When the process fails the purpose
Why legitimacy — not just ambition — must anchor sustainability regulation
Last week I was meant to release Profit by Design. COVID had other plans. Apologies to those waiting — the framework will now be published early next week, complete with case studies, playbooks and practical tools for embedding profitable sustainability. Thank you for your patience.
That delay gave me time to reflect on a broader failure of delivery: the unravelling legitimacy of Europe’s sustainability rulebook.
From CSDDD to CSRD to EUDR, the EU has made world-leading progress on ESG regulation. But the foundations are looking shaky — not because the intent is wrong, but because the process is breaking down.
The cracks are showing
In recent weeks:
The EU Ombudsman launched inquiries into both CSDDD and CSRD, raising concerns about transparency, due process and how stakeholder feedback has been handled.
EFRAG’s own Sustainability Reporting Board pushed back against plans to simplify the ESRS, citing concerns that due process was being circumvented.
Over 1,300 MEP amendments were tabled on CSRD alone — many of which would completely undo the point of the legislation by gutting scope, delaying timelines, or removing core concepts like double materiality.
The proposed threshold increase for CSRD would exclude tens of thousands of companies — particularly SMEs and mid-tier groups — from reporting, stripping out the value chain visibility that gave the directive its systemic power.
These are not small tweaks. They represent a loss of nerve — and a loss of coherence.
CSRD wasn’t just paperwork - it was infrastructure
CSRD was never meant to be a box-ticking exercise. It was designed to fix a structural failure in capital markets and policymaking: the absence of reliable, comparable, decision-useful sustainability data.
The goal? To build a shared language of risk and impact:
So investors could allocate capital more intelligently;
So policymakers could shape smarter interventions;
So buyers could evaluate supplier resilience;
So civil society could hold firms to account; and
So businesses themselves could govern with clarity.
Strip out half the dataset — or remove large sections of the value chain — and the system fragments. We return to patchy, voluntary disclosures. Black-box ESG ratings. Reputational firefighting instead of risk-led strategy. In short: the very behaviours CSRD was meant to end.
Transparency can’t be optional
And yet, behind closed doors, that’s exactly what’s being negotiated away.
The European Commission has held extensive private meetings with large corporate lobbyists, agreeing to exemptions and delays that fundamentally reshape the reporting landscape. These concessions were made without equivalent input from SMEs, civil society or technical experts — the very people most affected by the changes.
It undermines the cornerstone of sustainability regulation: transparency. If companies are permitted to obscure critical data in the name of competitiveness or confidentiality, the system breaks.
And here's the irony: data secrecy is becoming strategically irrelevant.
AI, satellite imagery, supply chain tracing tools and scraping technologies are already surfacing what companies try to conceal. Environmental impacts. Workforce disputes. Governance failures. Once proprietary data is increasingly inferred, modelled or leaked. The myth that disclosure weakens competitive position no longer holds. What does hold? Trust, legitimacy and the ability to stand by your data.
We’ve been here before
Financial reporting has already taught us what happens when political compromise outruns technical credibility. In the wake of the global financial crisis, regulators were rightly criticised not just for what standards said, but for how they were created: rushed, opaque, and too easily influenced by vested interests.
It took years of reform to rebuild confidence. We shouldn’t need another crisis to relearn those lessons.
Regulatory whiplash doesn’t build resilience
This isn’t just frustrating — it’s destabilising. For in-house teams, the past 18 months have brought wave after wave of reform, with frameworks half-written, then half-retracted. For leaders trying to plan strategically, it’s a moving target. And for advisory firms, it’s a bonanza — not because better outcomes are being created, but because clients are paralysed by uncertainty.
Sustainability should be a lever for resilience, not a source of burnout. But when regulation is inconsistent, even the best-intentioned organisations default to compliance theatre. Strategy becomes reactive. Value is lost.
It doesn’t have to be like this
Imagine a regulatory model that rewards clarity, minimises policy churn, and builds capacity — not just fear.
One where:
Stakeholder consultation is genuine and iterative;
SMEs are supported, not sidelined;
Reporting burden is tied directly to materiality; and
Every rule introduced is matched by real-world implementation support, not just enforcement threats.
That’s not utopian — it’s basic governance. And it’s the standard businesses are expected to meet. Regulators should meet it too.
“The opposite of good governance is not bad governance. It’s arbitrary governance.”
Arbitrary governance is what we’re now witnessing across the EU’s sustainability agenda. A system where key changes are negotiated behind closed doors. Where technical decisions are overridden by politics. And where legitimacy is eroded in pursuit of temporary consensus.
That’s not how you build trust. And it’s certainly not how you build efficient, effective markets — the kind that depend on fair access to information, clear rules of the game, and confidence in the signals those rules produce.
Ambition without process is noise
Sustainability regulation can’t afford to be performative. To work, it must be:
Rooted in public interest;
Shaped by those most affected;
Tested for unintended consequences; and
Delivered through processes that meet the standards we expect from the entities being regulated.
That’s the bare minimum. Right now, it isn’t happening.
So what now?
Businesses can’t wait. And they shouldn’t blindly comply either.
Most businesses I’ve worked with aim to stay in the middle of the pack: visible enough to be compliant, but rarely willing to lead. Others are simply focused on doing the bare minimum. That may feel safer, but it often proves more expensive in the long run.
The smarter move — the resilient move — is to lead. Not for the headlines, but because building strategy around what truly matters offers the clearest path to operational stability, reputational trust, and long-term value. Profit by Design picks up from there, showing how to embed sustainability in ways that protect margins, reduce risk, and deliver meaningful impact, regardless of whether the rules stay intact.
It’s coming next week. If you’d like a preview, drop me a note. Or wait for the full release and read it with a critical eye — because the debate isn’t going away, and neither is the need for better answers.
Subscribe now to get Profit by Design straight to your inbox next week — or message me for an advance copy.
If you’re tired of volatility, read this. Not to comply — but to compete on something that actually lasts.