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EU Carbon Reporting – From ‘Want To’ to ‘Have To’

CSRD EU Corporate Sustainability REporting Directive carbon reporting carbon drawdown environmental law legislation voluntary compulsory

The EU’s under-reported CSRD is provoking different corporate reactions : Ignore, Dodge, Pretend, Exploit & Embrace

The EU’s Corporate Sustainability Reporting Directive is revolutionising corporate carbon reporting, ending the Voluntary Era ushering in the Age of Compulsory.  

Scene: a boardroom

The EU’s landmark legislation on corporate carbon reporting came into force on January 5 2023. In boardrooms around the world, executives are asking: 

‘Aaand…onto the last agenda item, that ‘CSRD’ business. What shall we do?…’

This article explores 5 different types of corporate response to this under-reported, game-changing, new directive.

Ignore: ‘CS what?’

Even after years of negotiation before becoming law, the vast majority of companies doing business in Europe have still not even heard of the CSRD. 

The bigger your business, the more negligent such ignorance is. The CSRD targets major companies first. ‘CSRD’ may be impenetrable EU jargon, but it won’t be long before it’ll trip off executive tongues around the world. 

Businesses have some justification for their ignorance. Mainstream media favours culture wars, migrants, or celebrity beefs over carbon reporting standards, and many industry bodies have been slow to appreciate its radical impact on how we treat carbon reporting. 

But the law is the law. Like it or not – know it or not – the CSRD bandwagon is gaining momentum and heading your way. For a big business, ignorance of the law is neither a good look, nor a legal defence.

This new legislation is designed to improve the transparency, scope and reliability of corporate sustainability reporting. Critically, the CSRD makes what was once voluntary, mandatory.  

Previous legislation, like the equally un-catchy Non-Financial Reporting Directive (NFRD), suggested that companies voluntarily publish annual non-financial reports about the Environmental, Social and Governance (ESG) aspects of their operations. The NFRD only applied to the largest of companies, and only covered their Scope 1 and Scope 2 impacts. It excluded Scope 3 – potentially huge but harder to calculate.

The CSRD ups the ante. It:

  • requires large and medium-sized companies to comply
  • specifies more detailed reporting
  • includes Scope 3
  • demands more rigorous measuring and auditing methodologies

The CSRD doesn’t apply immediately to all businesses, but fires a starting pistol, sets out a roadmap and signposts a clear direction of travel with global implications.

Compulsory, comprehensive, accurate carbon reporting for all companies in no longer a matter of choice – it’s now a matter of time. 

Yet Ignore is still the default status of most companies doing business in the EU.

Dodge: ‘Next item?’

Once they’ve heard of the CSRD, most companies’ first instinct is to Dodge it. 

The bosses of such companies justify their inaction to their shareholders, investors, colleagues, employees (and, presumably, children and grandchildren) with self-exculpatory phrases like ‘being focused on the present’, ‘prioritising growth’ or other code for Business As Usual.

The brain bandwidth of executives favouring the Ignore response is occupied by delivering short-term shareholder value and quarterly profits. They see the CSRD as just more Brussels red tape. They sigh, roll their eyes, and hope it will go away.  

Just because the CSRD is EU law doesn’t mean it only applies to EU-registered companies. It impacts any company that trades with Europe, with a clear timeline: 

  • 2025 – companies of more than 500 employees will have to report the 2024 financial year 
  • 2026 – large non-listed companies will have to report the 2025 financial year 
  • 2027 – SMEs are included in reporting standards, reporting the 2026 financial year 

Big companies that continue to Ignore the law beyond this timeline risk financial penalties (see Exploit below). 

Smaller companies appear to have some justification for an Ignore response. The CSRD looks like it won’t affect them immediately, as it initially targets companies of:

  • More than 250 employees
  • Over €50 million in annual turnover 
  • Over €25 million of total assets

Reading these headline bullet points might evoke a sigh of relief from SME owners who feel they already have plenty on their plate. When you’re struggling to pay monthly bills, 2027 can look like a distant proposition. No need to even Dodge. Ignore is fine.

But Dodge betrays a misunderstanding of the implications of Scope 3, a critical contradiction to which we’ll return later.  

For bigger businesses, Dodge is the natural response once Ignore becomes untenable, even if they know it’s only a temporary measure. 

But other options are available, such as…

Pretend : ‘Give it to the intern

For companies that decide the CSRD requires a more active response than Ignore and Dodge, the next option tends to be Pretend.

Pretending means acknowledging the CSRD exists, and that it applies to them, but putting in minimal effort. Ignore the spirit, just look at the letter of the law. Phone it in. Go through the motions. Do a compliance v. non-compliance risk analysis, calculate the minimum action you can get away with, and hope this will appease Brussels.

If their industry bodies are still asleep at the wheel and not sounding the alarm, Pretend-response companies might rely on the Internet for their due diligence.

They might come across a reliable source like Cool Planet, and note their outline of three key changes the CSRD introduces, in addition to mandatory reporting:

Double materiality

‘Double materiality’ requires companies to report not just on how their operations affect people and the planet, but also, conversely, how sustainability and climate change affect their business. It highlights the need for businesses to place society’s interests, as well as its own, at the heart of their operations. 

