CSRD and ESRS – these acronyms have certainly become familiar over the past year. Many companies are facing new challenges, and the workload related to sustainability reporting might seem overwhelming. What benefits could increased reporting bring?

Sustainability reporting is becoming mandatory for many new companies, and preparations have already begun. Although it involves a lot of work and may sometimes seem challenging or like a necessary evil, reporting requirements can also bring positive outcomes. In this blog, we will explore the benefits that increased sustainability reporting can bring.

First, let’s start by reviewing the basics: the CSRD (Corporate Sustainability Reporting Directive) is a directive for corporate sustainability reporting that replaces the previous NFRD (Non-Financial Reporting Directive), which applied to large companies. The CSRD requires an increasing number of companies to report on their sustainability information annually. We have previously written about this topic and explained what you need to know about the CSRD and the changes, especially from the perspective of emissions accounting.

The ESRS standards are developed by EFRAG and serve as the basis for CSRD reporting. There are a total of 12 standards, with ESRS 1 and ESRS 2 covering general topics. ESRS 2 is mandatory for all companies within the scope of the CSRD. There are five standards related to the environment, with the ESRS E1 standard on climate change being a material aspect of sustainability reporting for many companies based on double materiality. If a company concludes that climate change is not a material aspect for them and that the ESRS E1 standard does not apply, this must be justified separately. The ESRS E1 standard also sets requirements for emissions accounting and climate targets, which must be compliant with the Paris Agreement.

What are the benefits of sustainability reporting?

A lot of mandatory work that requires time and money – this a thought that may come to mind when starting to prepare a sustainability report. But what benefits could CSRD bring?

1. Sustainability knowledge and awareness increase. More and more companies are starting to review their value chains from both environmental and social responsibility perspectives. Potential issues are identified, solutions are sought, and thus the company’s sustainability improves. Timely improvements also provide security for the entire business by reducing potential accidents or financial risks.
2. Increased knowledge also brings more data to emissions accounting. As more companies review their value chains, the availability of data for emissions accounting improves. With emissions data needed from subcontractors, suppliers, and customers, the quantity and quality of information also increase significantly. As a result, both the results of emissions accounting and their reliability and comparability improve.
3. The market position of a proactive company is strengthened. Whether you are a company that will come under the scope of the CSRD later or one that is not subject to it, you can prepare in advance for the requirements of sustainability reporting and improve your company's position. In the future, sustainability information will be increasingly required, and if it is already prepared before the final deadline, it can become a significant competitive advantage. There is a lot of work involved in the CSRD from the company's perspective, so the earlier data collection begins, the easier the project will be.
4. Innovations and new business opportunities increase. As reporting requirements tighten and the need for emissions data grows, this presents a good opportunity to promote low-emission innovations and develop operations towards more sustainable solutions. New innovations and solutions can play a significant role and provide a competitive advantage. Setting various climate and emission reduction targets also requires new solutions to achieve real reductions.

All in all, a lot of work lies ahead, and climate-related reporting requirements are part of a larger framework. It is advisable to prepare for emissions accounting in advance to ensure that the necessary data can be obtained and emissions calculated reliably. At the same time, attention can be given to the largest emission sources, and ways to reduce them can be considered.

OpenCO2net provides tools and services for carbon footprint calculations in accordance with standards. Our carbon footprint calculators are suitable for emissions accounting compliant with both GHG Protocol standards and the ESRS E1 standard. In addition to emissions accounting, we offer consulting services, such as for Science Based Targets setting and gap analysis for the ESRS E1 standard.