The clock is ticking on CSRD – is your IT department ready?

The EU has strong ambitions to reach its goals of no net emissions of greenhouse gasses by 2050, and to reach these, accountability needs to increase. New legislation in the form of CSRD will affect not only organisations that are headquartered in the EU but impact any business with operations in the European Union or UK tech supplier/vendor relationships with organisations which are expected to be CSRD compliant. The potential impact for UK and global technology companies is huge.

What is CSRD?

CSRD, or the Corporate Sustainability Reporting Directive, is legislation which requires companies to report on the impact their corporate actions and activities have on the environment. This important legislation is still being defined, but it is on schedule to be fully implemented in 2024.

What we know for certain is that companies are going to need to provide significantly more detail when reporting on their companies’ environmental impact, and companies which fail to provide accurate and detailed records will be subject to audits and fines.

The EU announced its adoption of this initiative as it aligns with the commitment it made under the European Green Deal. This deal recognises that climate change and environmental degradation are negatively impacting our world and seeks to hold businesses to a higher standard. Part of overcoming these challenges will include turning the EU into a more resource-efficient and environmentally conscious economy, which includes a commitment to no net emissions of greenhouse gasses by 2050, and a reduction of these emissions by 50 per cent by 2030 – which will bring emissions back to the levels they were at in 1990.

Holding businesses to account

CSRD recognises that businesses in various sectors make a significant contribution to environmental degradation and waste. And it’s time those companies are held to account. In the past, much of the conversation around sustainability has been focused on consumers, but to create real change and improvement, the EU believes the largest contributors need to be accountable.

On top of compelling companies to reduce their emissions, the CSRD will help investors, consumers, and stakeholders evaluate aspects of how companies are run, outside of financial performance. This will enable consumers and investors to advocate for green practices with their wallets, further encouraging companies to prioritise a sustainable approach to their business practices.

What is the aim of CSRD?

The overall aim of CSRD is to have larger companies integrate aggressive sustainability strategies to prove that they are fully green by 2030. The issue is that, for some companies, this is the first time they are seriously considering and discussing sustainable practices.

There are many questions the leaders of these companies are only just beginning to ask such as:

• Where does our carbon footprint start?
• Does it start with fossil fuels?
• What is the journey across the supply chain like for our products?

These questions will help inform the pursuit of sustainability.

How to get ready for CSRD

#1 – Collect as much information as possible

Companies should begin their efforts by collecting as much data and information as possible on their environmental impact, from every level of their infrastructure. This will help them understand where they really are in terms of sustainability and the steps they need to take to move forward.

#2 – Set realistic net-zero targets

In addition to data collection, companies should set realistic targets for achieving 100-per-cent net zero. A robust data collection plan can include the implementation of cloud-based software into the back-end of company structures to analyse how their technology is affecting waste, so that they can prove by 2030 that, at minimum, they are fully green. Gathering end-user metrics across your entire tech landscape (hardware and software measurements) is essential for organisations to measure and report on their carbon footprint. 

For example, how many hours per day is your laptop running? Even if it is in sleep mode (and therefore consuming less energy), it is still using energy. It might seem like a minor thing to measure the energy from a sleeping device, but every little bit adds up, and when you think about major enterprises, we’re talking about energy waste across tens of thousands of employees. This level of detail is incredibly important for companies that want to achieve true sustainability, limit energy consumption, and positively contribute to the planet—which is the big-picture aim of CSRD.

Does CSRD apply to tech firms in the UK?

The driving principles of CSRD certainly apply to tech firms in the UK, and CSRD regulations have implications for any tech firm that serves businesses within the EU.

The short answer is yes, CSRD applies to tech firms in the UK, but there are certain qualifications.

