By Business & Finance 
Corporate Sustainability Reporting Directive (CSRD) is going to place an increased focus on sustainability efforts
By Janice Daly, Partner and Sustainability Lead, Grant Thornton
Janice Daly, Partner and Sustainability Lead, Grant Thornton
The Corporate Sustainability Reporting Directive (CSRD) is going to place an increased focus on sustainability efforts and no company will be out of its spotlight.
While the CSRD has specific criteria for which companies fall under its remit, which technically limits its reach, features like the Scope 3 requirements will indirectly bring many others under its scope and have knock-on effects for those firms.
Scope 3 covers indirect greenhouse gas emissions due to a company’s operations generated by sources not controlled by that organisation. So, in essence, the supply chain of any company that falls under the remit of CSRD will also effectively be captured.
Given that CSRD disclosures will incentivise companies to boost their sustainability efforts, those organisations in turn will put more focus on their partners. Clearly this will play out with procurement functions placing a preference on companies with lower carbon footprints.
As a result, a wide variety of firms that do not fall under the CSRD remit will still find themselves having to provide detailed information to customers and they will naturally have to double down on their sustainability efforts in order to retain and win new business.
A trickle-down effect will follow, as even if a company does not directly supply to a firm under the remit of CSRD, they may be a vendor to a supplier, who then comes to them to ascertain certain information as part of their reporting to their customer.
Any organisation that has not, by now, realised what this increased focus on sustainability will mean for their firm is on the back foot, as CSRD has already come into effect for 12,000 of the EU’s largest publicly listed companies since the start of this year, with its reporting obligations extending to a much larger cohort of large enterprises and a subset of SMEs over the next couple of years.
What this means is that, under the CSRD, many companies will have to understand the obligations of firms they sell to, in a bid to ensure that they can track and provide data which they may be required to provide to those firms.
Information supplied to companies that fall under the remit of CSRD has to be as detailed and accurate as possible. Dependent on the nature of the products or services sold to these companies, individual suppliers may be required to conduct environmental footprint measurements of their product(s).
Given the far-reaching implications of CSRD, it is imperative for companies to look at how they capture the details of their environmental footprint. Regardless of whether they currently supply a firm under the remit of the Corporate Sustainability Reporting Directive, given the number of firms that will ultimately be required to report under the directive and how that may influence procurement functions, many companies’ long-term commercial success will be tied to how sustainable their businesses are and their ability to demonstrate that.
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