Sustainability reporting is often a balancing act

The implementation of the CSRD raises many legal questions. Emmanuel Leroux, lawyer at KPMG Law, and Kurt Verheggen, General Counsel at Barco, explain what companies should be mindful of.

Legal experts play a crucial role in identifying and mitigating risks, so it's only natural that they are also involved in mandatory sustainability reporting. “The role my colleagues and I play in sustainability reporting varies from company to company,” says Kurt Verheggen, General Counsel at Barco. “Some take on a more active, even coordinating role, while others are more limited and focus on specific areas. It all depends on the sector the company operates in, its structure, and the expertise of its employees.”

“For example, listed companies typically have an Investor Relations team that leads the reporting efforts. Some also have a Sustainability Manager who takes a more hands-on role. At Barco, we have both, which meant that my role was more limited,” Verheggen explains.

External lawyers also have a part to play, such as Emmanuel Leroux of KPMG Law. “We typically provide ad hoc advice, for instance on the scope of the CSRD. At the same time, we act as gatekeepers, because the sustainability report is, and remains, a legal document that is included in the annual report under Belgian law. Even if a lawyer doesn’t have a coordinating role, they still play a key role in reviewing what is published. The content and format often require a review of the company’s contracts as well.”

This advisory role is essential. Both experts point out that there are still many uncertainties. “Once you start reporting under the CSRD, a lot of questions come up,” says Verheggen. “We have to find a way to comply with the directive without neglecting other obligations or presenting an overly positive picture. It's a constant balancing act. The key is not to set the bar too high from the start. It’s only in the next reporting cycle that we’ll truly grasp the full scope of the CSRD within a given sector.”

Leroux advises companies to proceed with caution: “Translating legal requirements into operational practices isn’t straightforward. We need to avoid both under-reporting and over-reporting. Companies disclose a lot of information, and it’s hard to predict whether it might later be used against them. There may also be confidentiality obligations to consider. The regulator is learning too, assessing whether the legislation has been properly transposed. At the European level, there's increasing recognition that certain reporting requirements need revision and that various sustainability and ESG regulations need better alignment.”

One of the biggest challenges for companies today is avoiding over-reporting. “As lawyers, it’s our job to ensure that those drafting the reports stick to what the regulations actually require,” says Verheggen. “Sometimes it’s enough to refer to disclosures made under other frameworks. As a lawyer, you have to be willing to hit the brakes. You also need to keep a long-term perspective, despite the pressure from rating agencies, investors, regulators, and internal stakeholders. Even if a company wants to do its best, one has to dare to limit the reporting to specific information. Sustainability is not some kind of record that needs to be broken, especially when there are already calls to revisit the legislation. Given the high level of legal uncertainty and variation in interpretation, the safest approach is often the most prudent.” Leroux adds: “The principle of prudence also applies to financial reporting, so this isn’t a new concept.”

Not only is the pressure on legal teams increasing, but boards of directors are also facing rising expectations. The two roles can reinforce each other, says Verheggen. “People sometimes expect board members to have deep expertise in everything, but they’re already overloaded with information and aren’t involved in the company’s day-to-day operations. That’s where we come in—we understand the regulations and can ensure the board receives accurate, reliable information. It’s our role to bring clarity and peace of mind. Management must present the essentials, so the board doesn’t get lost in the details.”