EU Regulation Requires Thousands of Companies to Map Sustainability

Den Hertog (NVRD); Kerstens (Salacia); Hijink (Stibbe / Radboud University)

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3 minutes

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Knowledge

The European ambition for a circular economy is well known in the waste sector. But did you know that the EU also has the ambition to be completely climate neutral by 2050? This goal is at the heart of the European Green Deal and confirms the EU's commitment to the Paris Climate Agreement. But, how will the EU become the first climate-neutral continent in the world and how can we check whether we are on course in the meantime?

March 15, 2022
Image: 
Nick Fewings (Unsplash)

To achieve this ambitious goal, more clarity is needed about what exactly sustainable activities are, how much funding flows to them, and how companies can contribute to making the EU more sustainable. In order to gain insight into the latter, the EU published a proposal for a Corporate Sustainability Reporting Directive (CSRD) in 2021. The CSRD is a new framework for mandatory sustainability reporting on the basis of which (public) companies must report on, among other things, their impact on people and the planet.

Streamlining sustainability reporting

To date, there is no harmonized reporting system for sustainability as there is for financial reporting. Instead, there is now a multitude of (mostly) voluntary initiatives that are not subject to mandatory monitoring. As a result, current sustainability reports are often inconsistent, difficult to compare and not fully transparent. The CSRD aligns sustainability reporting so that the impacts of business activities can be compared fairly across Europe and aggregated to get a picture of Europe’s progress towards climate neutrality.

Learning from each other

What does this mean for the waste industry? First, the CSRD requires companies to disclose their performance and goals across the full range of sustainability, commonly known as ESG factors: Think not only of climate, but also of biodiversity, circularity, pollution, water use and aspects such as the treatment of employees. Secondly, a number of business activities typical performed by waste companies are classified as sustainable in the EU Taxonomy with some preconditions: for example, the collection of source-separated waste, material recovery and composting and fermentation of bio-waste. This makes it easier to attract financing for these activities. However, it does not mean that every form of collection is equally sustainable. This depends on how the collection is carried out, such as the route, the type of vehicle and the fuel. The CSRD reporting standards will help to gain insight into this so that (waste) companies can also learn from each other. This new reporting obligation is therefore a great opportunity – especially for public waste organizations and municipalities – to achieve a sustainable and circular society and to report unambiguously on this to all stakeholders.

Criteria

The CSRD will apply to companies (BV’s and NV’s in Dutch) that meet two of the three following criteria: at least 250 employees, at least €20 million in balance sheet total and/or at least €40 million in turnover. The larger (public) waste companies therefore meet these criteria. The directive will apply for the 2023 or 2024 financial year. The final decision on the timing has yet to be made in Brussels. The most important advice for now is to get down to business: delve into the regulations, update your sustainability strategy, collect your sustainability data and start a conversation with your accountant. A good start is half the battle.

This article first appeared in Dutch in GRAM Magazine, Issue 02/2022.

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