Navigating the EU Green Deal, CSRD and Carbon Compliance
The EU Green Deal signifies a change in basic assumptions for the business world. This article and video reviews the legislation introducing mandatory carbon reporting in the form of the EU Corporate Sustainability Reporting Directive (CSRD).
Martello supports investors and companies navigate the EU Green Deal
The Pillars of The EU Green Deal
The European Green Deal has been built upon a set of key pillars that are essential to achieving sustainability. These have been translated into compliance and regulation. The pillars are not absolute, and the EU can change the targets on an industry and sector basis depending on the progress made in achieving the legally binding targets of EU climate legislation.
1. Climate Action: Targeting climate neutrality by 2050 with a 55% reduction in greenhouse gases by 2030 and specific targets across all industry sectors.
2. Clean Energy: Focusing on renewable energy sources, including strategies for offshore renewables and hydrogen.
3. Sustainable Industry: Emphasising reduced industry emissions and implementing a Circular Economy Action Plan will drive downward disclosure requirements from multinational companies down the supply chain to small SME companies.
4. Buildings and Renovations: Improving energy efficiency in buildings by providing investment for renovating old building stock and investing in nearsite renewables.
5. Sustainable Mobility: Aiming for a 90% reduction in transport emissions by 2050.
6. Eliminating Pollution: Introducing a Zero Pollution Action Plan for water, air, and soil.
7. Farm to Fork: Transforming the food system to reduce waste enhances sustainability and decarbonises by removing high-carbon inputs into the farming system.
8. Preserving Biodiversity: Implementing strategies to restore ecosystems and promote nature-based solutions.
9. Research and Development: Backed by Horizon Europe, focusing on investment in technologies like clean hydrogen, batteries, decarbonisation of the grid, and increase in energy storage.
10. Preventing Carbon Leakage: Proposing a Carbon Border Adjustment Mechanism (CBAM) to manage import carbon content and increasing the pressure on multinational companies wanting to sell goods or services within the EU Block to measure, reduce, and report their operational and supply chain carbon to gain access to the market.
The EU Green Deal marks the beginning of a shift in how businesses manage their carbon compliance, risks and liabilities.
Mandatory Carbon Reporting
From the start of 2024, most businesses will start to feel the reality of the European Green Deal regulatory framework. With an EU-wide regulated carbon reduction target of 55% by 2030, the EU Green Deal is set to reshape how companies operate all aspects of their business and supply chains. Companies trading into the EU block must comply with mandatory carbon reporting in the form of the CSRD to align with the EU’s ambitious sustainability goals for decarbonising the economic block.
Not simply a set of policies
The Green Deal is not simply a set of policies. It will reset how governments transform their economies to fix carbon and climate. It's a complete shift in economic paradigm and how we approach key issues. The Green Deal comes with the financial mechanisms and investment opportunities to sustain its development and implementation, such as the Just Transition Fund and the Sustainable Europe Investment Plan. At the same time, non-compliant companies will face various penalties for failure to adhere to the multiple pieces of Green Deal Legislation.
International Companies Must Comply
International companies wanting to sell goods on the block will face compliance regulations in the form of carbon border taxation (EU CBAM). Modifications to EU Civil Law make it easier for companies that do not comply to face civil and criminal litigation via the courts.
Backed by legislation
Within the EU Climate Law, there are many reasons why companies within and outside the EU should act. For companies inside the EU, the business cost of non-compliance comes in the form of a £56bn carbon taxation via the extended EU ETS and legislation, which enables both regulators and the public to raise litigation against companies via the civil courts. Companies based outside the EU but wanting to sell goods and services into the EU market will be faced with a Carbon Border Tax (CBAM) and, in effect, the need to comply with the EU legislation.
Funding The Green Transition
The EU Green Deal Investment Plan earmarks €1 trillion for this transition. Key funding streams include €528 billion from the EU budget and the Emissions Trading System (EU ETS), which has an annual tax target of 56 billion Euros to fund the economic transition. More financing is available through the Invest EU program and national co-financing programs at the EU state level.
Investment in Innovation
The European Innovation Fund has allocated €300 million for market-creating innovations, and the Just Transition Mechanism supplies €100 billion for impacted regions and sectors. Access to capital from the EU foreshadows the uphill battle we face against climate change and the need to collectively build a green economy that functions and complements each other without ignoring the needs of both the public and private sectors.
Building a competitive position
With a target of climate neutrality by 2050, this ambition of the EU Green Deal is not just about environmental conservation. It is focused on rewiring the baseline operating model of the economy while creating a new economic blueprint. Interlocking pillars and initiatives cut across economic sectors and supply chains. Companies that want to manage the change and build a competitive position must focus on measuring their operational and supply chain carbon, followed by business improvement, which drives carbon reduction.
What Does the EU Green Deal Compliance Mean for Your Business?
Adapting to the Green Deal is more than meeting regulatory demands; it’s an opportunity for innovation and growth. Non-compliance risks penalties, including carbon taxation and potentially a 5% tax on global profits. This initiative integrates various policy areas, balancing economic growth with environmental protection, and is a key element of the EU’s commitment to sustainable development.
More about Martello and the Carbon Stream Map
Martello supports businesses and investors in reducing costs and liabilities in response to global carbon, climate, and net zero legislation.
The Martello Carbon Stream Map (CSM) unlocks the blueprint for boards and investors to decarbonise an organisation, supply chain, or portfolio by quickly calculating end-to-end operational and supply chain costs and liabilities.
The Carbon Stream Map is a highly visual tool that identifies the systematic options to affect emissions within one operation or down through its global supply chain.
Our services assist businesses and investors in various ways.
Understand the legislation and business risks affecting your company now and over the next five years.
Measure your operational and supply chain carbon liabilities.
Assess your company’s carbon and climate exposure and the related capital costs.
Provide the metrics baseline to unlock access to sustainable low-carbon finance and Green Bonds and engage with ESG Investors and Funds.
Unlock the metrics needed to meet the mandatory and voluntary reporting standards from TCFD, TNFD, ESG Reporting and Net Zero Goals.
Create an Action Plan to reduce your liability and set up the baseline for business improvement science-based targets.
If you believe we can help with your compliance needs for the Corporate Sustainability Reporting Directive (CSRD), the EU Green Deal, Net Zero compliance or other areas of ESG, please schedule a time for a consultation.
We can measure and map any business, in any sector or geographical region. The data allows business leaders to execute their plans at any point in their net zero transformation journey supporting any level of operational maturity.
Our other services include Business Improvement, Strategy, Financial and Capital Markets Advisory, Regulatory and Communications.
