CSRD - What it means for the food industry.
All European food companies are now required to expand their sustainability reporting to comply with CSRD (Corporate Sustainability Reporting Directive). In this text, we walk you through the basics: What CSRD is, what you are expected to report and when to take action.
Quick summary of the topics we’ll cover:
What CSRD is:
EU’s new sustainability reporting directive affecting nearly 50 000 European companies.
What kind of environmental reporting requirements CSRD includes:
Companies are expected to report e.g. their transition plan, resources and emission data showing that the company’s operations are aligned with the EU’s climate goals.
To whom it applies:
Businesses that meet at least two of these criteria: +250 employees, €40 million in net turnover, or €20 million on the balance sheet.
What kind of data will be needed:
Particularly primary data in order to calculate and report the current greenhouse gas emissions and emission reductions (All scopes 1-3).
When to take action:
Large enterprises are obliged to comply with CSRD starting in January 2024, and other companies soon after. All companies should ensure they have the tools and processes for reporting the full scope of their emissions as soon as possible. We’re here to help - get in touch.
Note: CSRD includes reporting requirements for both social and environmental sustainability. In this text, we will focus on environmental sustainability reporting with a particular focus on food companies.
Corporate Sustainability Reporting Directive (CSRD) - What it is.
There has been a lot of buzz around the Corporate Sustainability Reporting Directive ever since it was approved by the European Parliament in November 2022.
CSRD is a new EU-wide directive that contains comprehensive reporting requirements for all businesses regarding how they operate and manage social and environmental challenges.
It replaces the EU’s previous Non-Financial Reporting Directive (NFRD) and expands its scope. Approximately 12 000 European businesses have been required to report under NFRD, whereas CSRD will soon affect nearly 50 000 businesses.
The reason for introducing a new and more comprehensive reporting directive is to help all stakeholders evaluate and compare the non-financial performance of European companies and on the other hand, encourage the companies to develop more responsible business practices.
Essentially CSRD aims to bring sustainability reporting to the same level as financial reporting, making the sustainability data accessible, comparable, reliable and subject to third-party audits and certification.
CSRD - Environmental reporting requirements.
The environmental reporting requirements of CSRD will be based on the EU’s Climate Goals, including reaching net zero greenhouse gas emissions by 2050 and limiting global warming to 1.5°C.
The exact reporting requirements are currently being finalized by the European Financial Reporting Advisory Group and are expected to be published in early 2023.
The final standards will include two sector-specific reporting standards for the food industry: “Agriculture & Farming” and “Food & Beverages”.
While waiting for the final European Sustainability Reporting Standards (ESRSs), we have summarized their drafts.
CSRD & ESRSs & Food industry - What to expect to report.
Transition plan and strategy
Companies are expected to show that their strategy and business model are compatible with the transition to a climate-neutral economy. This includes specifying how companies take climate-related risks and opportunities into account and how the risks and opportunities will impact their core business.
Policies, actions and resources
Companies are expected to list policies, actions and resources they have adopted or will need to adopt to manage climate-related risks and opportunities.
Metrics and climate-related targets: All scopes (1-3)
Current greenhouse gas emissions: All scopes (1-3)
Greenhouse gas emission reductions and removals: All scopes (1-3)
The ESRSs will require companies to establish climate-related targets (in line with the EU’s target for net-zero emissions by 2050) and measure and report the full scope of their current greenhouse gas emissions and GHG emission reductions and removals.
For agri-food businesses, this can be challenging.
Food businesses are generally aware of their Scope 1 and 2 emissions and might already have processes for measuring and reporting them, but doing so for Scope 3 emissions up in the value chain is not as straightforward.
Scope 3 emissions include emissions that are produced by the growers and vendors that supply the food companies. These emissions typically represent the largest portion of food companies’ total emissions - up to 70-90%.
So far, most companies have used emission factors and industry averages for calculating and reporting their Scope 3 emissions. For more detailed data per sourced volume, they have requested their growers to manually collect and report data.
However, manual data collection doesn’t scale.
It’s too time-consuming for the growers, and the data quality is often too low for reporting. Then again, solely relying on industry averages or emission factors isn’t going to be enough when reporting under CSRD.
CSRD demands companies set detailed emission reduction targets, measure the full scope of their emissions as precisely as possible, and disclose methodologies, frameworks and tools used for emission calculations.
This calls for a scalable technological solution that helps companies quantify their Scope 3 emissions using supplier-specific primary data.
Improvin’s platform for Scope 3 emission quantification is built for buyers and processors with a large number of growers supplying them. Have a look at how it works, and don’t hesitate to reach out.
Which companies will be required to report under CSRD?
Will CSRD’s requirements apply to all European companies? The short answer is yes.
Most European companies and companies with operations in the EU will have to report under CSRD. Only very small micro-enterprises are excluded.
CSRD will apply to companies with*:
€40 million in net turnover
250 or more employees
€20 million on the balance sheet
* companies that meet at least two of the criteria.
When do companies have to start reporting under CSRD?
CSRD will be introduced in phases, starting with large enterprises in January 2024.
However, complying with the directive will be administratively challenging - especially when it comes to setting reduction targets and measuring Scope 3 emissions.
The time to take action is now. All companies in the food industry should ensure they have solid processes for quantifying the full scope of their greenhouse gas emissions as soon as possible.
We’re here to help. Don’t hesitate to reach out.
-
PS. Do you want to become climate compliant, but the landscape seems challenging to navigate? Subscribe to our newsletter and you’ll be among the first to access to the latest news and insights.
