Nov 7, 2024
Regulations for global carbon neutrality: the CSRD reporting rules
Learn how the new CSRD regulations reshape sustainability reporting for 50,000+ companies. Discover how EcoTree can help your business meet these critical standards.
The European Union’s Corporate Sustainability Reporting Directive (CSRD), effective as of January 2024, is reshaping sustainability reporting for over 50,000 companies across Europe. As part of the European Green Deal aimed at achieving carbon neutrality by 2050, the CSRD is setting new milestones that push companies to enhance transparency and take concrete actions against climate change. This regulation requires companies to disclose their environmental, social, and governance (ESG) impacts through more detailed reporting standards, creating new corporate responsibility and accountability benchmarks.
In this article, we’ll summarise what the CSRD means for businesses, outline the key actions required, and explore how EcoTree can support companies in meeting these standards.
CSRD Regulations: What are the new implementations in 2024?
NFRD became CSRD
Previously, under the Non-Financial Reporting Directive (NFRD), companies with over 500 employees were required to submit non-financial reports on their environmental and social impacts. The CSRD now expands these requirements to companies with more than 250 employees and annual sales exceeding €40 million or a balance sheet of at least €20 million. This change extends coverage from 10,000 companies to 50,000, including EU-based companies and foreign companies operating within the EU. The directive aims to create consistency in European sustainability reporting, mandating more extensive data collection and reporting better to reflect companies’ contributions to environmental and social outcomes.
Summary of the key CSRD requirements
- Who is affected: Companies with 250+ employees or that meet specified revenue or asset thresholds.
- Timeline:
- 2024: CSRD applies to all companies previously covered under NFRD (for 2025 reports).
- 2025: Other large companies must collect data to report in 2026.
- 2026: Listed SMEs and certain other entities collect data for 2027 reporting.
- Focus on Double Materiality: Companies must report both their environmental impact and the environment’s impact on their business, highlighting how climate risks are incorporated into their operational strategies.
- Audit requirement: Reports must be audited by an independent third party, ensuring credibility and accuracy.
Required reporting standards under the CSRD
The CSRD mandates specific ESG criteria in three primary areas:
- Environment: Companies must report on climate adaptation, circular economy participation, biodiversity preservation, sustainable resource management, and pollution reduction.
- Social: Disclosures should address equal opportunities, working conditions, and respect for human and fundamental rights.
- Governance: Companies must outline governance practices, including stakeholder relations, anti-corruption policies, and strategies for integrating sustainability into decision-making processes.
Additionally, companies will upload ESG data to a centralised online platform for easier access by stakeholders, investors, and supervisory bodies.
Presenting a Carbon Report: Scopes 1, 2, and 3 emissions
The CSRD introduces a new “transition plan,” compelling companies to account for all direct and significant indirect emissions (Scopes 1, 2, and 3). This plan must outline objectives, actions, and resources to reduce carbon emissions and meet climate targets.
- Scope 1: Direct emissions from owned or controlled sources.
- Scope 2: Indirect emissions from purchased electricity, heating, and cooling.
- Scope 3: All other indirect emissions, such as those from the supply chain.
From January 2023, companies subject to the Declaration of Extra-Financial Performance (DPEF) must integrate all three scopes. Failure to comply may result in fines. However, this regulation encourages proactive planning to reduce greenhouse gas emissions rather than imposing coercive penalties.
Calculate your carbon footprint
European green taxonomy: What is it, and to whom does it apply?
The European Green Taxonomy, part of Europe’s regulatory strategy for sustainable finance, helps investors identify environmentally sustainable activities. This classification system categorises business activities based on their environmental impact, allowing stakeholders to assess sustainability efforts more transparently.
Key Criteria: The taxonomy evaluates an activity’s sustainability against six environmental objectives:
- Climate change mitigation
- Climate change adaptation
- Sustainable use of water and marine resources
- Transition to a circular economy
- Pollution prevention and control
- Biodiversity and ecosystem protection
For an activity to be classified as sustainable, it must contribute to at least one of these six objectives without harming others. The taxonomy also includes transitional and enabling activities, helping companies transition toward more sustainable practices in industries lacking “fully sustainable” alternatives. Starting from 2024, the CSRD requires approximately 50,000 companies to report the proportion of revenue, investment, and expenses related to these sustainable activities.
Quick Fact: Businesses classified as public-interest entities or large corporations with over 500 employees must report sustainable activities under this taxonomy.
Why these new regulations are good news
The CSRD and European Green Taxonomy represent pivotal changes in the journey toward a sustainable economy. By mandating transparency in ESG disclosures, these regulations encourage businesses to take active roles in preserving biodiversity, reducing pollution, and combating climate change. Many companies view this as an opportunity to align business models with long-term sustainability goals, enhancing resilience in the face of environmental and social challenges.
The new requirements ensure a uniform standard across Europe and empower consumers and investors to make informed decisions based on environmental impact. In doing so, they foster a culture of accountability, prompting organisations to adopt practices that support both planet and people.
EcoTree’s solutions for meeting CSRD requirements
Specialising in nature-based solutions, EcoTree partners with companies to meet CSRD compliance and ESG standards by supporting carbon offsets and biodiversity initiatives. Our services empower companies to achieve measurable, transparent environmental impacts that contribute directly to CSRD reporting requirements.
EcoTree’s solutions include:
- Carbon sink projects: By creating carbon sinks through sustainable forest management across France and Europe, EcoTree helps companies meet emissions reduction targets.
- Biodiversity initiatives: EcoTree’s projects preserve vulnerable ecosystems, from establishing pollination initiatives to protecting wet meadows, mangroves, and riparian zones.
- ESG reporting support: We work with companies to define key performance indicators (KPIs) to include in CSRD, DPEF, or ESG reports, simplifying the reporting process while ensuring that sustainability efforts are clearly quantified.
Working with EcoTree means contributing to ecosystem preservation, enhancing your company's resilience, and building a reputation that attracts customers and employees.
Take action today! Learn more about EcoTree’s services and how we can support your company’s journey to compliance and sustainability.
