The EU is leading the way with mandatory sustainability reporting. Find out how to stay ahead of new regulations.
2024 is the beginning of mandatory reporting of carbon emissions. Leading the charge is the European Union through the Corporate Sustainability Reporting Directive (CSRD).
This means that companies must consider how emission reporting will impact them, with mandatory reporting, scopes of emissions and the requirements to fulfil.
As of January 2024, there are new reporting rules that large companies need to follow, seeing organisations provide more detailed reporting on sustainable issues in a plan to strengthen sustainable investment.
What is the CSRD?
Environmental Social Governance (ESG) has become a growing must for businesses to help tackle climate change. In 2022, Europe took the lead in embedding ESG into corporate sustainability reporting.
The CSRD is the new reporting that modernises and strengthens rules regarding the social and environmental information that companies must report. This results in a phased-in approach from large organisations to SMEs to report on sustainability.
The new regulation is an updated version of the previous corporate sustainability reporting under the Non-Financial Reporting Directive (NFRD), which some companies have already been following.
The CSRD is much more ambitious and far-reaching than the NFRD, making Europe the leader in standardised reporting. This is influencing similar actions globally with the UK set to announce its Sustainable Development Reporting by July 2024.
Click the button below to see the full timeline of the CSRD:
Who is affected by the new reporting regulations?
Around 50,0000 organisations are expected to be impacted by the new CSRD regulation.
The first organisations to be impacted by the new CSRD regulations are large companies that are listed on the regulated EU market. These organisations need to meet two out of three criteria:
- More than 250 employees
- Turnover €40 million
- Over €20 million in total assets
Within the EU, SMEs will need to report by 2028, however, the benefits of complying sooner rather than later can help boost their competitive advantage and ability to stay ahead of the regulations. Non-EU companies with a turnover of €150 million in the EU, with one branch in the union, are also required to start reporting.
What are the opportunities?
The CSRD is more than just ticking a box, it can offer many benefits to businesses:
- Reduces the risk of greenwashing by providing transparency for your external stakeholders.
- It provides credibility and a chance to cement your positioning in the market.
- Companies can take part in climate action and prove their goals based on data-based reporting.
Whilst this currently only affects the EU and large companies at present, the CSRD impacts other organisations.
This includes companies that are suppliers or trade with organisations that are currently reporting their carbon emissions. If other companies fail to adapt, this could result in them losing their business, as these organisations need to stay compliant with these regulations.
How can organisations overcome the challenges?
Early preparations are critical to ensure a smooth and compliant implementation of requirements for the CSRD reporting. Whilst it is currently affecting mostly EU companies, we will soon start to see a global shift in reporting standards. The USA has the Securities and Exchange Commission (SEC), which has rules around ESG reporting and plans to expand. Meanwhile, the UK has announced it will be implementing a reporting plan like Europe to be announced in 2024.
We recognise as companies move towards mandatory reporting there are some common challenges. The new reporting structure can be seen as complex, especially for companies who have never considered these before, and therefore will need to use some significant time and resources to ensure these requirements are met and ensuring the data quality is to the correct standard.
These challenges mean that organisations need to have a network of trusted suppliers and networks that can provide them with clear and transparent data to help provide accurate reporting.
How can we help?
The new regulations can be difficult to get your head around.
If you are not sure how to tackle this monumental task or understand how this applies to your organisation, if at all – get in touch with our team or look on our Sustainable Freight Network page to find out more!
