Unveiling Greenwashing in Fashion: Leveraging CSRD Data for Communication

With examples!

Welcome to another issue of The Crisps – your newsletter on anti-greenwashing and honest fashion communication. You can support us by subscribing to a free or pro subscription, liking, sharing, or commenting on our posts.

---

We’re back from our break with fresh content and our updated concept! Starting this issue, The Crisps will slide into your mailbox twice a month. Unlike before, the issue now combines the free and pro issues. Parts of the content will be free to read, others will be behind a paywall. So make sure to sign up for a pro subscription to get a detailed overview of each focus topic, learn about the communicational & operational pitfalls and greenwashing risks and get possible solutions on hand that make your work life more genuine. As a pro subscriber you also have free access to The Crisps workshops.

But now on to this week’s issue!

We look into the EU Corporate Sustainability Reporting Directive (CSRD) in a LOT of detail. And while this topic will not be relevant to everyone’s daily work, we believe it’s important to understand the legal frameworks and reporting guidelines if you work in the industry. We also dive into the limitations of current materiality definitions under the CSRD and advocate for their evolution to encompass broader societal and environmental impacts.

What to expect in today’s pro section:

• Criteria for evaluating the authenticity of sustainability claims and communications

• Questions you should ask yourself when utilizing CSRD data for communication

• Communicating your efforts inline with EU CSRD Requirements (with examples!)

All the best,

Tanita & Lavinia

---

Basics you need to know about the EU Corporate Sustainability Reporting Directive (CSRD)

The CSRD is a regulatory initiative by the European Union and part of the EU Green Deal. It aims at standardizing the reporting of social and environmental impacts by companies. It replaces the previous CSR Directive Implementation Act (CSR-RUG), which is based on the Non-Financial Reporting Directive (NFRD).

The CSRD came into force on January 5, 2023 and must be implemented by the EU member states within 18 months. Large companies have to submit their first CSRD report by early 2024 based on their 2024 fiscal year. SMEs have to start reporting in 2025 using streamlined guidelines.

Nearly 50,000 EU companies will have to disclose their environmental, social, and governance (ESG) impact.¹

How the EU hopes CSRD data can combat greenwashing

According to the EU "enabling direct comparisons, the CSRD holds companies accountable and highlights those that are truly leading in sustainability efforts"² by:

🔹 Standardization and transparency introduce reporting standards, minimize room for selective disclosure, and provide a complete picture of sustainability efforts.

🔹 The Double Materiality Principle requires reporting on both financial performance and environmental/social impacts, broadens the scope of accountability and ensures all significant impacts are disclosed.

🔹 Enhanced scrutiny by investors places greater emphasis on CSRD reports, increases pressure on companies for accurate, comprehensive information, and reduces the influence of self-published sustainability reports.

🔹 Accountability and comparability facilitate greater accountability through standardized disclosures, enable comparability across companies and sectors, and identify sustainability leaders and latecomers.

While the Corporate Sustainability Reporting Directive (CSRD) with its double materiality marks a step towards more inclusive sustainability reporting, it can be used to uphold corporate power structures as it provides only superficial transparency without substantial accountability. Additionally, companies might exploit the framework by highlighting less significant disclosures to divert attention from their more profound, systemic impacts.

So, without vigilant implementation and scrutiny, the CSRD can still serve as a tool for sophisticated greenwashing. And keep in mind: True change requires not just better reporting, but a fundamental reevaluation of corporate impacts on society and the environment.

---

1. Management commentary and data on material ESG themes, risks, impacts, and focus areas.

2. Sustainability and ESG performance targets, including greenhouse gas emission reduction targets for 2030 and 2050.

3. Plans for business model and strategy alignment with sustainable economy goals, aiming for EU climate neutrality by 2050.

