What does CSRD require of your greenhouse gas emission reporting?

Tens of thousands of companies will be required to comply with the new Corporate Sustainability Reporting Directive (CSRD) regulation, supported by the EU green taxonomy, and report their greenhouse gas emissions in detail

Citizens expect companies to identify the positive and negative impacts they have on society and the environment, and to prevent and mitigate any negative impacts, across their supply chains. 

Under the European Green Deal, powerful mechanisms are set in motion to promote funding for environmental and social objectives, in order to foster sustainable growth and achieve the EU’s 2050 climate neutrality objective.  A “substantial contribution” to climate change mitigation is one of the main ways for your company to align with this goal. Doing so should unlock large benefits, like better financing/loan conditions, satisfied customers and lower environmental impact. But what does it mean in practice?

The Corporate Sustainability Reporting Directive (CSRD) was adopted by the EU on the 11th of October 2022 and replaces the  Non-Financial Reporting Directive (NFRD). The CSRD sets much broader and stricter standards,  especially for greenhouse gas reporting. This is really good news for the climate!

Who’s required to report under the CSRD and when?

Under the preceding NFDR, only large listed companies, banks and insurance companies (public interest entities) with more than 500 employees were required to report their non-financial performance.  The CSRD expands this criteria by making it mandatory for a larger number of companies to comply with sustainability reporting.

EU companies that meet two of the following criteria will have to comply with the CSRD:

  • € 40 million or more in net turnover
  • € 20 million or more  in assets
  • 250 or more employees

Non-EU companies with more than € 150 million turnover and operations in the EU will also have to comply with the CSRD.

The new regulation applies on January 1st 2024 (with reports due in 2025) for large companies already subject to non-financial reporting requirements. Other large companies subject to the CSRD must comply on January 1st  2025, while requirements for smaller companies go into effect from 2026.

What’s required for CSRD compliant greenhouse gas emission reporting?

As per the Disclosure Requirement E1-9 in the ESRS (yes, yet another acronym), it is mandatory to disclose gross Scope 1, 2 and 3 greenhouse gas emissions in metric tons of CO2 equivalents. For Scope 3, one must include emissions from all significant categories, including: 

  1. Upstream purchasing
  2. Downstream sold products
  3. Goods transportation
  4. Travel
  5. Financial investments. 

The following aspects should be taken into consideration:

  1. Principles and provisions of the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (Version 2011)
  2. For  financial institutions, the GHG Accounting and Reporting Standard for the Financial Industry from the Partnership for Carbon Accounting Financial (PCAF)
  3. Screen total Scope 3 GHG emissions based on the 15 Scope 3 categories identified by the GHG Protocol Corporate Standard and Scope 3 Standard using appropriate estimates
  4. Identify significant Scope 3 categories based on the magnitude of their estimated GHG emissions and other criteria provided by GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (Version 2011, p. 63 and 65-68) or ISO 14064-1:2018 Annex H.3.2, such as financial spend, influence, related transition risks and opportunities or stakeholder views
  5. Calculate or estimate GHG emissions in significant Scope 3 categories
  6. Update the Scope 3 inventory at least every three years and in case of major changes (explanatory note: Scope 3 GHG emissions need to be disclosed every year, but a full update of the underlying inventory is only expected every three years unless major changes occur)
  7. Disclose the percentage of emissions calculated using primary data obtained from suppliers or other value chain partners
  8. Disclose for each significant Scope 3 GHG emissions category, the boundaries considered, the calculation methods for estimating the GHG emissions as well as if and which calculation tools were applied
  9. Avoid double counting with GHG emissions reported under Scope 1 or 2
  10. Disclose a list of Scope 3 GHG emissions categories included in and excluded from the inventory with a justification for excluded Scope 3 categories
  11. Disclose biogenic emissions of CO2 from the combustion or biodegradation of biomass that occur in its value chain separately from the gross Scope 3 GHG emissions, include emissions of other types of GHG (such as CH4 and N2O), and emissions of CO2 that occur in the life cycle of biomass other than from combustion or biodegradation (such as GHG emissions from processing or transporting biomass) in Scope 3
  12. Exclude any purchased, sold or transferred carbon credits, or GHG allowances from the calculation of Scope 3 GHG emissions.

What does this mean for B2B suppliers?

Large companies will require more and better data from their suppliers, in order to support the new  Scope 3 reporting requirements (upstream purchasing). Planning and systems to meet these requirements should  be in place in 2023 to start gathering data in 2024. Your company’s downstream products are someone else’s upstream products. Even if the CSRD requirements don’t cover SME’s, most companies, if not all, will  feel the impact of this regulation.

How can Ducky help you?

In place of supplier specific data, it’s critical to find and use appropriate emission estimates. See how Ducky can help you with CSRD compliant Scope 3 reporting and get started now.