Energy & Utilities on CSRD: The Good, Bad & Ugly of New Sustainability Reporting

The 2024 financial year marked a step change in corporate sustainability reporting and transparency in Europe. With the rollout of the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS), the 2025 reporting period shifted from a voluntary, flexible sustainability disclosure exercise to a mandatory, highly standardized, and assurance-ready regime. For the first time, around 11,700 companies were required to report under a fully harmonized framework, fundamentally transforming reporting practices compared with the prior years (KPMG, 2024). While recent EU policy discussions around the Omnibus package point to a future recalibration of both the scope of companies subject to CSRD and the volume of required disclosures, the experience of 2024 remains a pivotal reference point, capturing the most significant structural transformation in sustainability reporting to date and providing a highly relevant context for analyzing how companies are responding to the new regulatory paradigm. Investors, policymakers, and civil society have long argued that sustainability data is too uneven, selective, and incomparable to support decision-making. The CSRD aimed to change that, enforcing better and broader information to support better decisions, and acknowledging that sustainability data is becoming as important as financial data. As the first wave of reports has arrived in the first months of 2025, the real picture is more nuanced, highlighting the good, the bad, and the ugly of this approach. It led to greater standardization, richer data, and new disclosures such as internal carbon pricing (the good). But it also took away one of the most strategically useful tools, the materiality matrix (the bad), and it led to an overwhelming volume of detail paired with an underwhelming degree of true strategic commitment (the ugly). More than 75% of the EU’s greenhouse gas emissions are derived from the energy sector. Decarbonizing energy production and boosting renewable energy sources across different economic sectors are key building blocks for the low-carbon economic transition as described in the European Green Deal. That is why we use the energy and utilities sector as a case study to explore what this first year of mandatory sustainability reporting reveals, and what companies, boards, and investors should take away from it. The good: Standardization and greater disclosure of strategically relevant signals One of the clearest achievements of the CSRD/ESRS framework is a significant improvement in the consistency and comparability of sustainability information across companies. The energy and utilities sector offers a compelling example: before CSRD, sustainability-related disclosures varied widely. Looking at 2023 reports – before CSRD/ESRS became mandatory – Engie, a major French multinational energy company focused on the low-carbon energy transition, placed the results of its materiality assessment at the very front of its integrated report, underscoring its role as a strategic decision-making tool. In contrast, Iberdrola, a major Spanish multinational electric utility company, used the assessment primarily to structure its reporting, positioning the disclosure at the back of its non-financial statement and treating it largely as an add-on to financial reporting. In 2024, that changed. All 11 companies in the energy and utilities sector that we examined disclosed their respective materiality assessments in the core body of their disclosure. Particularly, all companies conducted a double materiality assessment (DMA), thereby providing both financial materiality data that matters most to investors, as well as impact materiality data that holds companies accountable towards all other stakeholders. Those DMAs were delivered by only three companies in 2023. This alone marks a major leap in standardization and the scope of practices. Standardization has value: it allows stakeholders to finally compare like with like, reduces greenwashing space, and forces companies to articulate their sustainability impacts and dependencies using a common language. A promising signal: The surge in internal carbon pricing disclosure Perhaps one of the most meaningful additions comes in the form of internal carbon pricing (ICP) disclosure. ICP is often described as a “credible signal” of climate commitment because it embeds the cost of emissions directly into corporate planning and investments (KPMG, 2023). As an input measure, it demonstrates corporate commitment towards the stated climate change ambitions (if applicable). When taken seriously, an ICP can shape capital allocation, technology choices, and long-term strategy far more powerfully than a sustainability slogan. In principle, this is exactly the kind of insight investors hoped CSRD would unlock: a financial lens on sustainability decisions. DMAs and disclosure of ICPs are a milestone achievement of the CSRD, leading to decision-useful data – not only for investors, but for all stakeholders of corporate reporting. In 2023, only four companies publicly reported in this way. In 2024, the number doubled to eight. Moreover, companies now disclose their actual price levels. But the picture becomes less rosy when we look closer at what we lost due to mandatory sustainability reporting. Why this matters Companies have conducted thorough double materiality assessments (DMAs) to identify material impacts, risks, and opportunities (IROs). However, we do not always see a clear strategy, action plan, or prioritization for addressing all identified IROs. Some topics naturally receive more attention than others due to urgency, resource constraints, or strategic relevance. This makes explicit and well-argued prioritization essential for turning materiality assessments