Is sustainability regulation too inconvenient, or is that the point? with Andreas Rasche

00:00:10: Welcome to Inconvenient Chats.

00:00:13: Today we will be talking about sustainability regulation, a particularly complex however very influential topic.

00:00:21: it seems to me like sustainability in general and sustainability regulation particular have suffered from some kind of backlash over the past few years next other priorities like geopolitics an economy competitiveness coming into focus.

00:00:36: At the same time, we're increasingly experiencing climate-related disasters.

00:00:40: For example heatwaves floods and landslides And there's neat full long term structures that support a more sustainable in livable future.

00:00:51: So I was keen to understand whether There is a real backlash how big it Is?

00:00:57: How do We actually Do effective sustainability regulation In A world That so much in motion?

00:01:02: i Invited under Reyes Rache to help me on trying all make sense of this question.

00:01:07: Andreas is an academic and a well-known commentator on corporate sustainability in ESG regulation, And I was really excited that he took the time to come discuss with us for one hour.

00:01:17: As always you can write it to me at carsoddinconvenientcharts.com if you have topic recommendations or comments.

00:01:24: Without further ado let's go into episode.

00:01:26: i hope u enjoy!

00:01:39: How

00:01:43: are

00:01:43: you doing?

00:01:46: I'm good, thank-you.

00:01:47: Summer is almost over so back to work right?

00:01:50: Back to work!

00:01:51: It's the bitter sweetness of August no?

00:01:56: Exactly that's a good framing – the bitter sweetness of August and i will remember it.

00:02:01: And I am really glad that you could find time today for an intro text made by me.

00:02:14: But so Andreas, you are a professor and an associate dean at Copenhagen Business School.

00:02:20: You spent much of your academic career researching ESG in corporate sustainability Next to research your much-followed commentator Of these topics as of this morning actually who had seventy four thousand seven hundred ninety seven followers on LinkedIn which is

00:02:39: And

00:02:44: on LinkedIn, you share a lot of your thoughts but also write for financial times.

00:02:49: You do a lot public speaking so... ...you're pretty big voice in this topic and as well.

00:02:56: I was really excited that we could make some time to have another conversation about regulation.

00:03:07: Just to start out what is the most fascinating part?

00:03:11: I

00:03:15: think for me, first of all thank you.

00:03:17: Thank you very kind introduction and also digging out the number of followers so that's really interesting!

00:03:25: Yeah i look at it every once in a while but haven't looked into time... I think most interestingly.

00:03:31: well.. You know ..I entered this field because ...this is a field which was shaped by empirical reality.

00:03:38: Right, I mean we see it every day in the news.

00:03:41: yesterday.

00:03:43: We had a Nepal kind of glacier come down and flooding.

00:03:49: so i think for me This is the relevance off-the-field?

00:03:53: We see it everyday we see the consequences And this also what motivates me.

00:03:59: Of course as an academic you can always deviate into different fields and some work on really more basic research.

00:04:05: that Maybe it's not as linked towards empirical reality and kind of what is happening around us.

00:04:15: I'm also interested in discussing with you, about sustainability regulation specifically in the EU because that's where some quite interesting evolutions have been going on for past years but all over the world right?

00:04:30: Because these are global phenomena.

00:04:32: there was something Even in action is action, and that's also part of the picture.

00:04:40: I'd also be very keen to hear your thoughts on what effective regulation really... This podcast is called Inconvenient Chats because we're interested in parts where there are not particularly any comfortable or straightforward answers And i think sustainability regulation qualifies as a Uncomfortable topic because of its sheer complexity.

00:05:07: I think there's an interesting balance that needs to be found between ambition and feasibility sometimes, Because regulation is created when There are something that market incentives like on their own intuitively don't just create so it Is meant for changing Something as what has to be ambitious enough?

00:05:28: It has powerful enough.

00:05:31: But it can also sometimes, especially now on the topic of changing corporate behavior... It can impose some costs as well or at least in the first instance and then at the same time you have to be realistic.

00:05:49: so if becomes too burdensome or politically difficult It can become ineffective or it can be rolled back altogether, which is maybe something that we saw a little bit in the EU over the past years and will go to that in a bit.

00:06:03: And I think so... That's kind of like the tricky balance that has to be found.

00:06:06: and then underneath there is this big question of responsibility especially in the context of the sustainability transition.

00:06:14: who has what responsibility?

00:06:18: Of moving us forward?

00:06:20: would you agree with that as if something to that inconvenience.

00:06:26: I think you framed it very well and i really believe we have an area here, but really is inconvenient particularly at the moment.

00:06:33: right so i think perfectly fits into the framing of this podcast series.

00:06:38: um particularly things off course.

00:06:42: the simplification agenda in thunderline second commission came.

00:06:48: I think we really face an inconvenient time here, but We need to see it in context and i will try To explain some things also throughout this podcast.

00:06:55: you know In order too.

