Leadership accountability in sustainability reporting

ESG regulations and requirements are shifting responsibility focus to corporate leadership — but what does that mean for sustainability strategy?

Who’s responsible for the ESG strategy in your business?

Many recent developments in legislation around the world have aimed to prompt action and engagement by shifting the focus from the company to the individual. With the Corporate Sustainability Reporting Directive (CSRD) transpositions that finalized in 2024, we saw several EU Member States include penalties and fines for business leadership that range in severity — some including potential prison time for senior leaders and other individuals.

With specific stakeholders now at risk of prosecution for infractions, there’s a greater sense of motivation for leadership to be proactively involved in the ESG strategy and practices in corporations. But how can directors and other leaders participate and contribute to ESG and sustainability reporting to ensure compliance?

In this article, Enhesa’s Sustainability & ESG subject matter expert Jin Wang will explore where these motivating regulations have come from and what they mean for businesses, while Enhesa partner APLANET will provide insights into how to build a robust ESG strategy that enables engagement and involvement at all levels of the business.

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Navigating the EU CSRD and national compliance

As global stakeholders demand greater transparency in corporate sustainability practices, the European Union’s Corporate Sustainability Reporting Directive (CSRD) has emerged as a transformative framework. The CSRD replaces the Non-Financial Reporting Directive (NFRD), broadening its scope to include approximately 50,000 EU-based and non-EU companies operating in the EU. It mandates detailed corporate reporting disclosures on environmental, social, and governance (ESG) matters — such as greenhouse gas emissions, materiality assessment, sustainability goals, and climate related risks — all aligned with the European Sustainability Reporting Standards (ESRS).

Leadership’s legal obligations

Crucially, the CSRD places governance bodies — boards of directors, supervisors, and executives — at the forefront of legal accountability. Key obligations include:

Strategic oversight

Boards must integrate sustainability into corporate strategy and governance. This includes setting measurable ESG targets, monitoring progress, and ensuring alignment with sustainability objectives under the Paris Agreement and the EU Taxonomy.

Risk management

Directors must identify, assess, and disclose sustainability issues and related risks, including those associated with companies’ own operations as well as their value chain.

Stakeholder engagement

Companies are required to engage with stakeholders (e.g., workers, investors, communities, and others) to identify material sustainability topics. Specifically, the CSRD requires leadership to engage with workers and their representatives and enable them to express their opinions on relevant sustainability information.

Compliant and accurate reporting

Members of the board(s) are legally accountable for the compliance and accuracy of sustainability reports, which must be published within a specific timeframe alongside financial information.

Assurance readiness

Sustainability disclosure must undergo independent third-party assurance, and leadership must ensure systems are in place to facilitate assurance engagements.

Failure to meet these obligations exposes companies — and individual directors — to legal and financial repercussions.

Penalties for non-compliance

The European Commission requires penalties to be “effective, proportionate, and dissuasive.” While the CSRD sets EU-wide standards, Member States are responsible for transposing the Directive into national law and enforcing penalties. This has led to varying legislative approaches. Some countries, such as France and Belgium, have introduced specific enforcement measures, while others, including Italy, Denmark, Finland, and Sweden, rely on existing sanctions for non-compliance with annual reporting rules. Despite these differences, most jurisdictions suggest similar punitive measures, primarily in the form of fines and, in some cases, criminal liabilities:

Fines

Nearly all EU Member States impose significant financial penalties on leadership for non-compliance. In France, obstructing assurance engagements can lead to fines of up to €75,000 for directors. Italy penalizes management or supervisory bodies with fines capped at €150,000 until 2026. Denmark allows authorities to impose daily or weekly fines on management for failing to provide an auditor’s statement with the sustainability report.

Criminal liabilities

Some countries impose imprisonment on leadership for violation. In France, corporate directors who fail to meet external assurance requirements risk up to five years in prison. Belgium applies up to one year of imprisonment for non-compliance with fraudulent intent, while Hungary enforces prison terms of up to three years for breaches of general reporting obligations, including sustainability reporting.

The importance of inclusive leadership for ESG success

The CSRD marks a paradigm shift in corporate accountability, placing governance bodies squarely on the hook for sustainability performance. With Member States escalating fines and prioritizing individual accountability, leadership must proactively align their business with both EU standards and local legal landscapes. Beyond avoiding penalties, robust compliance offers strategic advantages — enhancing investor trust, mitigating risks, and positioning companies as sustainability leaders in a rapidly evolving economy.

As the CSRD reshapes corporate governance, one truth is clear: Sustainability is no longer a voluntary initiative. For leadership teams, it’s a legal imperative.

