Last November, the EU adopted the Corporate Sustainability Reporting Directive (CSRD), with fines and penalties for those failing to disclose their indirect (Scope 3) emissions. The phase-in period for CSRD begins on the 1st January 2024 and the UK has matched this timeline.
The directive increases the range of companies mandated to report, with almost 50,000 affected, and sets stricter requirements on the range of issues and quality of data which companies must disclose.
The UK now requires large companies to report on their climate-related risks in line with the global Taskforce on Climate-related Financial Disclosures (TCFD), while the EU’s CSRD means that companies will be required to publish detailed information on sustainability performance.
Given the increasing appetite of investors and customers for engaging with sustainability leaders, stronger ESG metrics can also become a powerful competitive advantage.
In a poll of UK-based businesses to assess their readiness for Scope 3 reporting under CSRD, 96% had heard of the directive, 71% had measured their carbon footprint and while 40% were already to comply, 25% said they will not be able to meet the deadline.
There are warnings that many companies are underestimating what it will take to turn intent into action, with 40% overwhelmed during the last reporting period and 35% admitting that embedding ESG in the annual reporting process would be a squeeze with current lead timelines and staff levels.
One-third of the companies polled are delegating responsibility to the chief sustainability officer, another third to the chief executive and almost all said they are either hiring a specialist or enlisting an external auditor, while just under half are investing in digital solutions for emissions measurement and analysis.
Business leaders are uneasy about their new responsibility for reporting not only their own emissions but those upstream and downstream, and critically, businesses need to not only report, but also take steps to make reductions and improvements.
The penalties are substantial; UK firms are set to be charged up to £40 per tonne of CO2 emissions misreported under the new regulations and consumers can be unforgiving which puts their reputations at risk.
With Scope 3, businesses have to think about their role as a supplier to customers and their role as a customer to suppliers and be able to accurately measure and report on emissions to understand where they are starting.
Our MVT Eco module is already prepared for Scope 3 reporting of emissions that are not produced by your company and are not the result of activities from assets owned or controlled by you.
To request a demo or learn more, please EMAIL Ian Powell.