Carbon Accounting and Compliance Requirments of the EU Green Deal
In this article, we look at the key aspects of the Corporate Sustainability Reporting Directive (CSRD) impacting over 11,700 major companies across Europe and more due to the pressure of downward disclosure. While the regulation is a business challenge and risk, it is also a crucial step towards heightened transparency and responsibility in reporting greenhouse gas emissions.
Scope 1 - 3 Carbon Accounting
With the 2025 CSRD deadline looming, businesses must navigate the complexities of Scope 1, 2, and 3 emissions, leveraging cutting-edge technology and strategic planning to meet these rigorous new standards. This shift is not just about compliance; it's a fundamental rethinking of how corporate growth and environmental stewardship can coexist, reshaping the future of business practices in Europe and for companies wanting to trade into the block.
The Carbon Stream Map measures scope 1,2 and 3 emissions across a business and its operations.
The Scope of the corporate sustainability directive (CSRD)
Initially, the CSRD will apply to companies previously covered by the Non-Financial Reporting Directive (NFRD). By 2025, additional companies meeting certain criteria (over 250 employees, €40 million in turnover, or €20 million in total assets) will also need to comply. Eventually, nearly 50,000 companies in Europe, including over 10,000 non-EU companies with European subsidiaries, will be reporting under CSRD.
Reporting Requirments
The CSRD demands detailed reporting of greenhouse gas emissions, including Scope 1 (direct emissions), Scope 2 (indirect emissions from energy usage), and Scope 3 (emissions from the entire supply chain). Scope 3 emissions are particularly challenging to measure due to their complexity and the involvement of external suppliers.
Martello Carbon Stream Map Ensures EU CSRD Compliance
Preparation for Compliance
Companies must start preparing for the 2025 deadline by understanding the CSRD rules, conducting dry runs of their carbon accounting processes, and exploring ways to reduce emissions in their supply chains. The Martello Carbon Stream Map was developed to offer end-to-end measurement and abatement analysis so companies can identify their risks and reduce them strategically.
Role of Technology
A major challenge for companies will be to decouple business growth from increased emissions. Artificial intelligence and machine learning will be crucial in speeding up data gathering and calculations for carbon accounting. However, companies are advised to establish robust processes before integrating technology solutions. This can be achieved through innovative approaches like digital technology to simulate and test different emission reduction strategies at the operational or supply chain level.
Broader Implications
Beyond regulatory compliance, carbon accounting is becoming essential due to increasing investor focus on sustainable investments and public pressure for climate action. The CSRD should be the starting point when carbon accounting becomes as mainstream as financial accounting in assessing a company's sustainability and future valuation.
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 decarbonize an organization, supply chain, or portfolio by quickly calculating end-to-end operational and supply chain costs and liabilities.
The CSM is a highly visual tool that identifies the systematic options to affect emissions within one operation or down through its global supply chain.
We Enable Businesses And Investors In Several Ways:
We support you in understanding the legislation and business risks that will affect 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.
With the Carbon Stream Map, Martello 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.
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 click the Let’s Talk button to schedule a time for a consultation.
