with the European regulatory landscape, having brought forth the Corporate Sustainable Reporting Directive (CSRD) in 2024. By significantly lowering the eligibility thresholds for CSR reporting, the CSRD extended CSR obligations to approximately 50,000 companies across Europe. This directive marked a decisive step in Europe’s resolve to reinforce corporate responsibility in ESG matters, further accentuated by the advent of new approaches, such as double materiality.
The Concept of Double Materiality
The CSRD most clearly embodies the principle of double materiality, requiring a comprehensive assessment of the reciprocal impacts between companies and their environment. This concept, also visible in other regulations such as the Sustainable Finance Disclosure Regulation (SFDR) and the Green Taxonomy, compels companies to analyze not only how they are affected by their environment but also how they affect it. This holistic perspective is essential for understanding and managing the societal and environmental footprint of commercial activities for an increasing number of enterprises.
The Growing Involvement of Enterprises
The adoption of this approach influences the manner in which enterprises must operate, including those not directly subject to the CSRD. For instance, standards such as the European Sustainability Reporting Standard (ESRS) S2 require companies to disclose detailed information on working conditions within their supply chain. This necessitates close collaboration with all suppliers, thus fostering a more transparent and responsible value chain. This transforms the economic landscape through companies directly targeted by regulations, and by ricochet, those not subject but incentivized to act by the companies that are subject.
Towards a Different Economic Landscape
ESG-related regulations deeply alter the economic landscape, compelling enterprises, both large and small, to revise their business models, anticipate new types of risks, and rely on their collaborators to implement CSR strategies. In this dynamic regulatory context, enterprises are discovering new opportunities to innovate and enhance their sustainability. Moreover, compliance with ESG challenges becomes a central strategic imperative, showing a deep transformation of companies (including organizations), carried by collaborators and HR professionals.