For example, if a coffee manufacturer in Germany sources its beans from South America, it will have to report the operations of their bean supplier, including how it impacts people and the planet (i.e. Scope 3), as well as their own operations. 

Remember the contradiction we mentioned about SME involvement? We’ll come back to this soon…


Companies must comply with the European Sustainability Reporting Standards (ESRS) when reporting on their sustainability impacts, which cover Environmental, Social and Governance (ESG) matters. 

ESG has not been around long, but has already caused confusion and controversy, mostly deriving from the use of the same term to describe very different things, but broadly speaking:

  • Environmental matters include the company’s impacts on biodiversity and climate change
  • Social factors could include ensuring human rights and labour discrimination
  • Governance factors could involve anti-corruption measures and diversity inclusion

Third-party assurance

The CSRD requires companies to use an impartial third-party reporting partner.

This is designed to ensure a reliable review of sustainability data, avoid corruption and ensure data is accurate. It closes down the long-standing corporate Dodge strategy when it comes to environmental issues – self-regulation.

All industries have long lobbied for self-regulation, but most have a poor record when it comes to marking their own homework. Volkswagen had copped most of the headlines, fines, and reputational damage, but in truth was just one major car maker caught cooking the books on its environmental emissions over decades. All industries that successfully lobbied for ‘self-regulation’ and other voluntary means have similar scandals. What’s incontrovertible is that greenhouse gas emissions have continued to rise.

Businesses know the power of government regulation better than anyone, which is why they lobby so hard to dilute and kill off ‘green’ legislation. Dodge has worked in the past, but its failure to impact carbon drawdown is the reason why the Voluntary Era must transition to the Age of Compulsory.

The CSRD attempts to stop corporations from sidestepping their environmental responsibilities through legal loopholes, as well as outright corruption. It expands the level of detail companies are required to report. 

Pretender-responders take a calculated gamble when it comes to this new burden of detail.

They game-plan a tick-box ‘solution’ they reckon does the minimum to get Brussels off their backs, while disrupting Business As Usual as little as possible.

Pretenders soon discover that CSRD compliance is well beyond the capacity of any intern. They reluctantly pay commercial third-party carbon auditors to get the job done. They aim is defensive, to sweep this latest bit of red tape concocted by ‘those faceless Brussels bureaucrats’ back under the rug with minimum cost and disruption.

Pretenders who invest their energy in defensive actions like working out the minimum time and money they can legally get away with are missing a trick…

Exploit: ‘Can we spin this?’ 

More imaginative companies might see the CSRD as an opportunity. Rather than Ignore, Dodge or Pretend – might it be possible to find a way to Exploit the CSRD? Get on the front foot. Take positive action.

Exploiters spot an opportunity to take the CSRD’s socially responsible intention, and bend it in a direction that benefits corporate profit. In other words, to greenwash

Like the Pretenders, Exploiters are taking a narrow, short-term judgement. They check the small print of the CSRD’s schedule of fines and punishments, run the numbers and conclude that the cost of non-compliance is unacceptably high, financially and reputationally.

Enthusiastic greenwashers have a particularly acute problem – by honking their fake green credentials, they’ve raised expectations, and need to keep upping the ante to keep ahead of the greenwashing competition.

This is a nuanced judgement call, as the financial consequences of CSRD non-compliance vary between EU states.  

In Germany, companies that fail to report sufficient data could face fines of up to:

  • €10 million
  • 5% of the company’s total annual turnover
  • Twice the profits gained, or losses avoided due to the breach

In France, however, businesses won’t receive fines unless a concerned party requests the disclosure of sustainability data, and they fail to provide it.

Exploiters must also consider the reputational consequences of non-compliance. These may be more costly than a fine, especially for consumer-facing brands that have cultivated a ‘green’ image through such means as carbon offsetting, and paying commercial auditors for ‘carbon neutral’ badges.

Unlike Pretenders, Exploiters seize the opportunity to actively re-frame the CSRD’s mandatory requirement as an honourable green initiative.

This kind of greenwashing carries a risk. Environmental organisation the Earth Island Institute initiated an action against Coca Cola in 2021. The beverage giant claiming green credentials for inconsequential tweaks backfired when it was publicly rebuked for being the largest plastic polluter in the world.

Such attempts to game the system by spinning minimal effort into unmerited credit might fool some of the people some of the time.

But Exploiters condemn themselves to living in fear of exposure, and the CSRD has made their nightmares more likely to come true.

Unlike most previous legislation which left them a lot of leeway to self-regulate under some voluntary regime, the CSRD has teeth.

Embrace: ‘Let’s do this properly’ 

So if the CSRD makes Ignore, Dodge Pretend and Exploit seem so unattractive, what other options might our company boardrooms consider?

There’s the one that’s been available all along, but so neglected they may have forgotten it existed – Embrace.

CSRD Embracers realise this whole sustainability thing isn’t going away. They might as well do it, and do it right. 

To comply with the CSRD, businesses must start collecting data now. The extent of the CSRD’s requirements, and the type of data that needs to be collected, and when it need to be collected by, all make this a considerable challenge.

