What are the CSRD Requirements for Carbon Credit Compensation?

What are the CSRD Requirements for Carbon Credit Compensation?

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The European Union's Corporate Sustainability Reporting Directive (CSRD) is bringing a wave of transparency to how companies manage their environmental impact. This directive requires most large companies operating in the EU to report on their sustainability performance, with a specific focus on greenhouse gas (GHG) emissions.

Feeling overwhelmed by the regulations? Here's a breakdown of the CSRD's requirements for reporting company emissions, carbon credits, and net-zero claims, all presented in a clear and actionable way.

Understanding Your Company's Footprint: Emissions Reporting (ESRS E1-6)

The CSRD mandates reporting your company's total emissions using the Greenhouse Gas Protocol (GHG Protocol). This involves breaking down your emissions into three categories:

The CSRD also requires reporting your total GHG intensity. This metric helps compare your emissions to your business output, allowing you to track progress over time.

Haven't measured your emissions yet? No problem! The CSRD allows for limited assurance audits, which means an external auditor will verify your reported emissions data.

Here's the smart move: Start setting up internal processes to record and store emission data now. This ensures your data is accurate and readily available, and allows you to monitor improvements year after year. Feeling stuck?  Atlas Zero maintains a list of organizations that can help you with emission measurement – check it out!

Carbon Credits: Balancing the Scales (ESRS E1-7)

Have you used carbon credits to offset your company's emissions? The CSRD requires separate reporting for both your emissions and any carbon credits purchased.

Disclose your company's emissions in one section of your report, and your purchased carbon credits in another. When describing purchased carbon credits, specify the amount in tonnes of CO2 equivalent (tCO2e) that have been verified according to recognized quality standards.

Confused about recognized quality standards? The CSRD encourages companies to utilize the upcoming ICVCM guidelines, which define trustworthy carbon offset projects.

Here's a helpful tip: Research the quality standards associated with your carbon credit projects. Consider using verified credits from established organizations like Verra or Gold Standard.

Reduction vs. Removal Projects

The CSRD dives further into the types of carbon credits you've purchased. Reduction projects prevent emissions from happening (e.g., improving cookstoves). Removal projects physically remove existing emissions from the atmosphere (e.g., tree planting).

The CSRD asks you to disclose the percentage of reduction vs. removal projects you've invested in.

Understanding Paris Agreement Credits

Some carbon credits align with the Paris Agreement, allowing projects to register emissions reductions as tradable units. Disclose the percentage of these credits you hold, as they require a specific reporting process.

Planning for the future

Do you have future contracts to purchase carbon credits? Disclose the total amount of CO2e you plan to retire under these agreements.

Insetting: Taking Ownership of Your Impact

What is GHG setting?

Insetting involves a company investing in climate projects within its value chain. This can involve reducing emissions (e.g., switching to renewable energy) or removing emissions from the atmosphere (e.g., planting trees).

Reporting Insetting Activities (ESRS E1-7):

If your company engages in insetting activities, the CSRD requires you to report the following details:

If your company doesn't currently do insetting, simply report zero. However, planned future activities need to be reported once measured and quantified.

Net Zero vs. Carbon Neutral Claims

When it comes to reporting on your company's net zero or carbon neutral claims, there are key distinctions to understand. Net zero targets require outlining the methods and frameworks used to achieve a 90-95% reduction in emissions. The remaining 5-10% can then be offset through high-quality carbon credits. For instance, Company X might aim for net zero emissions across scopes 1, 2, and 3 by 2045. To achieve this, they would establish a detailed plan using the IPCC guidelines and other relevant tools.

On the other hand, carbon-neutral claims necessitate disclosing your emissions reduction plan. This emphasizes your company's commitment to actively minimizing its environmental footprint before resorting to carbon credits. The EU recently introduced stricter regulations for carbon-neutral claims, coming into effect in 2026. Make sure your claims adhere to these updated guidelines. Company Y, for example, could declare carbon neutrality, but to support this claim, they would need a comprehensive emissions reduction plan outlining actions they're taking and plan to take in the future.

Transparency for a Sustainable Future

The CSRD empowers businesses to be transparent about their sustainability efforts. By following these guidelines, you can ensure your CSRD report accurately reflects your company's environmental impact and showcases your commitment to a greener future.

We understand every company's path to sustainability is unique, and that's why Atlas Zero exists.  Our mission is to empower businesses by connecting them with the ideal sustainability solution, perfectly tailored to their specific needs. Check out our free guides, or our sustainability solutions database.

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