Navigating CSRD

How the CSR Directive indirectly hits suppliers too

The EU’s new proposed Corporate Sustainability Reporting Directive (CSRD), is here to take sustainability reporting up a notch. It’s the successor of the already existing NFRD and will increase the scope of companies who have to report on their sustainability - from 11.000 to more than 50.000 in Europe.

Companies will comply with the new CSRD if they meet at least two out of these three requirements: 

-- €40 million in net turnover;
-- €20 million on the balance sheet;
-- 250 or more employees

Meaning; the CSRD also covers:
-- Many large manufacturing companies;
And other companies with extensive value chains (e.g. assembly or food).

The crucial role of value chains in calculating environmental footprints
Having a (large) value chain, means you’re not the only one contributing to your company’s total environmental footprint. Up to 80% of a company’s environmental footprint can come from its value chain. 

a. Upstream in your value chain, environmental impact can come from your suppliers (e.g. the impact of producing the products/ingredients/materials they deliver).

b. Downstream in your value chain, the impact could come from consumers (e.g. the electricity required for using your products). 

The proposed CSRD highly emphasizes this crucial role of value chains in measuring a company’s carbon emissions* and its complete company environmental footprint** (all environmental impacts). They want this footprint information to be as robust, transparent, and accurate as possible. And not rely completely on average environmental impact outputs. 

This means you will need as much primary environmental data as you can find in your value chain. The biggest accessible source? Suppliers.

The need for product footprints from suppliers
For many large companies, supply chains form a large part of their environmental footprint. Some suppliers contribute the most to your footprint. They form a company’s so-called impact hotspots. These high-impact suppliers are crucial for both the company’s footprint measurements and increasing its opportunities for sustainable improvements. 

With the CSRD’s proposed reporting requirements, primary environmental data from these impact-heavy suppliers becomes a must-have. 

The result: companies have to request their tier 1 suppliers to also perform environmental footprint measurements of their own product(s). This is called a ‘product footprint’, and can be fed back into the main CSRD-compliant company’s own measurements.

*Carbon footprints will most likely have to be reported in the CSRD- and follow the Greenhouse Gas Protocol. A carbon footprint is one of the outcomes of a company footprint- which can be calculated by performing a Life Cycle Assessment (LCA). 

** Complete company environmental footprints are most likely requested by the CSRD as the proposed directive follows the EU Taxonomy’s requirements. They cover all the environmental impacts a company has (15+)- including its carbon emissions. It’s calculated by performing a Life Cycle Assessment (LCA). 

Source: Ecochain

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