Emissions from procured goods and services account for 70% of supply chain emissions, and food systems are responsible for ¼ of global greenhouse gas emissions.
With the EU’s Corporate Sustainability Reporting Directive (CSRD) now in place, businesses have to prioritise transparency and accountability like never before. But what exactly does this policy entail, and how will it reshape the way food businesses operate?
What is the CSRD and who does it apply to? 🇪🇺
The CSRD, introduced in January of 2023, is a far-reaching policy aimed at making corporate sustainability transparent, standardised, and impactful. By replacing the Non-Financial Reporting Directive (NFRD), the CSRD elevates the standards of what sustainability reporting truly means. Unlike its predecessor, the CSRD mandates the inclusion of verifiable, comprehensive data across all environmental, social, and governance (ESG) sectors, ensuring that corporate reporting is no longer a box-ticking exercise but a tool for accountability and action. The new rules mandate for both Impact materiality and Financial materiality; the former requires businesses to consider the impact of their activities on the environment and people, while the latter requires an inward-looking approach which considers the impact of sustainability issues on a company’s finances. The first companies will have to apply the new rules for the first time in the 2024 financial year, for reports published in 2025. Additionally, the CSRD directly supports the EU’s Green Deal objectives, aiming for net-zero emissions by 2050.
The CSRD policy applies to:
1) Large EU companies 🏙️ (with over 250 employees, €40 million in revenue, or €20 million in total assets).
2) Listed SMEs 🏢 (with simplified requirements, but still significant obligations).
3) Non-EU companies 📈generating €150 million or more in the EU market, provided they have at least one subsidiary or branch in the region
Mandatory Supply Chain Due Diligence – the key requirements of the CSRD are:
· Businesses must report on the environmental and social impacts of their entire supply chain, including indirect emissions (Scope 3), requiring extensive mapping and risk analysis. Industries with complex or global supply chains will need significant investment in data collection and collaboration.
· This sustainability data must be verified by independent third parties for credibility purposes and should comply with the European Single Electronic Format (ESEF), using XHTML format and iXBRL tagging.
Industries with longer, and more complex supply chains will naturally face a higher burden due to the increased number of suppliers and country routes. This will require support from skilled personnel. ⤵️
CSRD in focus – The Food Industry 🥘:
CSRD policy will require large-scale buyers of food items, to conduct due diligence throughout their food supply chain. Specifically, food-sector businesses will need to identify various suppliers, the origin of goods, the ingredients contained therein, and country routes. Stakeholders who fall in-scope of this policy are food services companies, food retailers, food wholesalers, brand owners, and hospitality groups.
As CSRD requires a sector-specific approach to reporting, food sector companies will be under increasing pressure to move away from broad ‘spend-based’ estimates. These companies will need to adopt a more granular, accurate method of tracking and measuring the environmental and social impact of food products. As most foods bought and sold contain multiple ingredients, with composite amounts (sometimes known or unknown), it is often difficult to accurately measure environmental impact, or trace the supply chain route. Such an undertaking will require a considerable amount of time, skilled professionals who understand the food sector and data integrity, plus smart software.
Beyond its mandatory and regulatory nature, the CSRD offers significant benefits to its adherents 👍:
Although the adoption of CSRD offers an array of benefits to businesses, it doesn’t come without its challenges. The accuracy of data is paramount to developing a credible transition plan to net-zero. Indeed, the complexity of accurately calculating environmental impact at the most granular level is both complex and resource-intensive. TrackCarbon specialises in the production and dissemination of sustainability data, having developed a digital solution to assist large-scale buyers of food and drink products to track and measure the environmental lifecycle impact of their purchases. Our impact measurement is based on the composition of each product, its country of origin, supply chain route and packaging type. Our software solution focuses on impact beyond atmospheric gases and considers the impact on nature. We do not rely on estimates, and ensure all our data is validated via a peer-review.
Stay ahead of the curve -> Contact TrackCarbon to see how we can support your sustainability data goals and transition plans.
TrackCarbon is a winner of Innovate UK’s Fast Start Award 2022/23 and is now a recommended data provider as part of the Science-Based Targets for Nature (SBTN) Program. https://sciencebasedtargetsnetwork.org/company/expert-advisors/trackcarbon/