MDTI

CSRD & EU Climate Road Map

CSRD is the new Corporate Sustainability Report, voted in April 2022 to be in force in 2024. The legal horizon (approx year 2035) allows a glimpse into the future of compliance and how companies will have to adapt their strategy in a hardened market, in order to avoid the brutal consequences of climate changes upon the world economy and modern way of life.  

The “Corporate Sustainability Report  Directive” (CSRD)  concerns 50 000 businesses within the EU.  Businesses categorized as SMBs (+250 employees or various turnover thresholds) will have to submit a new report allowing to measure their ESG strategy as well as their carbon emissions. Companies of 10 or less employees are not immediately concerned, except listed companies and companies with a long-term contract with a bigger company subject to the corporate sustainability report. However, the EU commission has declared that bigger companies should not attempt to transfer that  responsibilities upon smaller economic agents who are normally out of the Scope of the CSR directive. 

The CSRD replaces and complements the “non-financial report” directive (NFRD) and introduces more precise guidelines concerning the “Dynamic Double Materiality”  and the presentation of carbon emission objectives under Scope 1, 2 and 3.

The CSRD together with forthcoming directives and regulations are the tools used by Europe to achieve its ESG objectives in the short and long run. The CSRD is fed by the NFRD (Non Financial Report Directive) and SFDR (Sustainable Finance Disclosure Regulation),  and will be reinforced by the CBAM regulation which paves the road for GhG certificates on imports. 

The CSR Directive should gain “full direct effect”  by Q2 2024.

The slide below shows the deadlines for different types of businesses, as well as interactions of various directives and regulations.

IMPORTANT: the “reality check” :
Please note that EU climate objectives  still aim for a reduction of 50% of carbon emissions by 2030, whereas the downloadable below states “35%”. This is not a mistake but simply a very optimistic number that takes into consideration recent changes and acknowledged impossibilities to reach the objective of -50%  emissions of GHG (Greenhouse Gaz) or CO2e (carbon equivalent), and as a consequence, an impossibility to enforce it.  

35% is a personal opinion, and already a very high and optimistic number in the current context where GHG are steadily rising. It is plausible that the EU will simply not be able to reach any reduction due to international events, changes of member state policies, unwillingness to comply, or simply difficulties to take measures reducing carbon emissions (for example, the supply chain does not know how it can optimize GHG). 

Clearly, a reduction of 50% will not happen by 2030 or even 2035 (CBAM), at least not without the occurrence of exceptional events on a global, planet-wide, scale (discovery of new energy sources, natural disasters, events such as the COVID crisis, wars…).  

This does not mean that the CSR Directive will not be in force or that it should not be taken seriously. It will be in force after 2024, and unwillingness to comply may have serious consequences (such as, but not limited to, not being able to close a contract with a partner who is already “CSR compliant”, or having to face a variety of stakeholders’ actions). 

Other information and numbers in the PDF below reflect the CSRD original text and intents of the EU commission.  

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