A lot is going on with emissions accounting at the moment. In this blog, we will summarize what has been happening lately and what is coming up next.
We have been following changing requirements and writing several blog posts explaining the expected requirements and changes concerning, for example, several directives at the EU level. Especially from the point of view of emissions accounting, the Corporate Sustainability Reporting Directive (CSRD) sets more requirements for companies. On the other hand, the Corporate Sustainability Due Diligence (CSDD) Directive, if implemented, would oblige large companies to demand sustainability from all actors in the value chain. Empowering consumers for the green transition and Green Claims directives add their own contributions to corporate sustainability efforts related to environmental claims.
For many companies, increasing requirements mean a lot of work in sustainability and emissions accounting. Even if a company is smaller and the directives do not directly obligate them, the impacts can extend throughout the entire value chain, especially affecting subcontractors. Next, we will summarize what has recently happened on the policy and what to expect next.
The Corporate Sustainability Reporting Directive (CSRD)
The Corporate Sustainability Reporting Directive (CSRD) and the changes it brings are now sparking conversation. The first year of the directive has also been kicked off. The directive will apply to companies step by step. This year companies that were previously covered by the NFRD directive will start reporting under the CSRD directive. Afterwards other large companies will join, followed by listed SMEs as the third group. Even if your company does not belong to these groups, questions and requests for emission data may start pouring in. This is due to large companies being required to include their Scope 3 emissions in the reporting. Therefore they have to now investigate emissions throughout the entire value chain.
Companies falling under the scope of CSRD must ensure that corporate-level calculations are carried out comprehensively. They should also be reliably following GHG Protocol Corporate standards. This is due to the ESRS E1 standard of the CSRD directive being related to climate and its emissions accounting guidance being based on the GHG Protocol. If calculations have been done based on this previously, the situation is good, as CSRD will only introduce some refinements. Particularly, the transformation of Scope 3 calculation into a mandatory requirement increases the workload in emissions accounting. The workload of reviewing the entire value chain and collecting data may be surprising. Therefore it is wise to prepare well in advance. Conducting a practice round of emissions accounting before the first reporting year helps to assess the situation. Many companies in the second wave have already started preparing for reporting and have initiated CSRD-compliant calculations well in advance.
Inquiries for subcontractors may concern the emissions of products and raw materials. This is why product accounting is also important to consider in advance. In product accounting, reliability, comprehensiveness, and the scope of the calculation must be carefully ensured. Today, the availability of product accounting results might be a requirement just to participate in competitive bidding. This demand may even increase as the amount of emissions accounting grows. In case of such scenarios, it is advisable to conduct emissions accounting in advance. Therefore when the inquiries come, getting the results is already in progress or maybe even completed. This is important especially if emissions accounting and product carbon footprints are a part of the selection criteria for cooperation.
The EU’s Corporate Sustainability Due Diligence (CSDD) Directive
When the Corporate Sustainability Due Diligence Directive comes into effect, it would oblige large companies to ensure social and environmental sustainability both within their own operations and throughout the entire value chain. The implementation of this directive would also increase inquiries for subcontractor companies regarding environmental issues and, for example, the emissions of products.
The Corporate Sustainability Due Diligence Directive faced opposition from several EU countries. Especially regarding the introduction of class action, to which the Belgian Presidency has proposed an amendment. Finland has also supported the new proposal, and next, the European Parliament should accept the content of the directive. According to the new proposal, the scope of the directive would also change. It would then apply to companies with at least 1,000 employees and a revenue of 450 million euros. Previously, the limits were at least 500 employees and 150 million in revenue, and the directive also covered smaller companies in high-risk sectors. These high-risk sectors have also been removed from the new proposal and may be considered later.
Even though many companies fall outside of the scope of this directive, its implementation may increase inquiries towards smaller companies as well. Especially for large companies within the scope of the CSDD directive, it is important to be extremely careful about the environmental issues of the companies in their own value chain, where, for example, clarifying emission data may be a precondition for a company to be part of a large company’s value chain.
Empowering consumers for the green transition and Green Claims directives
Green washing and various environmental claims have created a lot of discussion. According to research, over half of these claims have been misleading or false. At the end of February, the Empowering consumers for the green transition directive was adopted, which already prohibits unfounded climate claims and green washing. Currently, the Green Claims Directive is being finalized, which complements the aforementioned directive by setting exact requirements for claims related to consumer products and services if implemented. The Green Claims Directive is expected to come into effect in the fall of 2024.
Because of the directives regarding climate claims, companies should consider carefully how they communicate the environmental impacts of their operations or products and what kind of image they want to convey. For example, it is not advisable to add an image of a green forest to air travel or commuting, and packaging should not be labeled as fully bio-based if even a small part of the materials is something else. Claims should be based on high-quality calculations, reliable emission factors, and verified information behind the calculations.
Carbon footprint calculations have positive impacts on a company’s operations
Emissions accounting does not have to be a necessary evil and a drain on resources that does not benefit the business at all. As mentioned earlier, especially for subcontractors selling materials and products, emissions accounting may be a precondition for competitiveness. Being a pioneer in carbon footprint calculations and providing carbon footprint data may, at best, promote business and increase cooperation possibilities with larger companies. In addition, starting the emissions accounting early allows time for data collection and calculation preparation. This then makes it easier to adapt to changing situations.
Primarily, the growing regulation aims to protect both consumers and investors. However increasing sustainability and consistent rules provide security for everyone. Increasing sustainability reporting and emissions accounting also facilitate our own work and provide more precise data to support emissions accounting. The more accurate information we receive from subcontractors, for example, the more accurate our own emissions accounting results will be.
OpenCO2net Oy provides tools and services for carbon footprint calculation. Our calculators and calculations are based on the most widely known standards in the world and a comprehensive emissions database that includes around 8,000 up-to-date emission factors validated by our experts.