00:06:58: Also right at a kind of balanced assessment Of what is happening?

00:07:03: And why these things are happening?

00:07:05: um and hopefully This would also help us understand the way forward.

00:07:11: Speaking of context I was curious if you could help us to take the helicopter view and take a step back.

00:07:18: Many people, especially in the work into sustainability field are quite familiar with the evolution of let's say five years where the omnibus or simplification package of some sustainability regulations has been very much a topic for discussion.

00:07:36: but we just go up before that.

00:07:40: Where does the European sustainability, and not necessarily only European but just a story of sustainability regulation.

00:07:47: What is that really start?

00:07:49: And how has it evolved over the past?

00:07:50: let's say fifteen ten years

00:07:53: I mean, probably it's very difficult to find kind of a moment in time where this has started.

00:08:00: Um...I think for me Of course A lot of us also comes when you go way back from these kind of voluntary commitments These voluntary standards right and they reach back into the nineteen seventies Nineteen eighties after last century Where you had these voluntary commitments?

00:08:15: And i remember offcourse Kofi Annan That was a landmark moment When he gave his speech in Davos In January in nineteen ninety nine.

00:08:24: Let's get together, let's form this kind of compact that he called back then and out-of-this grew a voluntary initiative.

00:08:31: But also in Europe I think we had... In the year two thousand five, two thousand eight.

00:08:36: We have good discussions around CSR but all of these was voluntary And at some point everybody recognized Voluntary is good, voluntary is nice.

00:08:47: It does not give us scale or scope to tackle the problems that we actually need to tackle.

00:08:56: And out of this groove, then I think the discussions and maybe with regard to European regulations you can say twenty fourteen uh...with the NFRD The Non-Financial Reporting Directive i think that was fucking the first time when We really talked about moving from voluntary CSR towards kind of mandatory disclosures.

00:09:16: right so That was a landmark moment.

00:09:20: Obviously, the NFRD was still rather patchy and it wasn't very well-developed also in terms of indicators.

00:09:29: But something that started their discussion then... I think you had your first discussions around sustainable finance?

00:09:39: You kind of woke up when they realized hey!

00:09:42: Something is moving there particularly in US back then.

00:09:48: And the Europeans kind of said, okay we also need to do something about that.

00:09:54: They always viewed it I think with a little more critique than Americans did.

00:09:58: and thats why they said you know... You had discussions around the taxonomy regulation, and the SFDR.

00:10:09: And then of course von der Leyen comes into office in twenty nineteen... ...and she bubbles it all up to this green deal!

00:10:14: This is when things really get moving.

00:10:18: She gets a lot of public attention.

00:10:19: She gives this speech on December twenty nineteen where she talks about Europe's men-on-the-moon movement.. ..and people have

00:10:26: hope!!

00:10:26: I think that is decisive.

00:10:28: People suddenly say

00:10:30: wow!!!

00:10:32: We elected her into office and this is a moment of hope.

00:10:38: And so out-of the green deal, then grow in number of regulatory initiatives again not for the sake of regulation but simply because the European Commission realized there's need for it right?

00:10:50: Because they are some areas which are simply not regulated.

00:10:55: And then I would say and we all know that what happened, you had the CSRD.

00:10:59: You have to see as triple D at a number of also more specialized regulations like equal design regulation for instance

00:11:08: reporting or doing it in certain way

00:11:14: Yeah, but also circularity.

00:11:16: I mean the green is a lot about circularity right.

00:11:19: so you had a number of regulations.

00:11:21: some of them only become Implemented now.

00:11:24: for instance textile producers cannot just burn their waste anymore And they're over production Right?

00:11:32: So i mean You would kind of think well this Is something actually that naturally no producer should do to simply Just burn kind of stock that is left, but you had to regulate it because there was simply too much of it.

00:11:46: So in that sense... You had all these regulations and then again we talk about politics.

00:11:52: here We have the twenty-twenty four elections.

00:11:54: The political landscape changed Also a lot.

00:11:58: what has happened in the US than influenced Europe?

00:12:01: The second fundalign commission comes into the house And basically starts the simplification agenda.

00:12:09: And what is interesting and maybe we can discuss that later, is that von der Leyen used almost the same arguments she uses in twenty nineteen to also justify this simplification of these sustainability regulations that she introduced.

00:12:24: it's competitiveness.

00:12:25: So In Twenty Nineteen She basically said We need all these regulations because we need to fight for the future of european competitiveness.

00:12:33: and then five years later she kind of says yeah it's a bit too much you know in order to be competitive.

00:12:39: We actually need to reduce the burden.

00:12:41: so we need two.

00:12:42: scale some of this regulations back.

00:12:44: i think is this contradiction that really makes people angry at times, because you have this immediate contradiction between twenty nineteen giving

00:13:00: hope

00:13:01: and twenty twenty four, twenty twenty five kind of using the same argument to take away the hope.

