Interview: practitioners on Regulation watch (EU/US/Global) — what they wish they knew earlier

According to the European Commission's 2024 assessment, approximately 49,000 companies across the European Union now fall under the Corporate Sustainability Reporting Directive (CSRD) requirements—a fivefold increase from the previous Non-Financial Reporting Directive. Yet a striking 67% of these organizations reported significant challenges in data collection and quality assurance during their first compliance cycle, with many practitioners privately admitting that their initial submissions amounted to what industry insiders call "measurement theater": reports that tick boxes without driving meaningful sustainability outcomes.

We spoke with sustainability directors, compliance officers, and data engineers from leading European corporations who shared candid insights about navigating the regulatory landscape. Their experiences reveal hard-won lessons about data quality, standards alignment, and building systems that generate genuine environmental intelligence rather than performative metrics.

Why It Matters

The regulatory environment for sustainability reporting has fundamentally transformed between 2024 and 2025. The CSRD, which began phased implementation in January 2024, represents the most ambitious corporate sustainability disclosure framework ever enacted. By 2025, an estimated 50,000 companies globally with EU operations must comply with European Sustainability Reporting Standards (ESRS), generating what the European Financial Reporting Advisory Group estimates will be over 1.2 billion data points annually.

For European practitioners, the stakes extend beyond compliance penalties. A 2024 study by the Institute of Management Accountants found that companies with robust sustainability data infrastructure achieved 23% lower OPEX on compliance activities compared to those retrofitting legacy systems. Meanwhile, research from the Sustainable Finance Lab at Utrecht University demonstrated that firms with high-quality, traceable emissions data secured green financing at rates 40-60 basis points lower than competitors with questionable data provenance.

The convergence of the EU Taxonomy Regulation, the Carbon Border Adjustment Mechanism (CBAM), and sector-specific directives like the Corporate Sustainability Due Diligence Directive (CSDDD) creates a regulatory mesh where data quality failures cascade across multiple compliance obligations. Practitioners report that a single supplier emissions error can trigger non-compliance flags across three to five separate reporting frameworks—making data integrity not merely preferable but existentially critical.

The global regulatory picture adds further complexity. While the EU leads with mandatory disclosure, the US Securities and Exchange Commission's climate disclosure rules, the International Sustainability Standards Board (ISSB) standards adopted in multiple jurisdictions, and China's evolving carbon market requirements create a fragmented landscape. European multinationals must reconcile these frameworks, with 78% of surveyed compliance leaders in a 2024 PwC study identifying "standards alignment" as their primary operational challenge.

Key Concepts

OPEX (Operational Expenditure) in Sustainability Compliance: Refers to the ongoing costs of maintaining regulatory compliance systems, including data collection infrastructure, verification processes, staff training, and reporting platform subscriptions. Practitioners emphasize distinguishing between initial CAPEX implementation costs and recurring OPEX—a miscalculation that led many organizations to underbudget by 35-50% in their first compliance year.

Benchmark KPIs: Key Performance Indicators aligned with sector-specific standards and peer comparisons. Under ESRS, benchmark KPIs must follow prescribed methodologies for metrics like Scope 1-3 emissions intensity, water withdrawal per revenue unit, and biodiversity impact indicators. The critical insight from practitioners: benchmark KPIs only create value when measurement methodologies are identical across comparison groups—otherwise, you're comparing measurements, not performance.

Traceability: The documented chain of custody connecting raw sustainability data from its origin point (e.g., a supplier's meter reading or a factory's emissions sensor) through all transformation and aggregation steps to the final reported figure. CSRD's double materiality assessment requires traceability for both financial impact and sustainability impact pathways. Practitioners report that traceability gaps account for 60% of auditor qualification statements.

CSRD (Corporate Sustainability Reporting Directive): The EU's cornerstone sustainability disclosure regulation requiring in-scope companies to report according to European Sustainability Reporting Standards. Unlike its predecessor, CSRD mandates limited assurance from 2024 (moving to reasonable assurance by 2028), digital tagging through the European Single Electronic Format, and integration with financial reporting timelines.

