The EU’s Corporate Social Responsibility Directive (CSRD) now mandates larger companies to report annually on their environmental, social and governance performance, an additional responsibility exporters need to consider. The CSRD applies not just to companies directly but also to their supply chains, extending the scope of the directive.
While many people have focused on the need to address environmental sustainability concerns, the directive also covers HR issues such as gender diversity and worker rights.
The CSRD employs what is known as a “double materiality” approach. This means that companies must report on both impact materiality – how the company’s operations affect the environment, climate and society – and financial materiality – how those same issues present risks and opportunities for the company’s financial performance.
The directive significantly expands the scope and depth of sustainability reporting across the EU and includes requirements for mandatory limited assurance. In-scope companies must report using the European Sustainability Reporting Standards, which cover environmental, social, and governance (ESG) topics, notes Sarah Thompson, head of ESG at law firm Aurthur Cox.
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“Like any new law or regulation, compliance with the CSRD does involve costs; companies must invest in systems, personnel and assurance processes to meet the requirements. Having said that, there are synergies with existing regulations – in Ireland and overseas – and compliance will get easier with time as internal practices mature,” says Thompson.
Recent changes contained in the European Commission’s Omnibus Package mean that many companies that were to have fallen within the scope of the CSRD won’t any longer, as mandatory reporting of CSRD will only apply to companies with more than 1,000 employees and either €50 million annual turnover or more than €25 million in assets. The directive will still have impacts on entities within their value chains, however.
“This includes suppliers, service providers and partners who may not themselves be in scope but are nonetheless required to provide sustainability data to help the reporting entity meet its obligations in light of the double materiality assessment,” says Thompson. “This dual lens means that companies must scrutinise value-chain relationships. In-scope companies will increasingly request ESG data from their suppliers and partners.”
One company that is acutely aware of the CSRD is Co Louth-based Suretank. The 30-year-old firm, which originally focused on manufacturing products for the oil and gas industry, has pivoted in recent years and now designs, engineers and produces certified products for a wide range of sectors including pharmaceutical, renewable energy and data centres. Focusing on sustainability policies and practices to align with the requirements of these sectors positioned the company well in terms of CSRD obligations.
Suretank employs more than 300 people at five global locations, ships to 26 countries and has 125 customers. It generates around 70 per cent of its energy from renewables which it plans to increase to 100 per cent next year. Some 87 per cent of its waste is currently recycled, while it has also introduced biodigesters at its staff canteen, turning waste into plant compost, to the delight of its green-fingered employees.
Compliance with Environmental Protection Agency (EPA) licensing requirements and the various ISO quality and environmental standards has helped the company on its path to meeting the requirements of the CSRD. The company also says it has no gender pay gap, a strong employee assistance programme and a commitment to significant off-site training for its employees.
“We have put a lot of policies and procedures in place here over the years and a lot of what we were doing was able to feed into the CSRD,” says Suretank’s managing director, Martin Winters. “People can be scared about these directives but if you align it with your overall vision and procedures, it can strengthen your business and make it more sustainable in the longer term.”
Since the CSRD came into effect, Winters says he has noticed a change in how the company is being inspected and audited as part of the supply chain. “We supply equipment for contractors to end clients, so we are a number of steps away from those end clients and we report our information up the supply chain. On larger projects end clients will often come to us as part of an inspection delegation. This now includes experts from the broader ESG side, not just from the technical side.”
Derry Group, a provider of logistics solutions to the export sector, among others, is another company committed to sustainability and is the first third-party logistics firm in Ireland to receive B Corp accreditation.
The company, which operates throughout Ireland, serving around 500 customers in the ambient-, chilled- and frozen-food sectors says it has the most sustainable cold store on the island.
It is equipped with 1,100 solar panels, which reults in a reduction of 107 tonnes of carbon every year and also powers its electric fleet. Diesel engines, meanwhile, have been replaced by hydrotreated vegetable oil- powered ones. The HVO is made from 100 per cent sustainably sourced renewable materials and results in up to 94 per cent less greenhouse gas.
Other sustainability initiatives at the group include a wild-flower garden which offers benefits for the environment, wildlife and personal wellbeing, and supports biodiversity by attracting pollinators such as bees, butterflies and beneficial insects.
