ESG x Governance (5): The CSRD Challenge – Céline Abecassis-Moedas

This is the fifth of a series of interviews intended to help our IDN members grapple with the ESG topic.
In this episode, we delve into the experiences of a seasoned business academic who is also an INED, and explore the insights she has gained in the course of her career.

Céline Abecassis-Moedas

Céline Abecassis-Moedas is an academic and corporate leader, with over 25 years of experience spanning academia, consulting, and board positions. She is the Dean for Executive Education and Associate Professor at Católica-Lisbon School of Business and Economics, and serves as a non-executive director on the boards of CUF (chair of the innovation and sustainability committee), Vista Alegre Atlantis in Portugal, and Lectra (Chair of the remuneration committee and member of the CSR committee) in France. She also was on the board of Europac in Spain and of CTT and Grrenvolt in Portugal. She earned her PhD from Ecole Polytechnique, a MSc from Dauphine University (France), and is also an INSEAD IDP-C certified independent non-executive board director.

How does ESG, particularly with the emergence of the CSRD, impact company governance and success?

In my view, the relevance of ESG for overall company governance and success is multifaceted. Firstly, it’s a requirement. Legislation is evolving, and 2024 is a pivotal year as companies will need to report increasingly detailed ESG information due When I say it’s a requirement, I’m referring to the Corporate Sustainability Reporting Directive (CSRD). The first cohort of large companies will need to report on their fiscal year 2024 activities under this directive.
From my perspective, obtaining this information is quite challenging, especially for SMEs, which are often suppliers to the companies on whose boards I serve. It’s like we’re reinventing accounting or creating a parallel system of accounting. We must report all these new metrics, and many companies are unsure where to begin.

What’s the added value of ESG beyond compliance and risk management, considering your board and academic experience, and do you see any geographical variations in its importance?

Yes, it’s an interesting topic. Last week, during our Advanced Management Programme (AMP)—the most senior programme we have— I invited a guest speaker (a female seasoned expert in the area) to discuss the Corporate Sustainability Reporting Directive (CSRD) because it’s a major topic. She titled her talk “CSRD: Challenge or Strategic Opportunity,” which aligns perfectly with what we were considering. While not all companies view it as an opportunity, some definitely do.
For example, I serve on the board of a company in technology for the fashion industry that focuses on computer-aided design and manufacturing. They report on metrics such as energy usage and improvements over time. This company structurally benefits the environment by helping its clients reduce waste. However, since it’s their clients’ waste being reduced, it doesn’t directly reflect on the company’s own sustainability metrics, which is frustrating. The fashion industry is highly polluting, but by enabling on-demand fashion and reducing waste, this company contributes to sustainability. This exemplifies how CSRD can be seen as an opportunity rather than just a challenge.
On the other hand, I also sit on the board of a ceramics company, which uses a lot of energy. The recent rise in energy costs has been a financial nightmare for them. They’re now considering changing their energy sources to become less dependent on traditional, more polluting options. For them, CSRD is more of a challenge, but it can become an opportunity.
I notice more industry-specific differences rather than geographical ones. My experience is mostly in continental Europe—Portugal, France, and some in Spain. I suspect the topic is less pressing in the US, but I don’t have detailed information on that.
I am an optimist and believe CSRD presents opportunities for those who understand what is at stake. In the last two years, I’ve seen the growing importance of our role as non-executive directors in this area. While executives drive these initiatives, we have a significant responsibility bring external perspectives and best practice from company to company. This makes our work as non-executives particularly valuable.

What alignment challenges do you observe between executive leadership and non-executive boards in terms of ESG, and what recommendations would you offer to address these?

In terms of alignment, I also see the need to balance the Environmental (E), Social (S), and Governance (G) aspects of ESG. When people talk about ESG, they often prioritize the Environmental part, while the Social and Governance parts receive less attention. Two companies where I serve on the board—a tech company, and a healthcare company—are very people-oriented. Both have faced the issue of doing a lot in terms of social initiatives but not reporting it effectively. It’s a pity because their efforts are not visible. They needed to make an effort to report better, use more KPIs, and show their social impact more clearly.
The environment part is always present and significant but difficult to address. As for governance, it’s often assumed to be well-managed, but it should receive more focus. This could be because governance was previously well-handled, or because the other two areas need so much attention that governance is overlooked. I believe it’s a bit of both.
In governance, two things are particularly important, diversity and processes. Diversity on the board is essential, beyond just gender diversity. Diversity is becoming mainstream, but it’s crucial to extend it beyond gender. More than anything it is the existence of processes that guarantees good governance.
Finally the balance between the three and they interact is core and needs to be looked at.

