EU Corporate Sustainability Reporting Directive (CSRD) the timeline for compliance
The EU Corporate Sustainability Reporting Directive (CSRD) has pulled over 50,000 companies into carbon compliance. The phased implementation and extension of carbon measurement and reporting down the supply chain forces all companies inside and outside the EU block to consider their compliance strategy in response to the CSRD.
The focus of this article will be on the CSRD, the challenges boards will face, and the timeline for implementation.
What is the EU Corporate Sustainability Directive?
The European Corporate Sustainability Reporting Directive (CSRD) forms a part of the EU Green Deal’s broader legislative framework, which includes initiatives such as the EU Taxonomy Regulation and the Sustainable Finance Disclosure Regulation (SFDR). Together, these regulations provide a cohesive and comprehensive approach to sustainability in the EU. They ensure that Environmental, Social, and Governance (ESG) factors are consistently considered and reported across various sectors.
The seven steps to comply with EU CSRD.
The Challenge of Double Materiality
The challenge lies in understanding and implementing the concept of “double materiality”, which is at the heart of CSRD. Companies must now evaluate how a range of sustainability issues impact their operations and how their operations impact the environment and society. Compliance requires a comprehensive approach to data collection, analysis, and reporting. Failure to adequately adapt to the requirements leaves the organisation with significant regulatory, financial, and reputational risks.
Robust approach to avoid greenwashing
For corporate boards and the C-Suite, understanding and articulating the implications of the EU CSRD is crucial. This is when all the talk of ESG and Net Zero, much of which has not yet touched nor influenced the strategy of many boards, becomes a reality in the form of compliance, regulation and market access. The increased data entering the market increases the regulation and compliance risk of companies not taking a robust operational approach to collect data and metrics being penalised for greenwashing.
Pressure of Downward Disclosure
Regarding regulatory pressure, the focus has been on more giant multinationals and public entities from higher to lower carbon-intense sectors. Which, on the surface, might lead smaller companies and supply chain companies to think the regulation does not affect them. This is a mistake.
While 60% of carbon liabilities sit with the large companies selling products at the end of the supply chain, up to 85% of carbon emissions are generated along the supply chain. We have engaged with and listened to supply chain companies under pressure of ‘downward disclosure’. This is where companies not directly caught by the regulation are being forced to measure and account for their operational carbon emissions to reduce the costs and liabilities of their more significant customer.
Phased Approach to 2030
The staggered approach aims to ensure a smooth transition for businesses of different scales and scopes, allowing them sufficient time to prepare and comply with the new reporting standards.
● From January 1, 2024, the first phase of the EU CSRD, part of the broader legislative framework of the EU Green Deal, is rolled out, targeting 50,000 + of the larger companies in the high emissions sectors.
● From January 1, 2025, the subsequent phase will extend to all other large EU-listed and non-listed undertakings, including significant EU subsidiaries of non-EU parents. The directive will apply to small and medium-sized undertakings listed on EU-regulated markets from January 1, 2026.
From January 1, 2028, the CSRD for non-EU undertakings not listed on EU-regulated markets.
Conclusion
The new Corporate Sustainability Reporting Directive (CSRD) by the European Union will come into effect in January 2024. To avoid compliance risks and liabilities, boards and investors must act.
With our delivery-focused approach, the Martello Carbon Stream Map team can help you navigate the EU Green Deal, ESG, Net Zero and Carbon Compliance.
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 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:
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.
