Navigating CSRD and Carbon Removal

The Corporate Sustainability Reporting Directive (CSRD) has brought significant changes to the European corporate landscape since its implementation on January 5, 2023. This directive heightens mandatory repatriating on the double materiality of climate change and climate related initiatives–including carbon dioxide removals.

By introducing both the concept of double materiality and mandatory climate reporting, the CSRD's disclosure requirements pave the way for effective sustainability communication.

What is the CSRD?

This directive aims to enhance transparency and accountability by imposing stricter Environmental, Social, and Governance (ESG) reporting requirements on large European companies with annual turnovers exceeding €150 million. With a direct impact on 50,000 companies, the CSRD's influence will have knock-on effects through their value chains, emphasising the importance of transparency.

The CSRD is the Corporate Sustainability Reporting Directive
Illustration of Coastal Blue Carbon

What is double materiality?

Double materiality builds on the corporate finance concept of materiality, that gauges the relevance of information or events for decision-making.

A double materiality assessment recognises the material significance of environmental and social impacts alongside financial considerations.

Viewing climate change through the lens of CSRD compels companies to act for several reasons:

Companies impact climate change through an environmental means, including their CO2 emissions and activities to mitigate climate change

Policies and targets that prepare for a societal net zero future, including a carbon tax or other incentivising measures–as suggested by the CSRD–are an important mechanism to driving change.

Climate change presents a financial and social risk, including material loss and repetitional risk, and these disclosures provide a platform to show that you are being proactive.

What does the CSRD have to do with carbon dioxide removal?

Carbon removals and storage are part of the climate metrics and targets that must be reported within the framework, alongside any financial investment in removals & storage, net zero targets, or neutrality claims.

The heightened focus on CDR also means that close attention must be paid to the type, storage, and transportation of greenhouse gasses. This also includes managing non-permanence risks, including monitoring for leakage reversal events–a potentially difficult undertaking for companies that are new actors in the carbon market.

Companies pursuing net-zero goals or Science-Based Targets must invest in carbon removal to address their emissions. Consequently, it's crucial for all such companies to report their investments in the CSRD framework, making it critical.

An Opportunity to Future-Proof Your Business

Beyond setting regulatory standards for disclosures, the CSRD framework enhances transparency and presents an opportunity to stay ahead of regulatory requirements. Becoming more future-proof in the eyes of regulators and stakeholders is essential in this sustainability-driven era. Highlighting your climate strategy and carbon removal efforts not only boosts your brand reputation but also positions you attractively as an employer and strengthens relationships with suppliers and clients.

Three Key Benefits of the CSRD

Getting started on double materiality analyses and CSRD may seem challenging. However, this process can also kick-start necessary planning, cross-collaboration, and change-making within an organisation.

To fully capitalise on the benefits of the CSRD's transparency era, it's more than just publishing a report.

  1. Asks companies to continually align their goals and actions with that of the Paris Agreement.
  2. Heightens quality and accountability in climate action–especially offsetting as it accounts for removals, but not avoidance.
  3. Transparency and clarity are two key values in CSRD. These translate into effective sustainability communication to stakeholders and boosts reputation.

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The CSRD is a transformative force driving transparency and accountability in the European corporate landscape. It mandates stringent ESG reporting, with a focus on climate-related metrics and targets. Embracing the CSRD is not only a regulatory obligation but also an opportunity to future-proof your business, enhance your reputation, and contribute to a sustainable future.

Join us and learn more about how you can employ a sound carbon removal strategy–that takes into account the double materiality assessments of CSRD–to minimise risk and make a real climate impact.