24 July 2024
Digital Product Passport: The New Era of Transparency and Traceability
- Production
In today’s world, sustainability has become a crucial aspect of business operations. Companies are increasingly recognising the need to address environmental, social, and governance (ESG) factors in their decision-making processes. To ensure transparency and accountability, the European Union (EU) has introduced the Corporate Sustainability Reporting Directive (CSRD). The CSRD aims to improve the quality and consistency of sustainability reporting among companies operating within the EU.
The CSRD represents a milestone in the EU’s commitment to sustainable development. It is designed to provide stakeholders with standardised and comparable information on companies’ sustainability performance. By enhancing the transparency and reliability of sustainability reporting, the CSRD aims to enable investors, consumers, and other stakeholders to make informed decisions based on companies’ ESG practices.
The CSRD builds upon the existing Non-Financial Reporting Directive (NFRD), which was introduced in 2014. While the NFRD focused on large public-interest entities, the CSRD extends the reporting obligations to all large companies listed on EU regulated markets. This expansion reflects the EU’s ambition to create a more sustainable and resilient economy which is also related to the global initiative of Sustainable Development Goals (SDGs).
Key Developments and Updates in the CSRD Realm
As the CSRD has already entered into force on EU level in 2023 and replaced in this regard the previous NFRD, the member states need to transpose the regulation into national law before July 2024. The CSRD aims to harmonise sustainability reporting standards across the EU, making it easier for stakeholders to compare and assess companies’ sustainability performance.
The key of the CSRD is transparency, which will be achieved by specifying clearly defined criteria and KPI´s in order to make data and facts comprehensible and comparable.
The CSRD expands the scope of reporting obligations to cover more companies, including small and medium-sized enterprises (SMEs) that are listed on EU regulated markets. The CSRD also introduces mandatory digital reporting, which will enhance accessibility and facilitate data analysis.
Impact of CSRD on Businesses and Stakeholders
The CSRD will have a profound impact on businesses operating within the EU. Companies will need to adapt their reporting processes and systems to comply with the new requirements. The CSRD will also increase the volume and quality of information available to stakeholders, enabling them to make more informed decisions. Investors will have better visibility into companies’ sustainability performance, allowing them to allocate capital to more sustainable businesses. Consumers will also benefit from increased transparency, as they can make choices that align with their values.
Delving into the Scope and Requirements of CSRD
Who is affected by the CSRD?
The CSRD applies to all large companies listed on EU regulated markets, regardless of their industry. In addition, SMEs that are listed on EU regulated markets will also be subject to the reporting obligations. This expanded scope ensures that sustainability reporting becomes more mainstream and comprehensive across the business landscape. In case you’re not affected by the CSRD at once there might be the request of other stakeholders in which supply chain you‘re a relevant part. You see, anyway it’s good to be aware of your running sustainability activities and the gaps which should be closed.
Detailed Breakdown of the Reporting Requirements under CSRD
Under the CSRD, companies will be required to report on a wide range of sustainability topics, including climate change, biodiversity, social matters, and governance. The reporting obligations will be more detailed and standardised, ensuring consistency and comparability. Companies will need to provide information on their sustainability policies, risks, targets, and performance indicators. They will also be required to disclose how sustainability factors are integrated into their business strategy and decision-making processes. Don’t forget to include your relevant stakeholders in the CSRD process, as this is essential for achieving transparency, accountability, and credibility in sustainability reporting.
Compliance Obligations and Timelines for Implementation
The CSRD already came into force on EU-level on 1st of January 2023. The member states need to transpose the directive into national law until July 2024. Once the CSRD is adopted, companies will have a transition period to adjust their reporting practices and systems. The exact timelines for implementation will be determined by the European Commission. During this transition period, companies will need to familiarise themselves with the new reporting requirements and make the necessary changes to ensure compliance. It is crucial for companies to start preparing early to meet the future obligations of the CSRD.
Exploring the Chances and Opportunities Offered by CSRD
Benefits of Complying with the CSRD Regulations
Compliance with the CSRD regulations offers several benefits for companies. Firstly, it enhances transparency and accountability, building trust among stakeholders. Secondly, it enables companies to identify and manage sustainability risks more effectively, reducing potential liabilities. Thirdly, it improves companies’ reputation and attractiveness to investors and consumers who prioritise sustainability. Lastly, it fosters innovation and drives the transition towards a more sustainable and resilient economy.
Opportunities for Businesses to Enhance Sustainability Practices
The CSRD presents an opportunity for businesses to enhance their sustainability practices. By embracing the reporting requirements, companies can gain a deeper understanding of their sustainability performance and identify areas for improvement. This process can drive internal changes, such as adopting more sustainable practices, investing in renewable energy or implementing social impact initiatives. By aligning their business strategies with the CSRD, companies can position themselves as leaders in sustainability and gain a competitive edge in the market. By setting measurable targets you can also see an essential progress, because the CSRD is not only intended for report replacement.
Competitive Advantages of Embracing CSRD Guidelines
Companies that embrace the CSRD guidelines can benefit from a competitive advantage in the market. By providing comprehensive and reliable sustainability information, they can differentiate themselves from competitors and attract investors who prioritise ESG factors. Consumers are increasingly demanding products and services from companies that demonstrate a commitment to sustainability. By complying with the CSRD, companies can meet these demands and build stronger relationships with their customers.
Leveraging COSH! for CSRD Compliance
How COSH! Supports Fashion Retailers and entrepreneurs in Meeting CSRD Requirements
COSH! understands the challenges faced by fashion retailers and entrepreneurs in complying with the CSRD. As an online platform dedicated to promoting local fashion retailers, who want to drive a positive impact, COSH! provides assistance solutions to help businesses meet reporting obligations. COSH! offers guidance and expertise on “how to start”, helping clients to identify the relevant sustainability topics and indicators to report on by running through a necessary “Double Materiality Analysis”. By leveraging COSH!‘s resources, businesses can streamline their reporting processes and maintain conformity with the CSRD.
Services Offered by COSH!
On the sustainability reporting journey COSH! can support fashion retailers and entrepreneurs by offering different services:
Data Collection: based on the available screening tool COSH! offers the opportunity to gather relevant sustainability data efficiently and to give the necessary advice about missing documentation and information content.
Reporting Training: COSH! provides training sessions and workshops to help companies understand the CSRD requirements and develop the necessary reporting skills. These sessions equip clients with the knowledge to move one more step forward on their journey towards sustainability reporting.
Through COSH!‘s guidance, fashion retailers and entrepreneurs are able to enhance their sustainability practices, improve transparency and gain a competitive advantage in the market.
Conclusion
In conclusion, the CSRD represents a significant step towards enhancing sustainability reporting in the EU. By providing standardised and comparable information, it enables stakeholders to make informed decisions based on companies’ sustainability performance. Businesses can leverage COSH!‘s expertise and resources to navigate the CSRD requirements and enhance their sustainability practices. By embracing the opportunities offered by the CSRD, companies can drive positive change, foster innovation and contribute to a more sustainable future. Don’t see the CSRD just as a “must do”. We all want to transform our economy, change our environment and society in a positive way.
Let´s start!
