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The DPP and the CSRD

The Corporate Sustainable Reporting Directive (CSRD) comes into effect in 2024. Who will have to report? And how can the Digital Product Passport substantiate reporting? We discussed these questions and much more in an hour-long webinar. Scroll down to find the full recording, or read about the ways the DPP can help the CSRD become an opportunity rather than a burden!

Global warming: the big one.

It all starts with a worldwide challenge: changing the way we do things. We humans have been using resources and need ever more to help us realise sustainable ecosystems. This has led to scarcity and emissions resulting in global warming. To counter these development, there have already been worldwide initiatives like the Sustainable Development Goals and the Paris Climate Agreement, that map out a road towards improvement.

The CSRD: part of Europe’s Green Deal.

The worldwide initiatives to accelerate the transition to more sustainable activities, have been translated into numerous continental projects, like the European Green Deal. Among other legislative measures, the CSRD has to contribute to a more constructive approach towards sustainability.

European legislation and initiatives related to CSRD: in short.

Sustainable Finance Action Plan (SFAP):

A strategy aimed at integrating environmental, social, and governance (ESG) considerations into financial decision-making to promote sustainable and responsible investment practices across the EU financial sector.

Non-Financial Reporting Directive (NFRD):

A regulatory framework (part of the SFAP) that mandates certain large companies to disclose non-financial information, including environmental and social aspects, in their annual reports to enhance transparency and accountability regarding their impact on society and the environment. This is to be replaced by the CSRD, to place sustainability in a broader perspective.

Fit for 55:

This package is a set of legislative proposals by the European Union designed to align the bloc’s climate and energy policies with the target of reducing greenhouse gas emissions by at least 55% by 2030 (compared to 1990), encompassing a range of measures across sectors such as energy, transportation, and industry to advance the EU’s commitment to combat climate change and achieve greater environmental sustainability.

EU Emission Trading System (ETS):

A cap-and-trade system where companies are allocated emission allowances, if they surpass their cap (possibly supplemented with purchases on the ETS market, companies can be fined.

EU Taxonomy:

A classification system to define and categorize economic activities based on their environmental sustainability, providing a common language for investors, businesses, and policymakers to identify environmentally sustainable activities and investments.

Revised Renewable Energy Directive:

A legislative framework that sets ambitious targets and guidelines for the promotion and use of renewable energy sources, aiming to increase the share of renewable energy in the EU’s overall energy mix.

Corporate Social Due Diligence Directive (CSDDD):

A directive requiring large companies to perform continuous research and report on sustainable and social topics in relation to their activities.

Ecodesign for Sustainable Products Regulation (ESPR):

A framework to set ecodesign requirements for specific product groups to significantly improve their circularity, energy performance and other environmental sustainability aspects.

CSRD and double materiality.

In the CSRD, companies will have to report in line with the so-called ‘double materiality’. What does this mean? Simply put, it’s distinguishing between activities of the company that have an effect on sustainability (and the planet), and aspects of sustainability (its consequences) that have an effect on the company.

Activities of the company that have an effect on sustainability (and the planet):

  • Generating waste (or preventing it)
  • Better use of raw materials, saving them by applying recycling and refurbishment schemes
  • Contribution to local, regional, national, and/or European objectives

Aspects of sustainability that have an effect on the company:

  • Legislation, like the ESPR – will we still be able to produce our goods the way we’re used to?
  • Material scarcity and global warming. What will be the effects on the availability of our resources?
  • Customer demand. Will our customers demand more sustainable steps from us?

The Digital Product Passport: essential input for reporting.

Cirmar’s C_passport® is a live document in which companies record their products. In essence, they do so using the material composition and weights of products, as well as the end of use solution.

To support companies in their transition towards ‘as circular as possible’, C_passport® can be filled with basic information, or competed with extensive information. There is room for material composition, product composition, defined use period, encodings, attachments and more. The passport automatically calculates impact as well. If you want to create insights from more than one passport, C_dashboard® can help you combine and compare material composition and impact.

Putting the CSRD into practice: 3 approaches.

There is more than one approach to substantiate CSRD-reporting. For some companies, emissions are the main focus. The DPP can be used to create insights into these emissions, and identify areas where emissions can be avoided. These data provide proof to support your claims as a company. A second approach would be to focus on materials. Phasing out as much material that is not fit for reuse or recycling, combined with the introduction of better end-of-use solutions for the materials you use. The DPP can help you visualise material use and connect your sustainable steps to the derived emissions you manage to avoid.

There is a third approach to using the DPP for CSRD-reporting, which we at Cirmar would consider going ‘full-flesh circular’. It combines the two previously described methods and is based on the idea that you can push lots of buttons in a circular system, and that any improvement you make can be expressed in a circular score. Whether you introduce reverse logistics to your value chain, create DPP’s, or use recycled content instead of virgin materials: it all helps, and is worth including in your reporting and general communication!

Whether you want to focus on emissions, materials, or go for a full-flesh circular economy strategy: the passport provides input data for your CSRD reporting. Mainly for the environmental reporting categories, but indirectly for the social aspects as well. In each case, the passport helps determine a benchmark and map out a path towards the best possible situation.

This webinar is part of a series on the Digital Product Passport. Every other month, Cirmar hosts a webinar at lunchtime to share information and real-life examples of circular transitions.

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