#193 Understanding ESG Reporting – CSDDD

Did you know that only a third of the emissions reductions required to achieve the country’s 2030 target are currently covered by credible plans?

As a result, we can expect to see more mandatory and voluntary regulations that require carbon emissions reporting to verify your ESG and net zero claims.

In this episode, Mel closes out the ESG Reporting Disclosures series by explaining what Corporate Sustainability Due Diligence Directive (CSDDD) is, it’s key emissions reporting requirements, the verification requirements and who qualifies for CSDDD.

You’ll learn

·      What is CSRD?

·      Key requirements of CSDDD

·      Key emissions reporting requirements

·      the emissions verification requirements for CSRD?

·      Who qualifies for CSDDD?

·      The likely impact of CSDDD

 

Resources

·      Carbonology

·      Carbonology LinkedIn

·       Carbonology Instagram

·       CSDDD

 

In this episode, we talk about:

[00:30] Join the isologyhub – To get access to a suite of ISO related tools, training and templates. Simply head on over to isologyhub.com to either sign-up or book a demo.

[02:10] Episode summary: Mel closes out the series on ESG reporting requirements by diving into CSDDD.

[03:10] What is CSDDD? – The Corporate Sustainability Due Diligence Directive (CSDDD) is a new EU directive that promotes sustainable and responsible corporate behaviour in companies’ operations and across their global value chains.

Purpose: It aims to promote sustainable business practices, protect human rights, and address environmental challenges.

The CSDDD was adopted by the European Commission on the 23rd of February 2022 and approved by the Council of the European Union on the 24th of May 2024. The new rules ensure that companies in scope identify and address adverse human rights and environmental impacts of their actions inside and outside Europe. The CSDDD is expected to start affecting companies from 2027 at the earliest once the directive has been transposed into national legislation.

[05:10] What are the key requirements of CSDDD?:

·      Human rights due diligence: Companies must identify, prevent, and mitigate adverse human rights impacts within their value chains.

·      Environmental due diligence: They must assess and manage risks related to climate change, biodiversity loss, and pollution.

·      Disclosure obligations: Companies must disclose their due diligence processes, findings, and any remedial actions taken.

[06:20] What are the Emissions Reporting Requirements? Under the CSDDDD, companies are required to report on their greenhouse gas (GHG) emissions within a climate transition plan.

This includes considerations for Scope 1, 2 and 3. These were explained in more detail in a previous episode on CSRD, so go check that out if you want to learn more about the individual scope requirements.

What if you fit the requirements of both CSRD and CSDDD, do you have to double report on emissions? In short – No!

The climate transition plan required by the CSDDD will be reported within CSRD reporting, as organisations just need to adhere to the CSDDD’s implementation requirements for the transition plan.

[10:10] What are the Emissions Verification Requirements? More definitive guidance on verification requirements is expected closer to 2027. Companies will more than likely need to verify the emissions data reported through CSDDD, as the directive mandates a climate change transition plan that aligns with the Corporate Sustainability Reporting Directive (CSRD), which does require companies to verify their emissions data.

[09:55] Who qualifies for CSDDD? The Corporate Sustainability Due Diligence Directive (CSDDD) applies to both EU and non-EU companies depending on their workforce size and revenue:

EU and non-EU companies (or the ultimate parent company of a group):

 

·      With more than 1,000 employees and a global net turnover of at least €450 million in the last fiscal year; or

·      Which have franchising or licensing agreements in the EU in return for royalties with more than €22.5 million generated by royalties in the EU and have a net worldwide turnover of over €80 million in the last financial year.

[11:10] What is the possible impact of this new directive? Similar to the other ESG disclosures I’ve covered over the past few weeks in this series on reporting disclosures, the impact of the CSDDD will result in 3 key impacts:-

·      Increased transparency: This directive will provide stakeholders with a clearer picture of companies' sustainability efforts, to combat greenwashing.

·      Enhanced accountability: Companies will be held accountable for their environmental and social performance.

·      Stimulation of sustainable business practices: The directive will encourage companies to adopt more sustainable practices, including regular reporting.

If you would like to learn more about CSDDD or inquire about the related course, please get in touch with Carbonology.

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