Guest Blog Post | BIFA is cooperating with Pledge, an integrated carbon measurement and offsetting platform, to help its members better understand and address the environmental issues that affect how they manage international supply chains.
The Corporate Sustainability Reporting Directive (CSRD) has come into force in the EU, potentially impacting over 50,000 businesses inside and outside the bloc. This regulation will affect BIFA Members, so you’ll need to start planning now to ensure you’re prepared for its impact. This post will outline everything you need to know so you can best prepare for upcoming emissions reporting requirements in the EU.
What is the CSRD?
The CSRD is a significant regulatory framework enacted by the European Union Council at the end of 2022 that replaces the existing Non-Financial Reporting Directive (NFRD). The first set of businesses impacted by the CSRD will be those currently covered by the NFRD (large enterprises), with SMEs, as well as non-EU companies, participating at later dates (2026 and 2028, with reporting due in 2027 and 2029).
In force in the EU since the start of 2023, the CSRD is designed to enhance corporate sustainability reporting in general, but this will also have significant knock-on effects for freight forwarders and their customers.
Why should freight forwarders care about CSRD?
One of the primary objectives of the CSRD is to streamline sustainability reporting for all companies that meet the reporting criteria. Many large corporations will need to report their scope 3 emissions — including emissions generated from both upstream and downstream transportation and distribution of goods (scope 3 categories 4 and 9 of the Greenhouse Gas Protocol) — for 2024, from 2025 onwards. The requirement to include scope 3 emissions in CSRD reporting is a new addition when compared to NFRD and other sustainability regulations, requiring further organisation and preparation from qualifying businesses.
In order to meet the requirement to report scope 3 categories 4 and 9, forwarders that rely on the movement of goods will need their shippers and distributors to report the emissions generated from shipping their goods.
As a freight forwarder, you have access to valuable shipment data that’s key to calculating shippers’ freight emissions for scope 3 categories 4 and 9. The CSRD means shippers will be dependent on you to calculate these emissions that their customers are required to report.
As the responsibility for reporting scope 3 categories 4 and 9 emissions moves down the supply chain, freight forwarders will hold the responsibility for ensuring that shippers and their customers are supplied with accurate, accredited and timely emissions reports. From now, you can expect to see a significant rise in sustainability reporting being included in RFPs from shippers that operate in or serve customers that have a presence in the EU.
Outlined below is everything you need to know about CSRD so you can prepare for the impending requests from shippers and other LSPs.
Who needs to report under CSRD?
The CSRD aims to establish common, consistent and standardised reporting practices for environmental, social and governance (ESG) factors within the EU, much like existing financial accounting and reporting standards. Companies that meet the following criteria will need to start reporting under the CSRD:
- Have over 250 employees
- Generate annual revenues exceeding €40 million
- Possess total assets surpassing €20 million
- Publicly-listed entities with more than 10 employees or generating more than €20 million in revenue
- International or non-EU entities that generate annual revenues surpassing €150 million within the EU and have at least one subsidiary or branch in the EU meeting specific thresholds
- Companies meeting these criteria will need to submit an annual report addressing how sustainability influences their business operations and their environmental and social impact — including their scope 3 emissions
CSRD report preparation and submission:
Large companies are required to submit their first CSRD report in early 2025, covering their environmental performance during the fiscal year 2024.
SMEs will begin reporting on 2026 emissions in 2027, following the streamlined SME guidelines outlined by the CSRD.
Non-European companies that operate and generate more than €150m in revenue within the EU will need to start reporting on 2028 emissions in 2029.
What are the requirements for companies to meet CSRD?
While it’s not directly relevant to you as a freight forwarder, it’s important to be aware of the CSRD reporting requirements for businesses so you can understand why they’re making requests for emissions reports.
Here’s a short breakdown of what information businesses are required to disclose under the CSRD:
- The selection of ESG themes and risks
- Sustainability targets and progress
- Strategies for transitioning to a sustainable economy
- Identification of sustainability risks
- Evaluation of strategy resilience
- Disclosure of fossil fuel exposure
- Environmental protection policies
- Social responsibility initiatives
- Human rights respect
- Anti-corruption practices
- Corporate governance
- Stakeholder interests
- Companies are also required to prepare their financial and management statements in an electronic format and digitally tag their sustainability information according to a specified categorisation system.
Third-Party assurance
Companies that need to comply with CSRD will need to seek “limited” assurance for the sustainability information they disclose. This involves engaging an independent and trusted third-party — such as an independent sustainability reporting company or auditor — to review the data.
When should freight forwarders start to prepare for emissions reporting under CSRD?
For Members that deal directly with shippers that serve large corporate entities based in the EU, the first round of required reports will need to be submitted in 2025, reporting on the emissions from 2024. For freight forwarders, this means that you will need to record and track the necessary shipment data from 2024 and have a reporting method in place by the beginning of 2025 if you are to meet the requirements of the shippers you work with.
To stay ahead, you should start preparing for calculating and reporting scope 3 categories in 2023. Many companies are already looking for forwarders that provide sustainability services, and emissions measurement is likely to become an RFP requirement for shippers and a real differentiator for freight forwarders in the very near future.
There’s an opportunity to gain a significant competitive advantage by offering more than the bare minimum when it comes to sustainability requirements. By offering highly accurate and accredited emissions measurement and reporting, as well as ways for customers to reduce their carbon footprint through carbon reduction and removal methods, you can differentiate your business and turn regulatory changes, like CSRD, into opportunities for success.
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Source: Pledge
PLEASE NOTE: All information contained in this article was correct at time of publication and obtained directly from Pledge. Please ensure information is cross-checked against current legislations before taking any action.
