ESG remains on the board agenda despite reduced reporting requirements

European legislation on sustainability reporting came to an abrupt halt over the past year. With the introduction of the new Omnibus regulation, only the very largest companies are now required to report. What does this mean for sustainability in business practices? KPMG set out to find answers, surveying more than a hundred companies across Belgium and Luxembourg.

Does simplification mean that sustainability and sustainability reporting have come to a standstill? According to Michael Wagemans, Head of Sustainability & ESG at KPMG Belgium, the opposite is true. “On the contrary, 94% of the CSOs we interviewed say they will continue reporting externally. ESG reporting has elevated sustainability to the boardroom and embedded it firmly within corporate strategy.”

However, the pressure is not equally strong everywhere. Without a binding European requirement and with an economic engine that is faltering, sustainability is slipping down the agenda for some board members. Yet the impact of climate change remains tangible and the market continues to demand ESG data.

For instance, large organizations continue to put pressure on smaller suppliers to provide clear proof of their sustainable approach through certifications and emissions data. “Respondents point to a growing focus on sustainability criteria in public tenders in particular, although price remains the decisive factor,” says Wagemans. “In the private sector, many family-owned businesses take a long-term view and place strong emphasis on sustainability. CSOs generally see them as highly committed stakeholders.”

A wide gap often remains between ambition and execution. Many organizations set bold targets, yet lack a concrete and actionable transition plan, particularly when it comes to reducing greenhouse gas emissions (see graph).

Today, companies increasingly prioritize sustainability initiatives that deliver immediate financial returns. Short-term financial logic often outweighs long-term impact. That said, a number of organizations do see sustainability as a growth driver and are adapting their business models accordingly. These companies look beyond quick wins or low-risk measures, building a competitive edge over peers that focus solely on compliance and risk avoidance.

Before a genuine shift towards sustainability reaches full momentum, businesses still face significant hurdles. “Nine out of ten CSOs experience implementation as complex,” says Wagemans. “First, they point to constantly evolving regulations, which often lead to a wait-and-see attitude among leadership. Internal business priorities also tend to clash, forcing difficult trade-offs. And finally, sustainable innovations often require substantial investments, which are being postponed in the face of ongoing geopolitical uncertainty.”

To help drive a company’s sustainability transition, the CSO must bring a broad mix of critical skills: from technical expertise in certification, regulation, carbon accounting, and life cycle analysis, to financial acumen, business insight, and data analytics.

“But it’s their soft skills that truly make the difference,” says Wagemans. “By communicating clearly, CSOs translate strategic ambitions into day-to-day practice. They build buy-in among internal and external stakeholders, increasing the chances of success. And they show strong adaptability, enabling them to respond to rapidly evolving markets and regulations.”

Some respondents feel that regulatory pressure weighs heavily on their role. “It only works when CSOs maintain a close line to the CEO and are seen internally as strategic partners, not merely as compliance officers ticking the boxes of European regulation.”

Today’s polyvalent CSO typically leads a small sustainability team that supports other departments. A decentralized approach, where sustainability permeates every layer of the organization, is increasingly becoming the norm.

Technology and AI are seen as valuable enablers in this context. CSOs are already testing artificial intelligence for repetitive, compliance-driven tasks. Truly transformative AI applications remain rare. Still, optimism prevails: 70% of CSOs believe that technological innovation will help deliver on both business and sustainability objectives in the future.

This article was created in collaboration with De Tijd and L'Echo.