00:13:08: Yeah I actually didn't know that it's really fascinating... That makes me reflect on another point i've heard before is this question of consistency versus inconsistency.

00:13:20: for example from a company perspective we're talking about regulating company behaviour in the sustainability context.

00:13:29: I've heard some companies say that it's not much about specifically what is being required, of course it has to make sense and be feasible but there have to be consistency.

00:13:39: so if you make an investment into being able to comply with regulation then you need trust from now on for two years or something completely different.

00:13:51: Exactly, I fully agree.

00:13:55: There needs to be a level of regulatory predictability and you cannot just move around that quickly.

00:14:04: unfortunately the EU has done this in particular with regard for sustainability legislation.

00:14:09: they have not done it so much regarding other legislations but They have been really affected by this lack of regulatory predictability.

00:14:19: Look at the deforestation regulation, right?

00:14:22: This has been delayed now twice and some of the companies they had their systems ready.

00:14:27: I just talked to a Danish company The other day said look we invested almost a million euros into the software system in order To kind get all these things ready And last year then told us it's another year that was postponed.

00:14:44: In that sense, I think predictability is key also in order to legitimize your actions.

00:14:51: Yeah for sure it sounds like the way you were describing did longer.

00:14:56: evolution of corporate responsibility and sustainability regulation.

00:15:04: there's been a gradual understanding, realising the imprint and effects that company activity has on the world.

00:15:13: And therefore then they need first to companies take more of their responsibility themselves... That voluntary umbrella!

00:15:20: ...and gradually introducing harder measures via regulation because you realise that voluntary measures are not going to take us all away there.

00:15:30: Which brings us this moment I think.

00:15:35: up until a few years ago This was indeed a gradual evolution in the big picture that was kind of moving towards being stricter, more all-encompassing etc.

00:15:48: I think there is now general perception that sustainability is suffering from backlash.

00:15:56: you just quoted von der Leyen yourself with the whole simplification agenda.

00:16:02: The omnibus has been prevalent example And this is of course in the context where we have geopolitics, energy prices.

00:16:11: All that taking the stage and there's like a new type of competitiveness narrative also coming from?

00:16:20: Is your read-of to situation really backlash or just one side of coin?

00:16:29: I think maybe i would call it focused backlash because you have a backlash on some areas A general backlash against all things sustainability.

00:16:40: i think that would be overstating things.

00:16:43: That was an interesting survey a couple of months ago where people were asked do you perceive the backlash?

00:16:48: and indeed in the u.s.. You know most stuff, uh... Most of the corporate leaders also perceived this backlash.

00:16:56: Whether it is really a backlash, I'm not so sure.

00:16:59: Maybe its just bit of reordering priorities because companies due to the geopolitical unstable situation and also economic downturn in many parts of world think they face number competing problems.

00:17:15: that has always been the case.

00:17:19: A backlash a focus backlash i think with regard to particular the reporting agenda.

00:17:24: so everything that has to do with disclosures reporting communication but also some targets if you look at companies plastic recycling target for instance have been wrote back.

00:17:42: Then on the other hand, you also particularly look into the energy sector and The energy discussions within this sustainability field.

00:17:51: And there actually You see still very strong investments.

00:17:55: You'll see companies moving away from fossil fuels Not always because of sustainability Also for geopolitical reasons because they want to lower their dependence on fossil fuels.

00:18:06: But I think that's what i'm saying.

00:18:11: generically talk about a big backlash.

00:18:14: I think we have these elements of the sustainability discourse that are under pressure, but then you also face elements like for instance investments in renewables that still very strong thriving and in that sense define the agenda

00:18:38: are taken despite the rolling back of some of these regulations because it makes sense for them from a supply chain perspective, form a raw material perspective.

00:18:51: If we look at the regulation there is still something that has been implemented the IAA, there's some new carbon budgets on buildings that are also going to come into place over the next five years.

00:19:05: There is a circular economy act coming up.

00:19:08: so while i feel like there has been a lot of noise around Omnibus and about the reporting directive and the mess it has caused in companies?

00:19:21: Some of these actually quite concrete measures but they may be more sector specific.

00:19:30: They're still moving forward, and of course there can be a bit of uncertainty around them.

00:19:35: But it seems like they are not so much talked about but could also have big impact for these sectors or companies in this sector.

00:19:43: So where do you see the EU standing?

00:19:52: Not walking away completely from the green deal and just because they simplified the CSRD under this year's triple D. I think what do you stay refrained debate when your policy documents these days that come out of all of the European Commission, You hardly see any men or any direct mentioning for instance of the words green deal sustainability and so on.

00:20:15: They talk a lot about resilience, they talked alot about geopolitical instability.

00:20:21: but then when you look at the substance and just manage industrial accelerator right?

00:20:24: When do we get the substance off these regulations to actually say there are still very much aligned with sustainability objectives, right?

00:20:33: So the Industrial Accelerator Act for instance is trying to create lead markets.

00:20:37: For certain products like green cement maybe also green steel this currently being negotiated.

