As the Corporate Sustainability Reporting Directive (CSRD) begins to affect companies that do business in the European Union, our team is developing a series of resources to help apparel and consumer goods brands prepare for this rigorous regulation. To support our customers in navigating compliance, this article tackles reporting requirements related to climate change impacts, as covered in section ESRS E1 of CSRD.
Who is required to disclose on climate change?
We’ll begin with the most important point: climate change reporting will be mandatory for nearly every business. While businesses only need to submit disclosures for topics that they deem to be material, the threshold for not disclosing on ‘Climate Change’ is higher than any other topical area. Simply put, climate change reporting should be viewed as the first and most important topical standard for which your business prepares a disclosure.
Your team should start proactively developing a plan for gathering supply chain data on climate impacts in a consistent, comparable, and verifiable way today. Data from 2024 will be mandatory for the first set of companies that need to disclose under CSRD — so there is real urgency to act on the requirements for ESRS E1.
What does the climate change disclosure cover?
Within CSRD, climate change disclosures include how companies manage the risks, opportunities, and actions associated with global warming — including policies and plans for climate change mitigation; energy consumption and greenhouse gas (GHG) emissions across Scopes 1, 2, and 3; and anticipated financial effects stemming from climate change. As discussed in prior blogs, brands will need to determine metrics and set targets for many of these topics.
For many businesses, this will require tremendous effort. Companies may already collect some of the required information — but most likely not across all of the topics, and not fully at the level of comprehensiveness needed.
How can Worldly help?
The good news is that Worldly offers solutions to facilitate disclosure under ESRS E1. First, our tools offer support in the measurement and management of Scope 3 (value chain) emissions, which often constitute a substantial portion of consumer goods brands’ total emissions and are a disclosure requirement for climate change.
For instance, the Higg Materials Sustainability Index (MSI) and Higg Product Module (PM) provide industry-average and supplier-submitted, third-party reviewed data that is modeled using robust and publicly available life cycle analysis (LCA) modeling methodologies. The outputs of these tools include material and product-specific greenhouse gas (GHG) emissions profiles that companies can use as inputs for their Scope 3 (value chain) emissions. The Higg MSI and Higg PM also break down impacts by process and stage, which can illuminate a business’s largest and most actionable GHG emissions hotspots. For apparel companies, Tier 2 is likely a hotspot, as it accounts for approximately 53% of apparel industry GHG emissions.
The Higg Facility Environmental Module (FEM) complements the Higg MSI and Higg PM by providing companies with the total GHG emissions and normalized emissions per unit or kilogram of production for their individual upstream value chain partners. Carbon accounting methodologies that incorporate primary data in this way are broadly considered to be more advanced, trustworthy, and aligned with best practices.
Additionally, Worldly offers data that can be used for the identification and monitoring of various climate risks within the value chain. For example, Higg MSI outputs can be used to quantify the average GHG emissions and use of fossil fuels for materials, broken down into impacts from raw materials and material manufacturing processes, on a per kilogram basis. In addition, the Higg FEM may help businesses identify facilities upstream in their value chains that are vulnerable to physical and transitional climate risks. For example, the Higg FEM could be used to identify high water users in areas projected to become significantly drier over the next 25 years.
It’s time to get started.
For a more in-depth exploration of the technical aspects involved in climate change disclosure under CSRD, we invite you to get in touch with our customer success team. Your representative can help you learn more about CSRD and will share a copy of our technical white paper.
Take the first step toward compliance – contact your customer success manager today.