All listed companies in the EU (included listed SMEs, even ones outside of the EU if they generate a net turnover) must comply with CSRD. Additionally, if large undertakings (including parent undertakings) exceed two of the three following criteria during two consecutive financial years, they must comply:

• €20 million balance sheet total
• €40 million net turnover
• Average number of 250 employees

The biggest takeaway for tech firms in the UK should be that these regulations will surely set the precedent for sustainability across the world, and they will likely be expanded upon. Tech waste is a large-scale issue, but even smaller-scale organisations could be asked for data in 2030. Research indicates that the UK is on track to become one of the biggest global contributors to tech waste, a startling finding that makes CSRD initiatives all the more pressing for businesses. This same research states that the UK produced a total of 1.6 million tonnes of e-waste in 2019 and was set to surpass Norway as a global leader in tech waste by 2023.

This is only the beginning. We can expect more elaborate and detailed regulations, increased requirements for reporting, and initiatives for tracking and monitoring sustainability metrics to increase exponentially. The faster your company can adopt and adapt, the better.

Beyond the detailed insights that will allow organisations to make easy adjustments to their energy use — such as telling employees to shut off their devices at the end of the day – tech companies need to think about the lifecycle of each device and how a lack of insight into that lifecycle can lead to hardware waste.

Comprehensive monitoring solutions that thoroughly analyse every area of a business’s hardware and software to accurately assess how devices are performing will help companies upgrade and replace equipment based on need rather than having a standard schedule for computer upgrades. This will ensure that computers, phones, monitors, and more are being used as long as they are functioning efficiently, rather than being needlessly tossed for new equipment.

Leveraging metrics per end-user device will help you correctly assess your carbon footprint through correct usage and accurate lifecycle planning.

Monitoring solutions push green IT initiatives forward through the identification of opportunities to reduce energy consumption, reduce waste, optimise hardware purchases based on performance through lifecycle management, differentiate your footprint across personas and device types, and educate your entire business on the importance of these sustainable technological practices. 

There are numerous benefits companies will gain from implementing these sustainability practices now, and not waiting until more requirements or regulations are applied. First and foremost, once the initial lift of implementation is addressed, it sets the business up for success in managing sustainability initiatives for the years to come. As organisations grow, they will be set up to track, measure, and understand the overall consumption and sustainability of the entire company because IT monitoring is already built into everyday business processes.

When does CSRD come into force?

CSRD enforcement is imminent. Companies will need to submit reporting on the first day of 2024, but there will be a staggered rollout for regulations. This is a swift timeline, and the most critical problem that companies are facing is a lack of awareness about CSRD as a whole. This unawareness is costly. A lack of compliance will result in fines, and the financial penalty will be significant. In order for companies to be in a position to provide reports by 2024, they must start now. Metrics must be measured now so that reports shared in 2024 are robust, accurate, and clear.

What happens if I don’t comply with CSRD?

The most straightforward cost, of course, are the fines companies will face if they fail to comply, but the cost of not complying goes beyond fines.

In the B2B space, if you, as a vendor, cannot provide assurance of compliance, you will lose out on clients. Your customers will vet potential vendors through the lens of CSRD, and they will choose to work with companies that demonstrate a high sustainability rating. As their vendor, your company’s sustainability ratings will reflect on their overall sustainability ratings, meaning they, too, could be subject to fines if your rating is poor. The best method for retaining your clients is protecting their reputation and wallet by making sure you have your ducks in a row.

B2C is not exempt from this. Consumers are becoming more aware of the impact of their purchases on the environment. They will choose not to engage with brands that neglect sustainability initiatives. They hold power, and they understand that their purchasing power can determine how companies invest in climate change initiatives.

Even further, compliance with CSRD and an overall prioritisation of sustainability affects brand image. Companies run the risk of losing out on employees, clients, and public respect if they do not take sustainability seriously. The time to act is now. The method for success? Cloud-based software that can provide highly detailed information on energy usage, device performance, and more to help inform your sustainability strategy and make sure that you’re able to prove the results of your efforts. 

Ayelet Elstein is VP EMEA at Lakeside Software

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