Understanding the CSRD & the Importance of Tracking Carbon Footprint
Abstract
The Corporate Sustainability Reporting Directive is a significant step in improving the transparency and accountability of businesses’ environmental impact. The CSRD will require companies to report their carbon emissions, and develop a clear understanding of the reporting deadlines to ensure they are fully prepared.
While it may seem like a cumbersome task, complying with the CSRD regulations can work to a company’s advantage by attracting new customers, investors, and employees who are motivated to help reach climate neutrality by 2050.
Businesses can effectively track their carbon footprint and report environmental impact with consultancy services like Planadigm and the cloud-based software provided by Pigment.
Author: Mike Huiberts
What is CSRD?
The Corporate Sustainability Reporting Directive (CSRD) is a new regulation that modernises and strengthens social and environmental reporting rules for businesses in the European Union, further in the text referred to as EU.[1]
The CSRD will set the standard by which nearly 50,000 EU companies in 2024, including large companies and listed small and midsize enterprises (SMEs), will have to report their environmental impact, including carbon emissions. [2] These companies are globally located. The first reporting deadlines for the CSRD will start applying between 2024 and 2028, with different deadlines for various business sizes.
What is the meaning of the Scopes in CSRD?
For large enterprises that do business in the EU, including those based outside the EU, carbon reporting is mandatory per the CSRD. The breadth and detail required by the CSRD framework can feel overwhelming, as it includes not only a company’s carbon dioxide (CO2) emissions but also other greenhouse gas (GHG) emissions. This includes emissions from both direct and indirect activities, known as Scope 1, 2, and 3 emissions.
- Scope 1 covers direct emissions from owned or controlled sources.
- Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company.
- Scope 3 covers all other indirect emissions that occur in a company’s value chain.
The CSRD will compel companies to substantiate their baseline emissions and targets for reduction. In the run-up to the reporting deadlines, companies must calculate their entire carbon footprint to comply with current and future reporting requirements. [3]
Why do we need to report?
CSRD is a new legislation aimed at improving transparency and accountability in companies’ environmental reporting. The directive demands that companies provide accurate and detailed information about their environmental impact, requiring them to invest in robust data management systems and develop the skills necessary to analyse and interpret complex environmental data.
The CSRD will replace the Non-Financial Reporting Directive (NFRD) and introduce more detailed reporting requirements, expanding the number of companies that must report. The directive will also apply to foreign companies with a presence in the EU and introduce new reporting requirements.
The CSRD will be implemented in phases, with large companies and groups being the first to report, followed by listed small and medium-sized enterprises. SMEs that are required to comply with the CSRD must meet two of the following three criteria:
- €50M in net turnover,
- €25M in assets, or
- 250 or more employees.
The reporting deadline for companies that need to comply with the CSRD will be at the beginning of 2025, and they will have to report on their emissions for 2024. It is crucial for businesses to develop a clear understanding of the reporting deadlines and ensure that they are prepared to meet them. Non-compliance with the reporting requirements may result in penalties. [4]
CSRD offers companies a chance to appeal to potential new customers, investors, and employees aligned with their goal of achieving climate neutrality by 2050. For companies that are collecting data for the first time, the CSRD can either enhance or diminish their reputation depending on the quality of the reported figures. As a result, the CSRD represents a significant stride towards cultivating a culture of greater accountability and transparency in environmental reporting, which will ultimately lead to a more sustainable future.
How will I track my emissions?
At Planadigm, we offer consultancy services in the field of supply chain management. We have catered to various industries in the past and present and have experience with many types of transport that emits Greenhouse gasses, such as transportation for goods and manufacturing of products. We have over 25 years of experience in supply chain management and 30 years of experience in providing solutions to businesses. We are confident we can provide a reliable framework that meets your needs.
As CSRD is a relatively new concept, we understand the impact it can have on your planning cycle. Therefore, we have developed a model that provides insights into the areas of your business that contribute the most to carbon emissions tracking. With this model, you can track emissions in all three Scopes and gain detailed insights into your business’s carbon footprint. We use Pigment, a software solution, to elevate your planning to the next level. Our team stays updated with the latest trends related to CO2 emissions and can guide you on how to report on this topic effectively. With the help of our reliable cloud-based Pigment software, you can access your planning data from anywhere.
Would you like to hear our proposition? Contact and connect with us for the latest information; message us or send an email to mike.huiberts@planadigm.com
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