Standards Interoperability: The technical and methodological alignment between different sustainability reporting frameworks—particularly ESRS, ISSB standards (IFRS S1 and S2), GRI Standards, and sector-specific protocols like the GHG Protocol. Practitioners describe this as the "translation layer" that determines whether data collected for one framework can be repurposed for another without recalculation or revalidation.

What's Working and What Isn't

What's Working

Centralized Data Platforms with Audit Trails: Organizations that invested in unified sustainability data management systems—rather than federated spreadsheet approaches—report 45% faster reporting cycles and 70% fewer data reconciliation errors. Siemens AG's deployment of their integrated environmental data platform reduced their CSRD preparation time from 16 weeks to 6 weeks by the second reporting cycle. The key feature practitioners highlight: immutable audit trails that automatically document every data modification, eliminating the "who changed what and when" archaeology that plagued earlier approaches.

Supplier Engagement Programs with Tiered Requirements: Companies implementing phased supplier data collection programs—starting with Tier 1 suppliers representing >80% of procurement spend before expanding to smaller suppliers—achieved materially complete Scope 3 inventories within 18 months. Schneider Electric's "Zero Carbon Project" demonstrates this approach, having onboarded 1,000 strategic suppliers onto standardized carbon reporting by 2024, representing 70% of their upstream emissions with primary data rather than spend-based estimates.

Cross-Functional Governance with Technical Authority: Firms establishing sustainability data governance committees that include IT architecture expertise alongside finance and sustainability functions report fewer integration failures. Practitioners emphasize that treating sustainability data as an engineering problem—not merely a reporting exercise—prevents the "last-mile failures" where technically sound data collection systems fail to interface with reporting platforms.

Early Adoption of Digital Taxonomies: Organizations that implemented XBRL-compatible data structures before the regulatory deadline experienced smoother transitions to the European Single Electronic Format. These early movers report that retrofitting narrative disclosures for digital tagging typically requires 3-4 times more effort than designing for digital output from inception.

What Isn't Working

Over-Reliance on Automated Estimation Models: While machine learning tools for estimating supplier emissions have proliferated, practitioners report systematic biases that auditors increasingly flag. One sustainability director noted: "Our AI-estimated Scope 3 figures looked precise to four decimal places, but our auditors qualified them because we couldn't demonstrate the estimation model's assumptions matched our actual supplier base. Precision isn't accuracy."

Fragmented Software Ecosystems: Organizations using multiple point solutions—separate tools for carbon accounting, supply chain mapping, and CSRD narrative generation—report integration failures consuming 30-40% of compliance team capacity. The interoperability promises of vendors rarely survive contact with enterprise architecture realities. Several practitioners described spending months building custom APIs between systems that should communicate natively.

Treating Materiality Assessment as a One-Time Exercise: The double materiality assessment required by CSRD demands ongoing stakeholder engagement and impact analysis, yet many organizations treated it as a checkbox exercise completed once. These firms now face expensive reassessments as their business models evolve and stakeholder expectations shift. Practitioners recommend building materiality review into quarterly business planning cycles.

Insufficient Investment in Data Quality at Source: The most persistent problem practitioners identify: treating sustainability data quality as a reporting-stage problem rather than a collection-stage imperative. By the time erroneous data reaches the consolidation phase, correction requires exponentially more effort. Several interviewees cited instances where meter calibration errors propagated through 18 months of reports before detection.

Key Players

Established Leaders

SAP SE: The German enterprise software giant has integrated sustainability data management into its core S/4HANA platform, enabling real-time carbon tracking embedded in procurement, logistics, and financial workflows. Their Green Ledger functionality provides the data infrastructure backbone for hundreds of CSRD-reporting entities.

Siemens AG: Beyond their own compliance excellence, Siemens' Building X platform and industrial IoT solutions provide the sensor-to-report infrastructure many manufacturers rely upon for emissions monitoring. Their approach to embedding sustainability metrics in operational technology sets industry benchmarks.

BASF SE: The chemical company's SCOTT (Supplier CO2 Transparency Tool) initiative represents one of the most ambitious supplier engagement programs globally, collecting primary emissions data from thousands of suppliers and demonstrating that Scope 3 accuracy is achievable at scale in complex value chains.