00:20:45: then you mentioned that you have the circular economy act coming up at the end of September trying to create a big market for secondary materials within the European Union.

00:20:57: You have climate resilience framework coming up probably in December, so there is lots still happening.

00:21:04: I think people don't always read it as being about sustainability because language also of the commission has changed and this something that i try do through my.

00:21:20: You mentioned LinkedIn before through my linked and I try to translate this right whenever they use.

00:21:25: on these, on these acts.

00:21:27: Um i tried to also kind of say look i mean just strictly speaking good news.

00:21:32: um maybe not as good as we originally envisioned them.

00:21:36: Also the for instance the industrial accelerator act.

00:21:40: you know there is quite some pushback against it simply because Of The political realities that if you have a european parliament right now where Where the center also is not as stable as you want it to be.

00:21:51: So, the conservatives often they kind of team up with a far right in order to push through legislative initiatives.

00:21:59: but all of this I think too to kind of wrap-up.

00:22:02: i think All Of This also shows we are not in a situation where the EU is just blindly walking away from the sustainability agenda.

00:22:12: It has been reframed, refocused and yes some areas particularly unfortunately reporting into diligence also scaled down significantly.

00:22:22: If we go to that change of narrative because I find it quite interesting this new language around sustainability sense.

00:22:34: If you think of it, do you need to speak the language or your context and environment in a way?

00:22:39: And I think that's politics very much... But there is risk.

00:22:45: we don't do sustainability for the sake of sustainability but maybe for other things like black-and-white view.

00:23:00: They need to justify they need to legitimize these things.

00:23:05: And at the end of today, you know I'm a person i care alot about outcomes.

00:23:11: what the motivation is whether Stéphane Sojourner he calls it sustainability or resilience I personally don't care, whatever he wants to call it and what ever gets through parliament and council.

00:23:25: So i think the framing as such for me is not that important at the moment As long as the substance is there And we dont lose out on the substance.

00:23:40: so of course in a long run There might be risk.

00:23:43: you know if Name the thing or if we don't call for instance Climate problems are climate risks really climate risks, but it's we kind of put a layer above It.

00:23:56: then I think in the long run.

00:23:57: I also see your wrist that we might That we might hide unnecessarily high problems which shouldn't happen.

00:24:04: So I think politicians should always open name the problem and not conceal too

00:24:08: much Mm-hmm is he good way off where you're putting it?

00:24:13: because in the end It is the outcomes that matter most and you, of course kind need to play with the rules there.

00:24:22: I was also reflecting if we look at this new focus so moving from reporting in due diligence more towards some like very sector specific rules, I wondered is this like a deliberate strategy of moving from certain type policy instruments or focusing on information and transparency to then maybe another way trying to shape the markets?

00:24:53: And that would be now just market shaping regulation.

00:25:01: Do you think it was also part that has changed narrative and therefore change also the tools.

00:25:11: I think it is probably the letter, i don't think there's a grand plan behind to kind of say no we move from reporting... And reporting still they are just for very limited number of companies reporting in the sense that you use it.

00:25:28: as you know this has been done.

00:25:30: now it has been.

00:25:31: we had to seize adi.

00:25:32: we have only was one.

00:25:33: so this is being done with knowledge.

00:25:34: move on let's move to kind of circularity industrial policy.

00:25:40: Kind off these areas i see more and as a kind over, responding to the context in which we are operating.

00:25:54: In that sense, disclosure regulations have had their time and you need to live with your outcome although I personally don't agree.

00:26:05: but it is what And, but I don't see it as a kind of grand plan behind that.

00:26:13: You know the commission says no we move away from reporting and remove towards different type of industrial style regulation?

00:26:21: It's what you said.

00:26:22: is context matters here.

00:26:23: It's the context that matters.

00:26:25: Yeah...

00:26:26: You mentioned earlier there was something around predictability then.

00:26:29: now there are of course the context as well.

00:26:32: That matters Are.

00:26:34: other things have happened Over the past year if we look at the process that EU has gone through.

00:26:40: are there other learnings?

00:26:43: To you from that?

00:26:46: I think one key learning for me, and i was reflecting on this a lot During during twenty-twenty five is i think The eu needs to better sequence and time.

00:26:57: The regulations they put out i think with the With the original green deal it was too much at once.

00:27:04: You know from the line goes on stage in twenty nineteen and basically promises a better future.

00:27:08: she promise is a lot of hope, And of course companies rightly complained, you know the SFDR didn't make much sense without CSRD.

00:27:31: So I remember that was in... In twenty-twenty one when some financial actors had to implement the SFTR and they said but we don't have data on what should be put into these templates?

00:27:46: That wasn't rolled out yet!

00:27:50: So I think the sequencing can be improved.

00:27:56: And then also, we need to give regulations a chance.

00:27:59: that's something i reflected on a lot and i also made this point again you cannot roll back some thing that has not even been implemented yet because The observers the feeling that all of this is done for political reasons and not for substantive reasons.

