The adoption of CSRD aligns with the European Green Deal, a commitment to transform the EU into a more resource-efficient and environmentally conscious economy. The aim is to reach net zero emissions of greenhouse gasses by 2050, with a reduction of 50% by 2030.
From 1 January 2024, larger companies in the EU will need to demonstrate the status of emissions in their supply chains. However, from 1 January 2025, the legislation will also apply to smaller companies. The requirement to report emissions applies to a company’s own emissions as well as those in the chain, including those of its partners.
This means compliance with CSRD will be crucial for UK registered companies to continue operating in the EU and maintain their supplier relationships. Companies failing to provide accurate and detailed records will be subject to audits and fines. For companies that remain in breach, the penalty could rise to as much as 5% of annual turnover.
To prepare for CSRD, companies will need collect as much information as possible about their environmental impact and set realistic net-zero targets. They will also need to implement monitoring solutions that push green initiatives forward.
A few things are necessary in order to report on emissions. First, data, and second, an application that can properly store and process the emissions data derived from the supply chain and convert them into clear reports. One of the tools for this is a Transport Management System (TMS) because it already has the basic functionality to process transport orders and estimate the emissions associated with a shipment.
However, some TMSs may have limitations in managing and planning for modes other than road transport, which may hinder operators from effectively combining data from road, sea, air, and rail transport. Air and sea freight for example, require more data, including information on ports, ships, and legs (connection points). And while a fair number of larger companies now work with a TMS, there are still some companies that do not use one or use an outdated system with limited capabilities.
The most critical problem facing businesses however is a lack of awareness about the requirements of CSRD as a whole. Research commissioned by software solution provider Descartes suggests that among all the European companies surveyed, less than half (46%) have an Environmental, Social and Governance (ESG) strategy while only 21% have actually drawn up an action plan and allocated the money to implement it.
This could be costly as the elaboration and detail of regulations, and the heightened requirements for reporting, are expected to grow exponentially in the coming years. Logistics companies failing to prepare and adapt could suffer both financial and reputational damage.
For more information about the CSRD, click here
For more information on how a TMS helps companies track and manage their transportation-related emissions, click here