Raw: [
Approximately 3,000 U.S. companies must comply with new EU rules, and many are not prepared. […]]
Guest Post: Unprepared For the CSRD? Here’s What to Know – ESG Today
ESG Investing, sustainable finance & business sustainability news
ESG investing news, analysis, research and information
Top Stories ESG News
Companies
Government
Investors
Regulators
Sustainable Finance
ESG Solutions ESG Tools, Services
Companies Companies
Investors Investors
ESG Disclosure ESG Reporting
Analysis
Regulators
Reports, Studies
Newsfeed
Whitepapers
Events
About About us
Our Team
Advertise With Us
ESG Reporting/ ESG Tools, Services/ Guest Posts
Guest Post: Unprepared For the CSRD? Here’s What to Know
ESG Today Guest Post
April 9, 2024
Approximately 3,000 U.S. companies must comply with new EU rules, and many are not prepared. Here’s what they should know.
By Harry Etra, Managing Director, North America ESG at Morrow Sodali
Many U.S. companies with substantial business in Europe are not prepared for new sustainability disclosure regulations. We are at an inflection point for companies to understand their exposure to upcoming regulations and take concrete action.
The EU Corporate Sustainability Reporting Directive (CSRD) takes effect next year and should be top of mind. About 50,000 companies globally will be affected, compared to just 11,000 affected by the directive’s predecessor, the Non-Financial Reporting Directive (NFRD). There will be phasing in of some requirements, and longer timelines for smaller companies. Still, while large multinational firms with dedicated sustainability departments are likely better positioned for compliance, smaller firms in scope of the CSRD should not delay.
Below are three important aspects of the CSRD for companies to know.
Value Chain Emissions in the Spotlight
Many U.S. companies have been disclosing only scope 1 and 2 emissions, or none at all. That will no longer suffice for many firms with business in Europe. The CSRD mandates reporting of scope 3 greenhouse gas (GHG) emissions, also known as value chain emissions. For many businesses, scope 3 represents more than 70 percent of their total carbon footprint. Companies cannot always control these emissions, such as how their employees commute or products are used downstream.
The disclosure requirements are challenging, but achievable. Companies will need to compile data from various parts of their operations and supply chain to comply with the new rules. Data advisory support can help ensure bullet-proof data, while carbon accounting platforms can serve as the single source of truth for companies’ reporting. Accurate and comprehensive GHG inventories not only serve as effective tools for compliance and disclosure, but also unveil opportunities for operational cost reductions and overall efficiency.
Unlocking Priorities: How Double Materiality Enhances Due Diligence
European regulators have prioritized double materiality to hold companies accountable for their impacts outside the balance sheet. Such impacts can be material, the rule argues, and thus should be disclosed. U.S. companies affected by the CSRD must complete a double materiality assessment, which considers not only what is material to the company, but also how the company impacts the environment and society.
Think of conducting a double materiality assessment as hitting the reset button on short- and long-term priorities to address key risks and opportunities. The mandate offers an opportunity for companies to weigh the significance of various sustainability issues to their business. From climate change to supply chain risks to shifting demographics, different issues may impact financial performance, long-term sustainability, or reputation to varying extents.
Keep in mind that double materiality assessments will be subject to audit and verification, so careful documentation of all processes and preparation for third-party assurance is imperative.
Enhanced Oversight and Data Management
The Sarbanes-Oxley Act, a congressional response to corporate abuses, upended corporate governance and financial practices in 2002. The Act’s financial data disclosure requirements were difficult and expensive for companies to implement, but ultimately led to greater efficiency and transparency for investors. Now, sustainability reporting is undergoing a similar transformation. The CSRD is a new frontier for sustainability regulation that raises the stakes for sustainability reporting.
ESG reporting – in particular CSRD-aligned disclosure – inherently requires data and information from many different departments. Companies cannot create robust scope 1, 2, and 3 emissions inventories without understanding where data sits, whether within finance, operations, or HR. As such, clear oversight structures and processes around data collection will be crucial. Companies must also prepare for eventual assurance requirements and should consider identifying and implementing new systems and controls for ESG-related data to ensure auditability and reliability.