00:28:17: so if you roll back for instance to diligence regulation which has never been implemented.

00:28:23: And you roll it back for reasons of competitiveness and saving costs, then so on.

00:28:28: I mean a lot.

00:28:28: people rightly ask how do you know what are the effects on companies?

00:28:35: It was just to couple business associations crying wolf because they always do in terms of anticipated cost.

00:28:45: So whenever regulations are put out we should also give those regulations first off all a chance collect data and then make evidence-based decisions.

00:28:58: I like your point about sequencing them in the right ways, that it's not actually one regulation or regulations acting in a vacuum but they're always somehow interconnected especially if company has to comply with several of them.

00:29:11: so as you mentioned CSRD was this kind of all encompassing across industries.

00:29:17: just have your sustainability data in place.

00:29:19: Have a baseline and understand what's going on, understand your impacts... And then from there you can make more informed decisions.

00:29:29: Then we had this SFDR which was for the financial industry specifically where they were some additional requirements.

00:29:36: so if they had

00:29:37: their

00:29:38: first layer of reporting in place maybe it would've been easier.

00:29:45: Yeah, I mean.

00:29:47: Of course it's always difficult from my desk here to kind of tell the European Union you need to sequence things better and i know how messy that political realities are.

00:29:57: but there many aspects do this.

00:30:01: sometimes these processes are delayed they are postponed for political reasons.

00:30:09: so first off all we probably should should really look into the pipeline and kind of see, you know.

00:30:15: Does this regulation really make sense to be rolled out without maybe complementary regulations?

00:30:22: I gave the SFDRC as an example just a moment ago so i think that's first step.

00:30:28: And then another is speed up also regulatory process itself.

00:30:36: I think we have a great institution with the EU.

00:30:39: We can be proud of it, especially in times like these where we see how bad things can be and other regions of the world... ...and i'm looking over atlantic here.

00:30:48: but is still effect that EU legislative processes take long time.

00:30:54: With the omnibus one, they were surprisingly fast because that was a political promise.

00:30:59: But the ordinary legislative process for many directives and regulations take too long I think... And this then often delays things.

00:31:12: it makes the sequencing also of course difficult.

00:31:15: Yeah but we've been talking about things don't work.

00:31:21: As you still said, like easy is a wonderful institution.

00:31:24: There's a lot of things happening.

00:31:25: nevertheless.

00:31:27: Do have some examples of good decisions?

00:31:30: Things that were done well even despite all the complexity surrounding The world and this situation?

00:31:37: now?

00:31:38: I think by and large the EU remains an institution That it very responsive to policy problems And i think Even if this was not the case with regard to the omnibus, there are many also legislative processes.

00:31:57: Of course where they look at evidence and try to understand a problem first.

00:32:03: for instance next month the Empowering Consumers Directive will be implemented.

00:32:12: so that's the anti-greenwashing law.

00:32:14: I think here you basically said we see problems.

00:32:19: We see a real life problem because they also studied it from the commission side.

00:32:22: Um, we see your problem here.

00:32:25: There are too many vague unsubstantiated green claims.

00:32:28: that's not good.

00:32:29: So let's move towards it.

00:32:30: so for me this This this this responsiveness I think that is good At at EU level.

00:32:39: That way um...that we often kind of see The high levels of responsibility and then Also And Then also i think There is usually, again not with the omnibus but there's a good deal of also inclusion.

00:32:57: Stakeholder voices are being heard.

00:32:59: so I think we cannot complain too much about this... ...I know it was completely different game regarding to Omnibus One and also the current omnibuses that were out where there wasn't much consultation.

00:33:17: But actually in the past EU has proven to have built a system, where they do impact assessments.

00:33:25: Where try to understand different stakeholder perspectives.

00:33:28: so I think that usually for me is also assigned of mature legislative process.

00:33:34: I've often been quite positively surprised and also impressed by how much work resources there are available behind behind different regulations and also even with the implementation.

00:33:49: And there's a lot of resources that you can get access to.

00:33:52: as a practitioner in field, Of course sometimes trying to understand the regulation is just on their own when they come out and then figuring out how do make sense?

00:34:03: How do implement them into your immediate context?

00:34:05: That could be a bit tricky or at least it takes a little bit time.

00:34:09: but It's hard for us know whether if thats what its supposed because as we discussed in the beginning, regulations are supposed to change something.

00:34:18: So of course if it changes something and means its new It's supposed be a bit uncomfortable No?

00:34:24: What do you think about

00:34:26: that?

00:34:26: Well, uncomfortable.

00:34:27: I'm not sure i mean regulations are supposed to solve a problem right?

00:34:31: A problem for someone Right usually for policy makers who kind of see look at greenwashing.

00:34:36: we have a problem here.

00:34:36: We need to solve it.

00:34:38: The market doesn't solve that.

