The Corporate Sustainability Reporting Directive (CSRD) signed a new petition this month, requiring 50,000 European companies to disclose environmental, social, and corporate governance data from 2024 on.
CSRD is a directive that supports the European Green Deal, a set of policy measures intended to combat the climate crisis with the goal of achieving zero net emissions of greenhouse gases by 2050 and working to transform the European Union into a modern, resource-efficient, and competitive economy.
The new initiative will require all companies outside micro companies and non-listed SMEs to report their carbon footprint to remain in business in the EU. This will be a much overdue transition for enterprises in Europe, as according to the report Better Late Than Later, the delay in introducing environmental, social, and corporate governance (ESG) strategies can result in a drop in market positioning and threaten a company’s future.
Let’s look at what this will mean for companies Europe-wide who need to clean up their environmental footprint for the new CRSD initiative.
Sustainability reporting to be on par with financial reporting
A carbon footprint is the total emissions caused directly or indirectly by a specific person, organisation, event, or product. It is a unit of measure showing the impact on our planet. A carbon footprint is expressed in Mg CO2e (Megagrams = tonnes of carbon dioxide equivalent).
So far, non-financial reporting is expected from around 11,000 companies (with more than 500 employees based in the EU). The CRSD will apply to all companies listed on the EU-regulated markets, except for listed micro companies. Listed small and medium-sized enterprises (SMEs) must comply with the reporting requirements until 1 January 2026.
It will also apply to a “large undertaking” that is either an EU company or an EU subsidiary of a non-EU company. This refers to an entity that exceeds at least two of the following criteria:
- A net turnover of €40 million
- A balance sheet total of €20 million
- 250 employees on average over the financial year
As a third category, the CSRD will apply to insurance and credit institutions regardless of their legal form. Overall, with a new bar of accountability for sustainability set, there will be savings for more than just money. Reducing energy losses and increasing the efficiency of companies, carbon reporting will encourage more efficient business as well as reduce the risk of companies needing to purchase a high number of offsets to operating.
A startup helping to manage and measure emissions
Polish startup Plan Be Eco has set itself the goal of decarbonizing the EU business sector by providing standard-compliant but simple collaborative software. It supports companies in calculating and reporting within the three different scopes of greenhouse gas emissions across the whole supply chain, following current standards.
Plan Be Eco automatically creates carbon footprint reports under TCFD, GHG Protocol, and ISO 14064-1 reporting standards. Better yet, each company can compare its climate performance with companies in its sector via an internal benchmarking system.
Machine learning algorithms create customised suggestions of GHG emission reduction actions for each company while also allowing users to simulate changes in the level of the company’s activities and see how this impacts their carbon footprint. Finally, what cannot be reduced, can be offset. Although the team encourages their customers to reduce rather than offset, the solution also supports the carbon offsetting process.
Plan Be Eco shortens the time of preparing a report by automating the process and lowering the costs of its preparation. All data is in one place and can be shared throughout the supply chain so that you can calculate the carbon footprint of all scopes for all contractors. They are also prepared that customers will not yet know all the necessary variables, and so as permitted by the European Commission, the company leverages the use of appropriate indicators, which are functionalities “sewn” into their product.
Each customer of Plan Be Eco who reports a decreased carbon footprint will be offered a significantly lower subscription price for the following year. For example, organisations with a 10% reduced carbon footprint will also receive a Plan Be Eco at a price 10% lower than the previous year.
“With us, companies learn how to run environmental impact data acquisition processes, and annual reporting takes less time from year to year,” says Aga Maciejowska, CEO of Plan Be Eco. “We run this business because we care. Therefore, we feel that charging less from more sustainable companies makes more sense than standard pricing strategies. We know it sounds risky, but our current investors have no doubts.”
Carbon neutrality to build climate competitiveness
According to the Climate Sentiment Index — a report on climate concerns from the perspective of consumers, employees, and voters prepared by Deloitte — 35% of surveyed employees are willing to change jobs if the employer does not implement sustainable business practices. In the face of growing difficulties in finding employees, carbon footprint reporting will benefit companies in the recruitment process.
The same report shows that 28% of respondents will accept a lower salary to work for a more environmentally friendly employer. It is also worth noting that this is most often declared by young people, up to 24 years of age, who are just entering the labour market—and it is a matter of time before this demographic becomes the most desirable pool of employees.
More and more European B2B customers require carbon footprint reporting from their suppliers to monitor the impact of their products. Investors are also increasingly being guided on certain benchmarks about carbon footprint in their potential portfolio.
Monitoring carbon emissions is the key to encouraging households, businesses, and industries to use energy-efficient products and clean energy—something that this new initiative, as well as Plan Be Eco, is helping to set a new precedent for.