An opportunity for the taking

While the CSRD and other regulations introduce legal obligations for leadership, forward-thinking companies recognize that ESG is more than compliance — it’s a strategic opportunity. Businesses that embed sustainability into core business practices and leverage technology-driven solutions will not only ensure compliance, but also gain a competitive advantage. So how can organizations transition from regulatory obligation to long-term ESG value creation?

The key lies in proactive leadership, stakeholder engagement, and smart ESG data management.

From compliance to strategy: Building a resilient ESG framework

With growing regulatory pressure and increasing expectations from stakeholders, companies must shift from reactive compliance to a proactive and integrated ESG approach. A well-structured ESG strategy isn’t just about avoiding penalties — it’s about creating long-term value, enhancing resilience, and fostering a culture of sustainability that’s embedded at every level of the organization.

Integrating ESG in leadership

With CSRD and other regulations holding directors personally accountable, leadership must go beyond compliance — treating ESG data as a core business imperative.

Investors, regulators, and stakeholders now rely on high-quality, decision-useful, non-financial data to assess corporate performance, manage risks, and drive long-term value. Companies that apply the same rigor to ESG data as financial data will be better positioned to ensure compliance, enhance resilience, and gain a competitive edge.

To achieve this, leadership must:

Prioritize ESG at the board level, integrating sustainability into risk management and governance
Link ESG to executive compensation, ensuring sustainability commitments translate into action
Establish cross-functional ESG committees, embedding ESG across finance, HR, operations, and supply chain
Enhance ESG reporting, leveraging data-driven transparency to strengthen stakeholder trust

Organizations that invest in scalable ESG data management will not only meet regulatory demands but also build market trust and drive sustainable growth.

Engaging stakeholders to drive ESG impact

For ESG to drive real impact, it cannot be confined to sustainability or compliance teams — it requires company-wide collaboration and active stakeholder engagement.

To achieve this, organizations must:

Embed ESG into corporate culture: Foster a sustainability mindset through clear communication, training, and defined ESG roles across all departments
Empower employees: Encourage participation in ESG initiatives, ensuring they understand their role in sustainability efforts
Strengthen investor and stakeholder dialogue: Maintain transparent ESG reporting and open communication with investors, regulators, and customers
Engage suppliers in ESG commitments: Extend sustainability efforts to value chain partners, ensuring responsible sourcing and emissions reductions

A centralized ESG management platform enables companies to gather insights, measure stakeholder sentiment, and drive informed decision-making, ensuring all voices contribute to ESG success.

Tools and solutions to strengthen ESG leadership and compliance

To meet ESG reporting demands and drive meaningful action, organizations need robust digital solutions. Technology plays a critical role in streamlining non-financial data management, enhancing transparency, and improving decision-making.

Key ESG tools that empower leadership include:

ESG data management platforms: Centralized solutions like APLANET enable seamless ESG data collection, validation, and reporting, ensuring compliance with CSRD and other frameworks
Stakeholder engagement tools: Built-in engagement features allow leaders to track stakeholder sentiment, conduct surveys, and foster open ESG dialogue
Real-time ESG performance dashboards: Visual dashboards provide executives with real-time insights into key sustainability metrics, enabling data-driven decision-making
AI-powered ESG analytics: Predictive analytics and automated ESG reporting reduce manual workload and deliver proactive sustainability insights.
Audit-ready compliance solutions: Automated workflows ensure ESG disclosures align with regulatory and assurance standards, reducing compliance risks

It’s a shared belief between Enhesa and APLANET that non-financial data is as essential as financial data when it comes to sustainability and business success. By leveraging technology, businesses can move beyond compliance — unlocking insights that drive sustainability, efficiency, and growth.

Sustainability success means knowing what’s needed — and how to achieve it

Businesses need to be well-versed in the latest changes and updates to sustainability regulations, so they’re able to stay on top of requirements while being ready for the next trends set to be incorporated into legislation. More and more, we’re seeing those regulatory changes aiming to influence and motivate business leadership to take a proactive and engaged approach to sustainability.

This means that ESG is no longer just about compliance — it’s now a leadership responsibility and a strategic necessity. With evolving regulations like the CSRD and CSDDD increasing accountability, organizations must move beyond meeting requirements to proactively integrate ESG into corporate strategy.

This starts with gaining a clear understanding of the sustainability requirements and expectations applicable to the business — and progresses with a robust implementation strategy, using the right tools to encourage and support company-wide engagement.

By engaging stakeholders at all levels, embedding ESG at the highest level, and leveraging technology for smarter decision-making, businesses can enhance resilience, strengthen market trust, and create long-term value. Those that treat non-financial data with the same rigor as financial data will gain a competitive advantage in the evolving sustainability landscape.