00:34:40: you mentioned in the beginning.

00:34:41: write and some cases also market mechanisms.

00:34:43: They they kind off fully work And that's why You don't Have To Intervene with Regulations.

00:34:50: so but But In That sense I Don't think Burden is the point of regulation.

00:34:55: It has one effect that sometimes it's difficult to avoid.

00:35:00: So, yeah That's how I would frame it

00:35:03: Mm-hmm.

00:35:04: And then How do you think of that in the context?

00:35:06: Of the omnibus?

00:35:06: because they're indeed One of the arguments that was given was to reduce the burden on Companies and that was a justification for rolling back the regulation.

00:35:18: Now off course.

00:35:18: there were also actually quite a lot of big quite A lot of Big companies who are so put out some statements saying, you don't have to.

00:35:26: We have the investments in place and we're willing to do this.

00:35:29: so it's not like the industries were aligned.

00:35:33: all companies wanted to be rolled back.

00:35:36: but I think there was a consensus that sometimes too burdening or costly

00:35:46: Yeah, but you know burden is relative.

00:35:48: Relative to company size, relative your own resource base, relative to your own ambitions.

00:35:53: I once talked with a Danish company family owned and they said look for us it's not burden its values of the family that are kind-of enacted also by responding to these regulations.

00:36:03: so i think burden something that And i agree with you, for smaller companies the original ESRS were too much.

00:36:18: Which

00:36:21: was the implementation guide?

00:36:22: Exactly!

00:36:23: So that is a rest european sustainability reporting standards so that it's kind of the implementation act the implementations framework that contains all these indicators for reporting.

00:36:32: That was put on this side of the seas.

00:36:34: are the i understand.

00:36:36: if your company with two hundred and fifty people can assess well you know that's a bit too much.

00:36:41: kinda doing all of these one thousand two hundred potential data points, Do not have.

00:36:48: you did also under the original either is sorry.

00:36:50: I just say that You do not have to report one thousand two hundred data points.

00:36:55: and thats important because in the press and public meetings and so on it was sometimes completely Framed.

00:37:01: but i understand that all small companies, maybe they cannot kind of do a report with four hundreds Data points on it would consume i think relatively speaking too many resources.

00:37:14: But, and that's the big but... Simplifying.

00:37:20: And reducing the ESRS for me was always not a problem.

00:37:24: I always ask myself why do we need to do both?

00:37:28: Why not just start with an ESRS?

00:37:30: because it legally speaking is separate document.

00:37:33: You could have done without touching CSRD.

00:37:40: I'm also so sometimes emotional about the CSRD because in my reading it was a political movement.

00:37:49: In the end, It wasn't politically motivated act to scale down this CSR D And it was not something that really proven by any sort of evidence.

00:38:02: There were also, if you look into the cost calculations... ...the savings estimates that the European Commission gave with regard to omnibus one I mean i would say this is like very rough calculation and based on a lot of assumptions My assessment in the end is, yeah.

00:38:29: The burden is relative.

00:38:30: I understand we need to kind of lift the burden or make it easier for smaller companies but this could have done without necessarily touching the directives itself.

00:38:40: you would've changed the ESRS first and then later on look at what the CSRD can be changing.

00:38:49: What you're referring to there is the fact that when the CSRD was also simplified, it was at the scope of companies who had to report under.

00:38:57: It was also dramatically reduced next to the data points That were on their DSRS.

00:39:03: Exactly so the scope off the company's attack to report recalculated actually was reduced by around ninety percent.

00:39:12: So absolutely unbelievable, right?

00:39:16: I mean it's and this is what i mean with proportionality.

00:39:19: You know we were talking about burden being relative and responses needing to be proportionate.

00:39:25: in my reading This Is Not A Proportionate Response But A Politically Motivated One.

00:39:30: so if you have around forty six forty seven thousand companies originally in scope And You Now Have Four Thousand Eight Hundred Companies In Scope.

00:39:40: I think then it is very difficult to explain to anyone that this really proportionate response because even moves below the level of companies in scope.

00:39:55: That was put out by we talked about at the beginning, the NFRD so kind of the predecessor.

00:40:02: The very early directive?

00:40:04: So if you move below And of course the response by the Commission and European policymakers is, yeah but you know all other companies can report voluntarily.

00:40:15: This why I say it's like a time machine that takes us back in time.

00:40:19: It almost feels like fifteen years ago.

00:40:21: Yeah!

00:40:22: But You could always report voluntary if you want to.

00:40:28: There also watered down value that CSRD was supposed bring.

00:40:33: for rest It could be other market actors, it could be investors.

00:40:37: It could consumers.

00:40:40: so having this comparable information that was being produced broadly by different companies in the market would be comparable and then you can also do your own due diligence learn to know better about sustainability impact of the company's that are looking into whereas now as we said for those five thousand companies only And that's not going to be representative.

00:41:06: No,

00:41:06: no I mean these are really the biggest companies in Europe and you know they very often have their sustainability units... ...and they're used to reporting anyway.

