CSRD: Mandatory CO2 accounting for companies

The “E” in ESG was already an important topic before the Corona pandemic. But with the tangible impacts of climate change and the ambition to reduce greenhouse gas emissions at international level, companies are under increasing pressure to make their contribution to climate neutrality. 

Sustainability and environmental protection have become an essential and, in many cases, an obligatory topic for business enterprises. According to the new EU Corporate Sustainability Reporting Directive (CSRD), companies will have to disclose which climate-relevant emissions they are responsible for. This applies not only capital market-oriented companies, but also to German SMEs. In Germany alone, the circle of users will expand from around 500 companies to almost 15,000. 

With the CSRD, the EU opens a new chapter in sustainability reporting and in the pursuit of climate goals. One of the most important indicators for recording the environmental impact of a company is the greenhouse gas balance. Entrepreneurs are faced with the challenge of obtaining an overview of the largest emitters in their own company and along the upstream and downstream value chain. Based on this information, the CO2 footprint is calculated. 

 

For this purpose, all greenhouse gas emissions generated by the company or its activities are recorded. According to the Greenhouse Gas Protocol Standard – which is considered the “gold standard” worldwide – all emissions are divided into so-called scopes: 

Once companies have calculated their greenhouse gas emissions, it is important to identify the major “hotspots.” The biggest challenge in accounting is data availability and quality. Scope 3 emissions in particular are difficult to capture because they are generated by third parties over which the reporting company has little or less control. These include, for example, employee commutes or the mining of raw materials. 

However, only a detailed understanding of their own emissions enables companies to improve their carbon footprint. According to the Greenhouse Gas Protocol, companies must show the development of their carbon footprint over time. As a base year, they should choose the earliest point in time for which consistent data is available. Whether for CSRD, EU taxonomy, or ESG ratings, CO2 metrics are essential.

According to this, companies benefit from already addressing their CO2 emissions now. Because in the future, companies will have to be measured on the basis of their CO2 balance sheet. 

Compared to other sustainability goals, particularly demanding goals and requirements will have to be implemented in climate protection in order to achieve the targets of the Paris Climate Agreement. This can only be achieved with a social act of strength by companies and politicians. 

Do you know your Scope 1, 2 and 3 emissions? We can help you determine them and optimize your sustaina­bility reporting.