into actionable insights. Prioritization tools help boards, management, and investors to quickly identify which sustainability issues are most decisive for business value creation and stakeholder expectations. Showing priority is not just about visualization; it enables resource allocation, risk management, and strategic planning. Without it, materiality disclosures risk becoming compliance exercises rather than strategic instruments. Fiscal yearNumber of companies disclosing Materiality Assessment (MA)Number of companies disclosing Materiality Matrix2023105 (50% of companies with M.A.)2024110 (0% of companies with M.A.) Under CSRD and ESRS, there is no explicit requirement for a materiality matrix or similar visualization. As a result, many companies have opted for exhaustive lists without hierarchy. While this meets compliance needs, it limits stakeholders’ ability to quickly interpret strategic priorities. The absence of a materiality matrix or other form of explicit prioritization in the disclosures, of course, does not mean there is no prioritization or visualization done for internal purposes. However, it does reduce the ease of understanding of prioritization and linking to strategy for external users of the report. One example from the GRI reporting era is the materiality matrix. Traditionally, this visual representation positioned topics along two dimensions, such as impact on stakeholders and impact on business, providing an intuitive overview of priorities. When used well, it acted as a strategic compass, guiding discussions on risk, opportunity, and capital investment. Boards often relied on it to determine where long-term planning or business model changes were needed. Investors used it to gauge clarity of focus and identify where companies saw their greatest risks and opportunities. The traditional materiality matrix was also challenged for its possible bias. Are topics identified as important to stakeholders really assessed based on the right data, variables, and weighting of results? Survey-based methods to determine impact materiality, in particular, face longstanding criticism. This highlights the need for companies to adopt fit-for-purpose prioritization tools that reflect both dimensions of double materiality: the financial impact of ESG topics as well as the impact on society. While the materiality matrix has been historically used, new tools or tuned materiality matrices might appear in the future. The bigger picture: What does this mean for decision-makers? The first year of CSRD implementation reflects a significant effort by large, listed companies to adapt to an unprecedented regulatory shift. To meet the technical, methodological, and assurance requirements of ESRS, substantial resources were mobilized by the first wave of companies. Yet, their new reporting practices also reveal important limitations. Indeed, looking at the utility and energy sector, while companies are meeting the technical requirements, the opportunity to turn reporting into strategic sustainability information disclosure is overshadowed by the primary concern of compliance that often adds little value. For boards, this creates both a risk and a clear mandate, and that’s why we encourage them to consider the following recommendations: – Restore strategic clarity. Introduce the concept of a materiality matrix or another prioritization tool. With DMA requirements now standardized, materiality assessments across companies are more comparable than ever. A prioritization tool would translate the now prevalent lists of topics into a clear, prioritized, and strategically useful outcome – something that plain lists alone cannot provide. – Use the reporting exercise to link materiality and strategy. Don’t let materiality assessments function as a technical annex. The DMA should function as a strategic exercise to inform strategy linking salient impacts and risks to capital allocation, performance indicators, and ultimately to a company’s value creation. Without this bridge, companies risk complying with ESRS while missing out on strategically important sustainability topics and using them for steering. Translating the prioritized materiality topics into strategy and therewith guiding the corporate input decisions and activation steps will not only demonstrate corporate commitment but support the company’s sustainable long-term value creation. – Turn internal carbon pricing into a genuine strategic signal. The diffusion of ICP disclosure is promising, but the wide variation and frequent lack of explanation reduce its potential. Boards should require transparency on why the chosen carbon price level is appropriate, how it is integrated into investment decisions, how it reflects material climate risks, and how it aligns with transition pathways. While the introduction of the mandatory sustainability reporting creates standardization, and therewith also allows for transparency and comparability, the initial approach seems to be limited to a compliance exercise. For large companies that remain above the new Omnibus thresholds, such as the 11 energy companies used in this study, the CSRD obligation is both reaffirmed and weakened. The largest EU firms must continue to publish a full sustainability statement, integrated into management reporting, and aligned with the ESRS. What changes is not the existence of the obligation, but its calibration: reporting is streamlined through temporary relief, a reduced number of mandatory data points, and tighter limits on information requests to value-chain partners, especially SMEs. Ideally, these changes will allow large companies to shift from a compliance to a strategic focus. Such a shift could strengthen internal commitment, even as mandatory reporting requirements narrow – shaping how sustainability is treated in practice.