00:41:16: so for them.

00:41:17: it is not much of an issue.

00:41:18: So we really....I think a good thing about CSID was that it really broadened the scope of the regulation that it brought in these mid-sized companies.

00:41:31: It wasn't small companies because The original club was at two hundred and fifty employees, yes And a company with Two hundred and Fifty Employees is not Small anymore.

00:41:40: I think this Is a Midsize Company?

00:41:43: As i said before I fully understand That they cannot have the same obligations as A company With one Hundred Thousand Employees.

00:41:49: right but then let's make it more contextual.

00:41:54: right, let's define different responsibilities in terms of reporting at different reporting tiers for instance.

00:42:01: And this was always rejected by Jürgen Warborn you know who was the reporter of The Omnibus as kind of saying oh we want simplification We don't want to make a system more complicated.

00:42:11: That is not complicated.

00:42:13: You know if you introduce some reporting tiers that should be doable.

00:42:20: I want to stay in this question of responsibility a little bit and the burden, cost?

00:42:26: And how do you bring that balance?

00:42:27: because it's twenty-twenty six right now.

00:42:30: We're also at time when many researchers are saying that this decade is going be decisive for climate change mitigation and that the window is closing towards twenty thirty, so the action has to happen now.

00:42:45: And of course there's been some context in ESG's bike and you know push for a green deal at first place... Now we have other troubles around the world as well but climate-related issues are not going away.

00:43:05: almost to the opposite create even more volatility in security, in the mid and long term.

00:43:14: So how do you read this urgency on one hand?

00:43:21: And then on the other side being realistic needing to understand the short-term priorities as well... ...and who has the responsibility really take lead and navigate?

00:43:36: what Do You think of This?

00:43:38: I Think Big question.

00:43:42: Who has the responsibility?

00:43:45: I would say in a democratic society, of course... ...the politicians that we elect through democratic processes have the responsibility for it.

00:43:56: We as citizens and consumers also bear part of their responsibilities but primarily with those who design frameworks.

00:44:06: You said at first the urgency of this situation, and yes I agree.

00:44:15: We are not talking about one point five anymore even theoretically.

00:44:18: there was a paper recently that said we will probably bulldoze through the one-point-five degree Paris target sometime by twenty twenty nine twenty thirty And then there will be overshoot.

00:44:33: The question at this stage is how much as the over shoot and How big is the overview?

00:44:39: And can we attain it, I'm not very hopeful unfortunately At that moment i think the EU's doing good when it comes to mitigation but Not so good When It Comes To Adaptation and the EU Is Of Course Just One Part of The Bigger Puzzle.

00:44:57: So I think we really need more ambitious policies on the climate mitigation, climate adaptation but also the broader sustainability side.

00:45:07: And we need politicians that really also think longer term right?

00:45:12: I understand there are short-term constraints to policy making But this long-termism is something which unfortunately got completely lost in politics.

00:45:28: And we talked about the Green Deal earlier, right?

00:45:30: The Green Deal and hope.

00:45:32: This is why people were so inspired by the European Green Deal because they said that's really a long-term vision for Europe!

00:45:39: I think this what are lacking now... When you look at EU politics but also lots of national politics it's more like trying to solve the most urgent problems one crisis after another, but there is not really in my reading at least a roadmap for future generations.

00:46:04: So it's more cleaning up our...after ourselves right now.

00:46:09: And what about then the responsibility of other actors?

00:46:13: Yeah I think financial markets bear some responsibility here But markets are markets.

00:46:23: We know how markets work and the mechanisms.

00:46:28: And we also know that of course market respond to some of these risks, opportunities related to climate change, biodiversity loss but for instance still often do not have tools yet to really quantify some of this risk sufficiently.

00:46:51: We see I think over the last two years, i've seen some change in that.

00:47:02: Yeah, so I think that also destroyed some of the trust.

00:47:24: That is necessary for financial markets really to make a difference and this trust will need.

00:47:31: But financial markets for me, investors I think they play a key role in all of this.

00:47:38: and with regard to the energy transition i'm actually quite hopeful.

00:47:42: We are seeing it as moving at the right direction.

00:47:46: It is also accelerating rapidly In some countries more than others.

00:47:52: So that's what makes my hope.

00:47:55: but you know its not just about energy Its bigger picture When you look at the planetary boundaries, right?

00:48:02: You also have biodiversity loss.

00:48:04: And personally I'm equally concerned about biodiversity than about climate change because once a species is gone it's gone we don't get back.

00:48:12: so in that sense i think and would always encourage us when we had these debates to not only Yeah,

00:48:27: that's a really good point.

00:48:29: We actually made one episode very early on when we started the podcast about like what words should be used?

00:48:34: Should we always see climate change by diversity laws and everything else because as you're mentioning like plan tree boundaries there are nine in total.