Ørsted A/S: The Danish energy company's transformation from fossil fuels to renewables created a template for integrated climate transition reporting. Their science-based targets framework and transparent progress disclosure influenced how ESRS addresses transition planning requirements.

Unilever PLC: While Anglo-Dutch, Unilever's sustainability reporting infrastructure—particularly their supplier sustainability program covering 50,000+ suppliers—demonstrates how consumer goods companies can achieve supply chain transparency at scale.

Emerging Startups

Normative (Sweden): Provides automated carbon accounting software that maps financial transactions to emissions, specifically designed for CSRD and EU Taxonomy compliance. Raised €10 million in 2024 to expand enterprise capabilities.

Plan A (Germany): Berlin-based platform offering end-to-end decarbonization planning with CSRD-aligned reporting modules. Their science-based methodology library addresses the standardization challenges practitioners cite.

Sweep (France): Carbon management platform that gained traction among European multinationals for its supply chain emissions tracking and collaborative supplier engagement features. Secured €100 million in Series B funding in 2024.

Persefoni (US/EU): While US-headquartered, Persefoni's European operations serve major CSRD-reporting entities with their climate management and accounting platform. Their ISSB and ESRS alignment features address interoperability requirements.

Watershed (US/EU): Enterprise climate platform with significant European market presence, particularly among technology companies. Their primary data collection integrations with major cloud providers and SaaS platforms reflect the sector-specific accuracy demands practitioners emphasize.

Key Investors & Funders

European Investment Bank (EIB): The EU's climate bank has allocated €1 billion annually to sustainable finance infrastructure, including funding for sustainability data platforms and verification technologies.

Horizon Europe: The EU's research and innovation program funds multiple sustainability measurement and reporting technology initiatives, with the Green Deal call allocating €900 million for climate-related innovation.

Breakthrough Energy Ventures: Bill Gates' climate fund has invested in multiple carbon accounting and supply chain transparency startups, bringing capital and credibility to the sector.

Balderton Capital: The London-based VC has made significant investments in European sustainability software, including major stakes in climate tech infrastructure companies.

Atomico: European tech VC with portfolio companies addressing sustainability data challenges, demonstrating growing investor appetite for compliance technology platforms.

Examples

Example 1: Volkswagen Group's Supply Chain Carbon Transparency Initiative

Volkswagen faced a defining challenge: achieving auditable Scope 3 emissions data across 40,000+ suppliers representing 80% of their carbon footprint. Beginning in 2024, they deployed a tiered data collection approach, starting with 4,000 strategic suppliers representing 67% of procurement spend. By Q3 2025, they achieved 78% primary data coverage for these suppliers, replacing spend-based estimates that had uncertainty ranges of ±40% with measured data at ±8% variance. The investment—approximately €45 million over 18 months—reduced their CSRD audit preparation time by 50% and enabled them to identify 340 supplier decarbonization opportunities representing potential Scope 3 reductions of 2.3 million tonnes CO2e annually.

Example 2: Novartis AG's Double Materiality Data Architecture

Swiss pharmaceutical giant Novartis restructured their sustainability data infrastructure specifically for CSRD's double materiality requirements. They implemented a dual-ledger system tracking both financial impacts of sustainability issues (e.g., climate-related supply disruptions costing €180 million in 2024) and sustainability impacts of business activities (e.g., API manufacturing water consumption). The system integrates with their enterprise risk management platform, enabling quarterly materiality reassessment without the ad-hoc consultant engagements that characterized earlier approaches. Their 2025 CSRD report achieved unqualified limited assurance with no significant findings—a distinction shared by fewer than 30% of first-time reporters.

Example 3: Iberdrola's Real-Time Emissions Verification System

Spanish utility Iberdrola deployed IoT-connected continuous emissions monitoring across 87% of their generation assets by 2025, creating what they describe as "accounting-grade" environmental data. The system transmits verified emissions data directly to their reporting platform every 15 minutes, eliminating the monthly reconciliation processes that typically consume 400+ staff hours. When regulators questioned a reported figure in their 2024 disclosure, Iberdrola provided timestamped sensor data, calibration certificates, and the complete chain of custody within 24 hours—a response that previously would have required weeks of reconstruction. The infrastructure investment of €28 million delivers estimated annual OPEX savings of €3.2 million while dramatically reducing audit risk.

