CSRD and CCF - Why companies should use a holistic solution

Why ESRS E1 is mostly material for production companies

The ESRS E1 (European Sustainability Reporting Standards) being Climate Change, plays a crucial role for production companies, given their significant environmental impact and sustainability challenges. The various subtopics of E1, such as energy (E1-5), are highly important to production companies due to their dependency on energy for operations and the use of energy-intense materials and transport. Consequently, E1 is almost always material for these companies. ESRS E1 distinguishes itself from other standards as companies must provide detailed explanations on why and how climate change is not material. To avoid greenwashing claims, companies should thoroughly document and use adequate methodologies while disclosing information.

Reasons for Relevance:

1. Environmental Impact

Production companies often have substantial environmental footprints, including high energy consumption, emissions, waste generation, and resource usage. Mandatory reporting ensures these impacts are measured, managed, and mitigated.

2. Regulatory Compliance

To meet the European Union’s climate and sustainability goals, stringent regulations are necessary. ESRS E1 aligns with the EU’s Green Deal objectives and the Paris Agreement, ensuring production companies contribute to broader environmental targets.

3. Transparency and Accountability

Mandatory reporting enhances transparency, allowing stakeholders, including investors, consumers, and regulators, to assess and compare the environmental performance of companies. This accountability drives improvements in environmental practices.

4. Risk Management

Identifying and disclosing environmental risks, both transitional as well as physical, helps companies mitigate potential regulatory, financial, and reputational risks associated with their operations and supply chains.

Synergies Between the Corporate Carbon Footprint (CCF) and Corporate Sustainability Reporting Directive (CSRD)

1. Integrated Reporting

Aligning CCF and CSRD allows companies to streamline their reporting processes, reducing redundancy and improving efficiency. This integration simplifies the reporting landscape, making it easier for companies to meet their sustainability reporting obligations.

2. Comprehensive Data Management

Unified data collection for both CCF and CSRD can lead to more robust and comprehensive data management systems. This ensures accuracy and reduces the administrative burden, allowing companies to focus on achieving their sustainability goals rather than being bogged down by data collection and management.

3. Cost Efficiency

Combining efforts for consultancy, auditing, compliance, and verifying sustainability metrics under both CCF and CSRD frameworks can result in significant cost savings. Companies can leverage the same resources and expertise to fulfill multiple reporting requirements, reducing overall expenditure.

4. Enhanced Strategic Planning

By identifying overlapping areas between CCF and CSRD, companies can implement unified strategies that address both carbon reduction and broader sustainability goals. This holistic approach ensures that efforts in one area complement and reinforce initiatives in another, leading to more effective sustainability outcomes.

5. Improved Stakeholder Communication

A single, cohesive sustainability report simplifies communication with stakeholders, enhancing clarity and trust. This unified approach can improve a company’s reputation and stakeholder relationships by providing a clear and comprehensive view of the company’s sustainability efforts and achievements.

6. Regulatory Alignment

Aligning CCF and CSRD efforts ensures compliance with multiple regulatory requirements simultaneously, reducing the risk of non-compliance and associated penalties. This alignment not only meets regulatory demands but also positions companies as leaders in sustainability, demonstrating their commitment to environmental stewardship and regulatory compliance.

Conclusion

ESRS E1 ensures environmental impacts are managed and mitigated, aligns with EU sustainability goals, enhances transparency, and mitigates risks. For production companies, the relevance of ESRS E1 is clear: most of the subtopics fall under their business operation, therefore making E1 material. Therefore, aligning Corporate Carbon Footprint (CCF) and Corporate Sustainability Reporting Directive (CSRD) efforts provides enormous synergies and savings. Integrated reporting, comprehensive data management, cost efficiency, enhanced strategic planning, improved stakeholder communication, and regulatory alignment all contribute to more effective and efficient sustainability reporting and performance.