00:48:41: so there is even more And of course most of them are interconnected than they kind of... There's positive feedback loops between them but The effects can be very different in ways where you govern then and you mitigate can be also quite different.

00:48:58: Exactly!

00:49:00: You said that you're not very hopeful just now, your optimistic about certain developments but you are not very helpful?

00:49:09: It's interesting because you aren't the first one to say that I've had discussions with several people who work in this space and they say yeah hope is like a concept that doesn't really resonate anymore And i was always so puzzled by it Because for me I think for me, there has to be some kind of hope.

00:49:30: Otherwise... otherwise why bother?

00:49:37: See what i mean?

00:49:38: So

00:49:38: curious to hear your reflections on that!

00:49:47: As an academic we in the sustainability field have an imperative to hold.

00:49:54: We always need level of hope because sustainability is by definition about the future, it's about future generations and that always goes along with hope.

00:50:05: I

00:50:06: think what has happened was that configuration itself changed in recent years... This means when people say they have reduced or less than before Because, you know we come out of these years and talked about them in detail.

00:50:28: You now twenty nineteen until twenty-twenty three where there was only one direction for this debate right that was upwards an onwards and the sky is the limit at least Europe I mean.

00:50:41: we saw their problems other regions of the world but here in Europe they were a clear direction And then we had to push back roughly twenty four months, which then of course reduced hope.

00:50:57: and I wouldn't say i'm not completely without hope.

00:51:02: I think there are areas...I just mentioned them for instance the energy transition that actually make me hopeful.

00:51:10: However when I look at the overall picture..when I looked how politicians behave?

00:51:16: How markets behave?

00:51:17: And most also the pace off the transitions versus the urgency of the problems, then I think we are running into major trouble.

00:51:29: And this is what kind of reduces hope.

00:51:33: for me.

00:51:33: it's this mismatch between but when The pace of what?

00:51:38: We're trying to do and finding solutions for the problem that were That out there end be escalation off the problems themselves.

00:51:48: so this is the mismatch that actually Reduces hope.

00:51:53: on my end, but as indicated there are also areas where I'm still hopeful.

00:52:00: And that frustration totally resonates a hundred percent.

00:52:04: You mentioned the few of the area such is energy transition Where you're more optimistic?

00:52:10: Are they in your mind?

00:52:12: some areas were want to see more debate?

00:52:15: or I don't know, it's like there is one thing that you really want to change.

00:52:19: It's really frustrating for you?

00:52:21: Why don't we just go and fix this?

00:52:27: For me obviously a lot of people would say Andreas now basically says the biggest misconception is simplification which actually not...I mean i see the need for simplification!

00:52:45: But I really think what we don't talk about enough is, first of all the interconnectedness off these different problems.

00:52:55: Um...I think we always treat them in silos politicians often treat them and silos which makes us not aware so much of the scale of some of these

00:53:05: problems.

00:53:06: And then for me it's also biodiversity loss Which i think still an underappreciated topic Because it is really less standardized and you cannot quantify as well for instance, the climate debate.

00:53:26: You know in the Climate Debate when we look historically its very interesting... When The Climate Debates took off It was a moment where We had CO²E equivalent measure Where we have one standardised metric by which we could really measure.

00:53:43: what's the problem For biodiversity?

00:53:45: you don't have that and probably, You will never.

00:53:48: Have that because biodiversity is really more heterogeneous or local problem?

00:53:55: And thats why of course it's really difficult to grasp.

00:53:59: but at the same time when I talk with executives When i talked about my students at CBS We quickly arrive in a discussion where we see how much companies depend on nature How much they depend on the ecosystems around nature, be it water or forests.

00:54:19: For instance particularly in tech ecosystems when you talk about enzymes which are necessary for quite a lot of processes.

00:54:28: so I think this is an area that deserves much more attention and really attention also moves beyond these labels like nature positive and so on.

00:54:45: I think we need to really have also, in the corporate side a more substantive debate about it.

00:54:52: Thank you!

00:54:52: That's a nice place for us at this conversation with some food for thought or anyone listening.

00:55:00: just one thing of hope topic because i found that fascinating.

00:55:05: We talked about long-term evolutions which give hope.

00:55:08: what are things you do day by day?

00:55:10: That gives me energy.

00:55:14: Well, I live close to a lake so usually jump into the lake In this summer.

00:55:21: i'm not winter bathing person.

00:55:25: that give's my energy and to be honest playing with my son Playing with children gives you an enormous amount of energy, I must say.

00:55:36: Although we usually tend to also frame it as kind of activity that also sucks a lot of energy but when you really actively engage and try to understand what they are doing or how they're doing things then for me at least that provides energy.

00:55:51: Beautiful!

00:55:52: Two ways being connected one with nature in other humans?

00:55:57: If you want put them this way yes.

00:56:00: Thank you so much, Andreas.

00:56:01: Thanks for sharing your time and thoughts.

00:56:04: It's been a wonderful

00:56:09: conversation!