4. Sustainability risks, including climate change impacts, and the company’s societal and environmental impacts.

5. Business model resilience with sustainability risks and impacts on operating results.

6. Exposure to coal, oil, and gas-related activities where applicable.

7. Environmental protection policies, sustainability due diligence, and company sustainability policies.

8. Social responsibility, human rights, anti-corruption practices, and corporate governance related to sustainability.

9. Corporate board diversity and management’s expertise in sustainability matters.

10. Consideration of stakeholder interests and impacts on sustainability matters in business strategy.

And how does the report have to be submitted?

The CSRD reports must be prepared in XBRL or electronic format aligned with EU sustainability taxonomy. The sustainability information has to be digitally tagged according to CSRD requirements or using compatible ESG software. They have to be submitted within 12 months after the company’s balance sheet date, as specified in Commission Delegated Regulation (EU) 2019/815.

Plus, organizations have to seek "limited" assurance of disclosed sustainability information from a neutral third party. This is to ensure data credibility without the strictness of a financial audit.³

---

In case you’re not familiar with the term “materiality”, here’s a quick definition. Materiality is a principle used in corporate governance and financial reporting to determine which environmental, social, and governance (ESG) issues are significant enough to affect the decisions of stakeholders such as investors, regulators and customers. Part of materiality is identifying and prioritizing issues that could have a substantial impact on the financial performance, operations, or reputation of an organization. Material issues have to be disclosed in financial and sustainability reports to provide a clear and comprehensive picture of the company's overall health and potential risks.⁴

Now that you have a basic understanding of the term, let’s look at the different forms of materiality and their greenwashing risks:

1. Financial Materiality

Definition: Prioritizes information impacting a firm’s financial performance from the investor's perspective.
Perspective: Outside-in, centered on financial risks due to ESG issues.
Critique: This narrow focus perpetuates a profit-centric worldview, ignoring the broader social and environmental harm companies may cause.
Greenwashing check: By sidelining significant ESG impacts that don't hit the bottom line, financial materiality paves the way for superficial greenwashing narratives.

2. Double Materiality

Definition: Incorporates both financial (outside-in) and non-financial (inside-out) materiality, considering a company’s impact on the environment and society.
Perspective: Inclusive of both internal financial risks and external social/environmental impacts.
Scope: Extends beyond investors to include consumers, civil society, and employees.
Critique: While a step forward, it often still centers the narrative on how environmental and social issues affect financial outcomes, rather than addressing the systemic inequalities perpetuated by corporate actions.
Greenwashing check: Offers a more comprehensive view, yet can still fall short if companies manipulate which impacts are deemed "material".

3. Stakeholder Materiality

Definition: Focuses on impacts significant to stakeholders, identified through engagement methods like surveys and workshops.
Perspective: Inside-out, driven by stakeholder concerns.
Process: Relies on actively listening to various stakeholder groups.
Critique: Often, the power dynamics in stakeholder engagement are imbalanced, privileging voices that align with corporate interests while marginalizing the most affected communities.
Greenwashing check: When genuinely inclusive, it can expose greenwashing, but it risks becoming performative if stakeholder voices are selectively amplified or ignored.

4. Comprehensive Materiality

Definition: Encompasses all relevant stakeholders, including marginalized groups and future generations, aiming for a truly inclusive scope.
Scope: Considers entire value chains and long-term impacts.
Challenges: Operational complexity and lack of adoption by standard setters.
Critique: While aspirational, this approach often remains theoretical, with corporations avoiding its full implications to maintain the status quo.
Greenwashing check: Potentially the most robust against greenwashing, but its lack of implementation allows companies to continue business as usual under the guise of complexity.

---

In our next issue

Have you ever checked your communication for colonial narratives? We partnered up with Cinthya Sopaheluwakan for our upcoming issue and will dive into the colonial legacies in our language and propose decolonial narratives.

---

Pro Section

Welcome to our new pro section! If you’ve made it this far you’re eager to dive EVEN deeper into CSRD and learn how to use CSRD data for communication. Here’s what we are covering in our pro section:

• 6 criteria for evaluating the authenticity of sustainability claims and communications

• Questions you should ask yourself when utilizing CSRD data for communication

• Tips for crafting transparent and credible sustainability narratives inline with EU CSRD Requirements (including examples!)