What are the main gaps for boards to become ‘ESG fit,’ and how can they efficiently up-skill directors? What should Board Chairs prioritize?

What I’ve been observing more and more from the inside is that, in the last year or two, companies are increasingly hiring for ESG roles. They are bringing in consultants and hiring dedicated ESG personnel within the company. It’s like we’re creating a second accounting system and now building the team for it.
If you compare it, today a company might have an accounting team of 25 or 30 people for regular accounting and only two or three for ESG. It will take time to build up to the same level, but that’s where we are getting. As both a board member and an academic, I see that even the most dedicated companies often don’t know where to start. The CSRD rules are very demanding, still being designed, and this creates a significant challenge. Companies often don’t know where to begin. They are seeking help from consultants, but even the consultants are still learning. This situation is both exciting and a bit scary because we are all learning as we go.
For boards to be “ESG fit,” the biggest gap to close is in understanding and capability. Boards need to prioritize building their own knowledge and skills in ESG. This means Board Chairs should create ESG training for board members, hire or consult with experienced ESG professionals, and integrate ESG considerations into the core strategy of the company.
Efficient and effective up-skilling can be achieved through dedicated training programs, learning from best practices, and ensuring ongoing education on the evolving ESG regulations and expectations. It’s essential to foster a culture of continuous learning and adaptation to keep up with this rapidly changing field.

What are the primary ESG challenges ahead for non-executive boards, and how can companies address them effectively?

I think the big challenge is not just having a strategy and an ESG strategy separately, but rather integrating ESG as an essential part of one cohesive strategy. Not all companies are ready for this integration, and in some cases, it might require significant changes that are daunting for them.
The role of the board is essential here. Because we have a broader perspective and can bring insights from across different companies, non-executive directors have a unique responsibility. For example, I serve on the boards of three companies with different activities, but the discussions we have in one often become relevant in another.
One example I’m proud of is how we integrated ESG into the variable remuneration of the CEO at one of the companies. As the Chair of the Remuneration Committee and a member of the ESG Committee, I led multiple discussions to include ESG criteria in the CEO’s variable pay. For 2024, 50% of his variable remuneration will be based on ESG performance, which is a significant change. Next year, we plan to extend this to a few more executives and eventually further throughout the company. This makes ESG truly strategic; if variable remuneration is tied to both EBITDA and ESG, it changes priorities significantly.
Another critical issue is getting the right information, which is often challenging. In the private healthcare group that I sit at the board of, we discovered that anaesthetic gases had the same carbon footprint than their entire fleet of vehicles. Initially, this seemed like a mistake, but after thorough checks, including comparisons with NHS data, it was confirmed (Desflurane has a significantly higher global warming potential compared to Sevoflurane). We then had to convince doctors to switch to the gas with the lower carbon footprint. This example illustrates how crucial it is to have accurate information; without it, significant impacts can go unnoticed.
In summary, for boards to be “ESG fit,” they need to integrate ESG into their core strategy and ensure accurate information flow. Prioritizing ESG training, hiring knowledgeable professionals, and setting clear ESG metrics in executive compensation are key steps. This approach not only aligns short-term actions with long-term goals but also makes ESG a fundamental part of the company’s success.

Could you provide an overview of University’s upcoming CSRD preparation program, its objectives, target audience, and key features?

The programme is still a work in progress, we aim to launch it by October. It will be called ESG Strategy and Reporting. The idea is to address the needs of the many companies that will soon be required to comply with the CSRD. For example, in Portugal, around 1,200 companies will need to report, a significant increase from the current number. The top 50 companies probably have the resources and knowledge, working with large Audit firms. However, the remaining thousand companies probably don’t know where to start.
Our goal is to build a programme that helps guide these companies through compliance. We’re still finalizing the length and cost because it needs to be accessible. We also want to involve the right experts, as few people have deep knowledge of the CSRD requirements. The programme will include expert instruction and numerous guest speakers from top companies that have already begun this process. We aim to create a community where participants can share best practices and support each other during and after the program. These companies are not in competition; they are facing the same challenges and would benefit from working together.
We see this as a significant opportunity, but we acknowledge that auditors are already moving into this space, which is only fair. We will need to collaborate with them to ensure the programme’s success.

The interviewer: 

Dr. Pamela Ravasio, Shirahime

Dr. Pamela Ravasio is the founder and managing director of Shirahime Advisory, a Corporate Development & Responsibility Governance boutique consultancy. She serves as fractional Chief Sustainability Officer for companies and advises boards on ESG and governance. With a background in roles like Global Stakeholder Manager, she played a key role in making the European outdoor industry a leader in future-proofing.
She currently is a member of INSEAD’s International Directors Network.

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