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Understanding the Corporate Sustainability Reporting Directive (CSRD) is critical for businesses as it heralds a new era of accountability in environmental and sustainability reporting.
Carbon accounting software provider Position Green recently took a closer look at CSRD and carbon accounting challenges.
The directive calls for significantly greater transparency in how companies manage and report environmental, social and governance (ESG)-related impacts, risks and opportunities.
Specifically, it introduced strict requirements on emissions disclosure, encouraging around 50,000 companies to provide more detailed information about their greenhouse gas (GHG) emissions and set ambitious reduction targets. This is the goal. The move highlights the growing global focus on environmental issues, and calls for organizations around the world to step up efforts to understand and minimize their greenhouse gas emissions.
Carbon accounting is a structured approach to measuring, managing, and reporting an organization’s GHG emissions. Quantifying emissions in terms of CO2 provides a standardized method to assess the environmental impact of different GHGs over a period of time. This method allows companies to understand the scope of their carbon footprint and facilitates the development of strategies aimed at reducing emissions and promoting sustainability. The Greenhouse Gas Protocol classifies emissions into Scope 1, 2 and 3 and provides a clear framework for identifying sources within a company’s operations and across its value chain.
The CSRD sets out specific requirements for carbon accounting, requiring comprehensive emissions disclosure and setting reduction targets across all three ranges. Adopt the European Sustainability Reporting Standard (ESRS), which specifies the information and indicators that companies must report to achieve compliance. This includes obligations to disclose total Scope 1, 2 and 3 emissions in tonnes of CO2e and to identify significant Scope 3 categories based on a variety of criteria. These standards aim not only to increase transparency, but also to encourage companies to prepare for and effectively manage future reporting requirements, particularly regarding scope 3 emissions. Scope 3 emissions often make up the majority of a company’s total emissions and are the most difficult to quantify and mitigate.
Addressing Scope 3 emissions requires a nuanced understanding of the indirect impacts on a company’s value chain. Best practices to address this challenge include thoroughly understanding supply chain impacts, improving data quality over time, and professionalizing data collection and storage. These strategies emphasize the importance of starting with a clear understanding of where significant emissions occur and gradually increasing data accuracy and granularity. By collaborating with suppliers and leveraging advanced data management systems, companies can streamline reporting processes, ensure regulatory compliance, and ultimately contribute to a more sustainable future.
Position Green’s carbon accounting software provides a solution for companies seeking to align their greenhouse gas reporting with CSRD and other key standards. By making it easy to measure, report and reduce CO2 emissions across the spectrum, companies can base their climate change strategies on trusted data. Position Green simplifies the complex process of carbon accounting, providing a path for companies to meet their sustainability goals and comply with evolving regulations.
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