It’s a challenge Embracers reckon is worth taking on. They’re considered the long-term trend, but have also clocked the contraction in the CSRD this article has been hinting at, and is now spelling out.

CSRD’s big contradiction

The CSRD means large companies must file before small companies. But the ‘double materiality’ rule and Scope 3 requirements need accurate carbon reporting data from their supply chain.

And their supply chain consists of Small and Medium-sized Enterprises that the CSRD doesn’t yet directly require to report their carbon emissions.

Large companies must start reporting at the beginning of 2025, so the heat is on – but which third-party carbon auditors can they rely on to deliver reports accurate enough to satisfy Brussels now, and in the future?

There are plenty of commercial carbon auditors offering their services, but they’re all adapted to the Voluntary Era. SMEs will never be able to afford the fees they charge big businesses, but the OECD reckons SMEs may be responsible for up to 70% of all business emissions.

An Intractable Problem?

Whether motivated by commercial, reputational, HR or moral concerns, how can Embracing companies square this circle?

What carbon accounting standard, or auditing service, can they turn to in order to persuade SMEs in their supply chain that are not yet legally required to accurately report their carbon footprints, to do so?

Even if big businesses’ supply chains depends on their big customer for most of their revenue, big businesses are reluctant to blow any goodwill by compelling them to – for example by making signing up to a third-party auditor a contractual obligation.

And even if they do compel them, who’s going to foot the bill? The SMEs can’t afford the kind of commercial fees asked by commercial carbon auditors, and the cost of subsidizing it would be prohibitive even for the richest and biggest businesses.

Whatever the question, AI tends to be the answer these days, but not for this intractable carbon reporting challenge. As we’re starting to realise, the Large Language (LLM) model that the hot new AI like ChatGPT is based on is only as reliable as the data it’s trained on – usually The Internet.

When the Internet is awash with greenwash, AI can’t help. Garbage in, garbage out. Our decades of Ignoring, Dodging and Pretending mean we’ve we’ve denied ourselves the meaningful training data set on which to unleash AI.

If the current carbon auditing toolbox contains nothing to fix the intractable ‘problem’ the EU’s new directive has created, what new tools are available?

To comply with the spirit and well as the letter of the CSRD would require a carbon accounting and auditing standard that was:

  • Free: provided free at the point of delivery
  • Scope 3-compliant: include a trusted, transparent mechanism for assigning SME’s carbon footprints to their customers in order to calculate their Scope 3
  • Transparent: both in terms of the calculation methodology and the visibility of its auditing trail
  • Trusted: free from the lobbying influence of bad actor vested interests who seek to retard carbon drawdown

This seems like a tall order. See Through Carbon’s pilot schemes, launched in September 2023, tick all these boxes, but will businesses accept its radical approach?

The advantages of Embracing

Forget about spreadsheets, contracts, EU Directives and loopholes. At heart, we’re all social apes whose language capacity has evolved to the level that our ability to communicate dominates all our interactions, decisions, and behavioiur.

In short, stories are important. We all like a good story. Even better, a good story which casts us as the Good Guy. For Man The Storyteller, a good story makes us feel good about ourselves, and makes others feel good about ut.

Embracers have a good story to tell. Unlike Exploiters, they can sleep at night, unconcerned about getting found out.

Unless you genuinely believe this sustainability thing is a temporary fad, that will soon disappear when The Boffins discover a silver bullet solution to dig us out of this hole, Embracing is a smart long-term investment.

Why not go beyond? Rather than meeting the bare minimum, like the Pretenders, why not exceed the EU’s CSRD requirements? Getting ahead of the game means not just future-proofing your business as the CSRD and other carbon drawdown legislation, but also gifts you a much better story to tell.

For visionaries who lead, rather than functionaires who follow, the CSRD is a unique, one-off opportunity for reputational gain. There can only ever be one first adopter in any sector, and it could be you.

If disruptive initiatives like See Through Carbon succeed, this needn’t even cost you anything more than a bold decision. Supporting it by donating to its development, with no strings attached, offers you an even better story to tell.

Does Embracing still seem a naive and foolish option?

So what’s it to be? 

The reports required by the CSRD are due imminently. How companies deal with this new EU legislation is still ultimately up to them, but it won’t be long before other jurisdictions follow suit. 

Ignoring, Dodging, Pretending and Exploiting all have their pros, but all carry considerable cons. For those who prefer spreadsheets to stories, the CSRD makes these cons calculable.

Understanding how the CSRD works is a first step to compliance, but big business bosses with their eyes on the horizon rather than their next step – and who read and understand what the IPCC scientists are telling us – do have another option.

Companies are adept at kicking the ball into the long grass, lobbying government to water down requirements or reduce punishments, and paying media to ventriloquise their manipulations.

Such responses are so commonplace, they’re seen as ‘the norm’.

But on a planet where our fossil fuel addiction already means that ‘normal’ is history, a bolder, more visionary, less defensive approach is required.

Embrace the CSRD. Embrace See Through Carbon.

For more information on See Through Carbon’s accurate, free, open-source, transparent model for CSRD compliance, visit