For U.S. companies that want to stay competitive in Europe, the transformation of their ESG reporting begins now. Conducting scope 3 emissions inventories and double materiality assessments can be time- and labor-intensive. However, insights gained from these preparations can be used to strengthen risk management practices, better inform capital allocation and budgeting decisions, and build stronger business cases for implementing and investing in sustainability initiatives. U.S. companies in scope of the CSRD should take this opportunity to consider the value creation potential for their stakeholders beyond compliance.
About the author:
Harry Etra is Managing Director, North America ESG at Morrow Sodali. Etra’s experience is in advising public and private companies on their sustainability and environmental, social and governance (ESG) strategies.
ESG Today Guest Post
Related Posts
ESG Reporting /
Watershed Launches New CSRD Sustainability Reporting Solution
ESG Tools, Services /
EY Launches Sustainable Finance Hub to Help Financials Meet New ESG Reporting, Regulatory Requirements
Guest Posts /
Guest Post – Adapting to CSRD: 5 Essential Considerations for European Businesses
‹ Watershed Launches New CSRD Sustainability Reporting Solution
ESG Today Newsletter – Subscribe
Subscribe to the ESG Today NewsletterJoin our mailing list for the latest breaking ESG investment news!
LevelC-LevelSVP / EVPDirector / VPManager / SupervisorMid or Entry LevelFreelance / ContractStudent / InternRetiredOther
FunctionAccounting & FinanceBusiness Development & SalesCustomer SupportFacilitiesHR & TalentInvestingLegalMarketing & CommunicationsOperationsR & DProcurement & ContractingSupply Chain & DistributionSustainabilityStrategyTechnologyOther
SUBSCRIBE!
You have Successfully Subscribed!
Sustainable Finance
EY Launches Sustainable Finance Hub to Help Financials Meet New ESG Reporting, Regulatory Requirements
JPMorgan, Citi, RBC Reach Deals with NYC to Disclose New Climate Finance Metric
MUFG Triples 2030 Sustainable Finance Target to $660 Billion on Strong Demand
Constellation Energy Issues First Nuclear-Focused Green Bond in U.S.
Government
SEC Pauses Climate Disclosure Rules Amidst Legal Challenges
Biden Administration Announces $20 Billion of Awards to Finance Clean Energy Projects in Low-Income Communities
Shell Appeals Court Ruling Ordering it to Slash Emissions by 2030
Biden Administration Allocates $4 Billion Tax Credits to Drive Clean Energy Supply Chain
Categories
Select Category
Business Wire
ESG News
Analysis
Climate
Companies
Energy Transition
Environment
ESG Reporting
ESG Tools, Services
Executive Moves
Governance
Government
Guest Posts
Investors
M&A
New funds & products
Platforms & Markets
Private Equity & Venture Capital
Professional bodies
Regulators
Reports, Studies
Social
Social & Governance
Sustainable Finance
Welcome
Back to Top
Home
About us
Disclosure, cookies & privacy policy
© ESG Today 2024
Don’t miss the top ESG stories!Join the ESG Today daily newsletter and get all the top ESG stories, like this one.
Subscribe now below!
LevelC-LevelSVP / EVPDirector / VPManager / SupervisorMid or Entry LevelFreelance / ContractStudent / InternRetiredOther
FunctionAccounting & FinanceBusiness Development & SalesCustomer SupportFacilitiesHR & TalentInvestingLegalMarketing & CommunicationsOperationsProcurement & ContractingR & DStrategySupply Chain & DistributionSustainabilityTechnologyOther
SUBSCRIBE!
You have Successfully Subscribed!
Never miss the latest breaking ESG investment news. Get ESG Today’s newsletter today!
Subscribe Now
c
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.OkPrivacy policy