Understanding the CSRD

Lets invest in a sustainable future!

Put briefly, the Corporate Sustainability Reporting Directive (CSRD) mandates that European Union companies report their impact on people and the environment.

Initially proposed in 2021 and agreed upon by the EU Parliament in 2022, the CSRD is a significant legislative step towards enhancing sustainability reporting standards. The main aim being to align sustainability reporting with the rigor and precision of financial reporting, ensuring comprehensive coverage of non-financial information. These enhanced standards aid progress towards reaching the EU Green Deal’s objectives, including the target of achieving climate neutrality by 2050.

Who Needs to Act and When?

Now, in the summer of 2024, compliance with the CSRD is mandatory for large listed companies starting from the fiscal year 2024, while SMEs have until fiscal year 2026 to comply. This transition period allows companies to prepare for the new reporting requirements effectively. Non-listed SMEs are not directly subject to the CSRD, but they might still be affected if they are part of the supply chain of a reporting company and are asked to provide information. In fact, we observe in practice that the competitiveness of non-listed SMEs increases significantly when they are in a bidding competition with companies required to comply with CSRD regulations.

If your company meet two of the following three points, the time to act is NOW:

• More than 250 employees
• More than €50 million in Annual net sales
• More than €25 million on Total assets

How does it work?

In your mandatory sustainability report, you evaluate your business based on Double Materiality. Double materiality is one of CSRD's core tenets. This means that the impact on your business and the impact of your business should be covered in sustainability disclosures. The former is known as financial materiality, and the latter as impact materiality. Together they form the basis of your reporting.

Our report should provide insights into how your business is affected by sustainability developments, such as the impact of climate change on your business model. Additionally, you should detail how your business impacts the environment, for instance, if your company emits harmful gasses during production and how this affects local air quality.

You will report on actual and potential impacts, risks, and opportunities in the areas of people, governance, and the environment over the short, medium, and long term, following the European Sustainability Reporting Standards (ESRS).

Why has the CSRD been Implemented?

Customers are putting more and more pressure on their preferred businesses to reduce their environmental effect. Since customer trust is essential to success, reports that do not demonstrate sufficient progress run the real risk of damaging a company's reputation. Even more so when they uncover greenwashing by failing to substantiate advancements that have previously been proposed. With CSRD, customers can choose their stores more simply based on real delivery as well as sustainable goals, which benefits successful shops.

Better data on corporate sustainability is what CSRD aims to provide stakeholders. The Non-Financial Reporting Directive (NFRD) was the ancestor of the CSRD . While the NFRD mandated that businesses report on sustainability-related matters, it made no recommendations for how they had to do it. This had a problem. According to an assessment by the European Parliament, NFRD reporting was uneven, which made it challenging for stakeholders to comprehend and contrast different enterprises.

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CSRD's objectives are to:

• Standardise and raise the calibre of declarations and data pertaining to sustainability.
• Provide investors and other stakeholders with information that is clear, concise, and comparable.
• Boost corporate openness and responsibility for sustainability-related initiatives.
• encouraging the shift to a sustainable economic model.

Businesses required to file under the CSRD are required to use the European Single Reporting Standards (ESRS). In short, the ESRS is a standardized electronic reporting format introduced under CSRD. It aims to streamline sustainability reporting by providing a common format for companies to report their non-financial information. This simplifies the process of data collection and analysis while enhancing comparability between companies.

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Scature Can Help!

With Scature, we can help analyse your supply chain, assist in finding regenerative farmers within your value chain and help those farmers in obtaining the required certification in order to receive its nature-based carbon removal credits.

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As a value chain partner, you can purchase these credits to offset your residual emissions from Scope 1, 2, and 3 and help your (carbon) farmer with transition finance to become regenerative or help your regenerative farmer to expand his regenerative system. By investing in regenerative practices within your value chain, you can achieve the following benefits:

• Reduce Future Scope 3 Emissions (ESRS E1):
  ‍Implementing regenerative practices helps lower your future emissions, leading to a more sustainable supply chain as regenerative farmers store carbon instead of emitting them.

• Re-Green Your Value Chain (ESRS E4):
  ‍Through purchasing carbon removal credits you can invest in for example growing regenerative cotton, or bamboo, replacing synthetic fibers by natural fibers, enabling you to produce circular products.

• Improve Water Use (ESRS E3):
  ‍Efficient water management practices will be incorporated, benefiting both agriculture and the surrounding ecosystems.

• Increase Biodiversity (ESRS E4):
  ‍Support diverse ecosystems by fostering habitats for various species.

• Clean the Air (ESRS E2):
  ‍Reduce air pollution through sustainable farming techniques.

• De-Acidify the Ocean (ESRS E3):
  ‍Mitigate ocean acidification by supporting nature based solutions that rde-acidify our oceans.

• Shift Towards a Circular Economy (ESRS E5):
  ‍Transform your value chain into a more sustainable and resource-efficient system. Support the growth of fast growing trees for your future building practices, support the growth of Bamboo as a possible replacement for steel, support the growth of biobased isolation materials or support the growth of your needed  nature based raw materials to replace your polluting product line.

• Enhance Workforce Well-being (ESRS S1):
  ‍Bring healthy food to your workforce and help them to be more vital and healthy. Improve working conditions for people in your value chain by eliminating the usage of pesticides.

• Support Rural Communities (ESRS S3):
  ‍Help rural communities thrive by regenerating their lands, enabling them to create a living.
  By partnering with Scature, you not only offset your current emissions but also invest in a future where your value chain is more resilient, sustainable, and in harmony with nature. Join us in this journey towards a greener and more circular economy.

Summary

To sum up, the implementation of the CSRD marks a noteworthy advancement in the EU’s endeavors to encourage transparent and sustainable corporate practices. Through comprehension of its prerequisites and consequences, corporations can modify their reporting procedures to satisfy the changing needs of interested parties and foster a more sustainable future.

Recall that the goal of sustainability reporting is to foster good change and trust among stakeholders, not merely to ensure compliance. Businesses may demonstrate their dedication to sustainability and make a positive impact on a greener, more sustainable world by participating in the CSRD.

By working with Scature, you can invest in a future where your value chain is more robust, sustainable, and in balance with the environment in addition to offsetting your present emissions. Come along on our quest towards a greener and more biodiverse world!