The Corporate Sustainability Reporting Directive and the CO2 Performance Ladder

The Corporate Sustainability Reporting Directive (CSRD) sets new rules for what and how companies must report on sustainability. It covers not only CO2 but also circularity, biodiversity and the rights of workers in the value chain, among other topics. The CSRD will apply to all large companies and listed SMEs - some 50,000 companies across the EU.

The CSRD represents a paradigm shift in how companies should report on their activities and their impacts - sustainability becomes central, instead of second to financial reporting. Organisations must not only pay attention to their organisation's sustainability impacts but also to the impact of environmental developments on their business, so-called double materiality. For example, if their activities depend on a certain raw material whose supply may be affected by climate change. Companies will then not only report on the past year, but also on their long-term sustainability goals and the progress they are making towards these goals.

Standard reporting methods per theme are being developed and separate reporting standards will be developed for small and medium-sized companies. The European Commission aims to introduce the reporting standard in October 2022, so that companies can report from 2023, but this is not yet certain.

Understanding, monitoring and communicating about emissions is a core part of the CO2 Performance Ladder. As such, it can help organisations meet or even exceed the climate-related requirements of the CSRD. Furthermore, by using the CO2PL as a GPP tool in procurement processes, governments can stimulate green companies and projects, and organisations concerned with their upstream scope 3 emissions can have a similar effect on their suppliers. This all contributes to the CSRD's goal of redirecting financial flows to the sustainable economy.

So the CSRD sets the reporting requirements, and the Ladder helps to fulfil them.