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Sustainability
The good, the bad, and the ugly: What big energy and utilities players tell us about the new sustainability reporting regime
CSRD’s first year in the energy and utilities sector improves comparability and data depth but risks turning sustainability into a compliance exercise, weakening strategic clarity.
Rapid read:
- CSRD has raised the focus on transparency but not strategy. Mandatory ESRS reporting has improved consistency and comparability in sustainability data, yet early disclosures show companies prioritizing technical compliance over strategic insight.
- The loss of strategic prioritization weakens board-level focus. Despite universal adoption of double materiality assessments, the absence of clear prioritization tools has turned materiality into long, undifferentiated lists with limited strategic insights for stakeholders.
- Richer climate data is not translating into stronger commitment. Expanded disclosures, including internal carbon pricing, often lack a clear rationale and connection to investment decisions, undermining their role as credible signals of transition readiness.
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.
Standardization has value: it allows stakeholders to finally compare like with like, reduces greenwashing space, and forces companies to articulate their sustainability impacts.
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.
The bad: Missing strategic prioritization
The first year of CSRD reporting has delivered significant progress in standardization and transparency of sustainability information. However, it has also revealed a critical gap: the absence of a clear mechanism to communicate the prioritization of material topics and link them to strategic initiatives. While companies have complied with disclosure requirements and identified material topics, many reports stop short of showing how and which of these topics translate into strategy or action plans. Without a prioritization lens, materiality insights risk being flattened into long lists, often 20–30 items deep with no hierarchy or signal of which issues demand immediate management attention and why.
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 year | Number of companies disclosing Materiality Assessment (MA) | Number of companies disclosing Materiality Matrix |
|---|---|---|
| 2023 | 10 | 5 (50% of companies with M.A.) |
| 2024 | 11 | 0 (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.
Few companies explain their rationale, the basis for their price level, or how it is used internally.
The way forward
Without the materiality prioritization, reported DMA results now resemble technical inventories rather than strategic tools. The risk is that sustainability will be even more perceived as a list of compliance topics rather than strategic ones. A matrix or another tool should translate material topics into a clear, prioritized, and strategically useful outcome.
As a result, companies should consider reintroducing prioritization mechanisms in their disclosures to preserve (clarity in communications on) the strategic value of materiality assessments. Visual or structured prioritization can help stakeholders understand not just what is material, but what is most critical and has an active strategy and plan for addressing it. This is key to ensuring that CSRD reporting supports informed decisions, resource allocation, and long-term value creation.
The ugly: Strategic commitment is weakened
The greatest paradox of the CSRD is that it elevates detail while sometimes reducing clarity. Reports are now filled with granular datapoints, but the strategic narrative that makes those datapoints meaningful is often missing. This tension is especially visible in internal carbon pricing disclosures.
Lots of numbers, little explanation
While disclosure has doubled, the quality and coherence of the information vary dramatically:
| Fiscal year | Number of companies that report having an ICP in place | ICP price value (Euro/Ton CO₂) (average value) | ICP price value (Euro/Ton CO₂) (Minimum value) | ICP price value (Euro/Ton CO₂) (Maximum value) |
|---|---|---|---|---|
| 2023 | 4 | 85.50 | 85.00 | 86.00 |
| 2024 | 8 | 80.08 | 39.00 | 137.50 |
- Internal carbon prices appear surprisingly low, especially given that many energy and utilities companies operate in highly carbon-intensive segments. Several independent benchmarks, such as those produced by the US Environmental Protection Agency, suggest that credible decarbonization-aligned carbon prices should range substantially higher.
- The variability is increasing. A price range of €98/tCO₂ points to inconsistent methodologies or fundamentally different interpretations of what an internal carbon price is meant to serve. Some companies seem to use it for investment decisions, others for scenario analysis, and others simply as a symbolic indicator. It will be important to monitor the usage and development of ICP practices in the coming years as one of the tokens of corporate commitment towards climate change.
Few companies explain their rationale, the basis for their price level, or how it is used internally. In other words, the numbers are disclosed, the story is not told, and actual commitment does not look to be enhanced. This combination, detailed data with limited strategic framing, leads to the “ugly” side of early CSRD reporting: compliance without clarity, transparency without insight, and disclosure without direction.
“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.”
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.
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