ESG Alphabet Soup
Five Important ESG Acronyms
As many of you know, the world of ESG and its supporting frameworks and guidelines continues to grow exponentially. To find our way through the chaos, we turn to our colleagues at Greenbiz for a small cheat sheet of acronyms and definitions. If you are unfamiliar with Greenbiz, they are a media and events company that has evolved over the years into one of today’s leaders in building a clean economy. They specialize in promoting stories that are at the intersection of business, technology, and sustainability. Their platform links climate change and social change.
Understanding the Alphabet Soup
In their latest article “CSRD, CSDDD, ESRS, and more: A cheat sheet of EU sustainability regulations”, they provide a breakdown of four of the major European initiatives CSRD, CSDD, ESRS, and PPMFLR. In the breakdown, we get a brief description of who must comply, what are the initiative’s mandates, and the current status.
At a high-level, here’s what we know.
The CSRD replaces the Non-Financial Reporting Directive in Europe, and it focuses on double materiality. Double materiality is when we align our key performance indicators (KPIs) with both financial and ESG requirements. There are several brackets of companies that must comply but overall if your company has more than 250 employees and $43 million in revenue, you’ve got to report. This will be applied during a phase-in period from 2024 through 2028.
The Corporate Sustainability Due Diligence Directive (CSDDD) has the objective to build a European framework that guides a responsible and sustainable approach to global supply chains and a sustainable society and economy. Like the CSRD, companies with 250 employees and $43 million in revenue must comply. This includes non-EU companies with $43 million in revenue generated in the EU or with parent companies of at least $161 million in revenue of which $43 million is generated in the EU. This is to be finalized within the year.
The European Sustainability Reporting Standards (ESRS) is the interoperability standard that helps bring together the various ESG reporting standards like ISSB, TFCD, and GRI. It establishes guidelines for the various areas of ESG. Topics like climate change, water, and resource management, as well as biodiversity, human rights, labor practices, and anti-corruption are included. The same requirement of 250 employees or $43 million in revenues applies. Plan on using this standard in the 2024-2026 time frame.
The Greenbiz article states that there are efforts in place to prevent green washing (stating that your product is more environmentally sound than it is) in the form of the European Green Claims Directive and the Prohibiting Products Made with Forced Labor on the Union Market Regulation. Each of these initiatives is being used to change the way businesses conduct their sourcing, manufacturing, and sales in the European Union.
Getting Started
What can you do today? Talk with your customers to determine how these directives, regulations, and initiatives impact the products you source, manufacture, and sell in the European Union. Knowing which ESG requirements are important to your customers will help your company stay a step ahead of the competition. Staying ahead of the competition means documenting customer requirements, building policies and procedures to comply with those requirements, updating your supplier agreements to reflect the new sourcing terms, and forming a solid program to ensure due diligence.
These changes are big across all industries. Minimizing the chaos is about mapping out the changes and building programs that support global compliance requirements. This won't be done over night. Always remember, we cannot improve what we do not measure.
Don't know where to start? Talk with our ESG experts!
Links
Greenbiz – “CSRD, CSDDD, ESRS and more: A cheat sheet of EU Sustainability Regulations”
Global Reporting Initiative - GRI - About Us
Compliance and ESG Newspaper
Stay Informed About Product Compliance