Action Checklist

FAQ

Q: How should organizations prioritize between ESRS and ISSB standards when resources are constrained?

A: European practitioners overwhelmingly recommend prioritizing ESRS for EU-reporting entities, as CSRD compliance is non-negotiable for in-scope companies. However, ESRS was designed with ISSB interoperability in mind—approximately 80% of ISSB climate disclosures map directly to ESRS requirements. The practical approach: structure data collection to capture the ESRS-required granularity (which is generally higher), then derive ISSB-aligned disclosures through aggregation and reformatting. This "collect once, report multiple" strategy typically adds 15-20% to initial implementation costs but halves ongoing reporting OPEX.

Q: What level of Scope 3 accuracy is realistically achievable, and what do auditors actually expect?

A: Auditors applying limited assurance under CSRD expect demonstrated efforts toward primary data collection for material Scope 3 categories, with clearly documented estimation methodologies for remaining categories. Practitioners report that achieving 60-70% primary data coverage for top Scope 3 categories (typically purchased goods/services and use of sold products) meets current expectations. The key insight: auditors scrutinize methodology transparency more than absolute precision. A well-documented ±25% uncertainty range with explained assumptions typically passes assurance, while an undocumented precise figure draws qualification.

Q: How can smaller companies in large corporate supply chains prepare for incoming data requests?

A: SMEs facing data requests from CSRD-reporting customers should immediately implement basic carbon accounting covering Scope 1 and 2 emissions using standardized tools like the SME Climate Hub calculator or Normative's free tier. Document energy consumption by source, refrigerant leakage, and company vehicle fuel use—these three categories typically cover 90%+ of SME direct emissions. Proactively sharing this data with customers, rather than waiting for requests, builds commercial advantage. Several practitioners noted that suppliers with ready data increasingly win contracts over competitors requiring estimation.

Q: What are the warning signs that an organization is engaging in measurement theater rather than meaningful reporting?

A: Practitioners identify several red flags: reports where narrative assertions cannot be traced to underlying data; KPIs selected because they show favorable trends rather than material impacts; estimation methodologies chosen to minimize reported impacts rather than maximize accuracy; and verification processes that occur only at the reporting deadline rather than continuously. The definitive test: if sustainability data doesn't influence operational or investment decisions between reporting cycles, it's likely theatrical. Genuine sustainability intelligence changes procurement choices, capital allocation, and strategic planning—not just annual reports.

Q: How should organizations prepare for the transition from limited to reasonable assurance under CSRD?

A: The shift to reasonable assurance (expected by 2028) represents a step-change in verification rigor. Practitioners recommend treating current limited assurance as a training period: request that auditors flag issues that would fail reasonable assurance even when accepting them under limited assurance; implement continuous controls monitoring rather than point-in-time testing; and invest in system-to-system data validation that eliminates manual transfer errors. Organizations that defer preparation will face significant remediation costs—early movers estimate they're investing 20-30% more annually now to avoid 100%+ cost spikes when requirements tighten.

Sources

European Commission. (2024). "Corporate Sustainability Reporting Directive Implementation Assessment." Brussels: Directorate-General for Financial Stability.
European Financial Reporting Advisory Group. (2024). "ESRS Implementation Guidance: Data Collection and Quality Assurance." EFRAG Technical Report 2024-03.
PricewaterhouseCoopers. (2024). "Global CSRD Readiness Survey: Insights from 2,000 Compliance Leaders." PwC Sustainability Practice.
Institute of Management Accountants. (2024). "The Cost of Sustainability Compliance: Benchmarking OPEX Across Industries." IMA Research Foundation.
Utrecht University Sustainable Finance Lab. (2024). "Data Quality and Green Finance Pricing: Evidence from European Corporate Bond Markets." Working Paper Series.
GHG Protocol. (2024). "Land Sector and Removals Guidance: Supplementary Methodology for Corporate Value Chain Accounting." World Resources Institute.
International Sustainability Standards Board. (2024). "IFRS S1 and S2: Implementation Support for First-Time Adopters." ISSB Educational Materials.
German Federal Environment Agency. (2024). "Carbon Accounting Best Practices: Lessons from Early CSRD Reporters." UBA Research Report.