The business news is head-spinning, so it’s understandable that many people feel like they don’t know which way is up. At the risk of publishing something that’s out of date by the time it gets uploaded to the 3D InCites website, I’m going to try to make sense of sustainability reporting requirements.
With the United States being such a wild card, I’ll focus on news from Europe. The European Commission recently proposed updates to the Corporate Sustainability Reporting Directive (CSRD). The announcement put a positive spin on the news, saying the changes will simplify reporting and spur growth. Perhaps so, but there are many potential negatives.
CSRD Updates
If enacted, the CSRD updates will have wide-reaching effects on manufacturers, including those in the semiconductor industry. Here’s a quick summary.
The scope is shrinking. Instead of requiring reporting from all organizations operating in the EU, the new CSRD requirements will only apply to businesses with over 1000 employees. The change exempts 80% of the companies that previously fell under the CSRD scope. One-third of 3D InCites member companies have over 1000 employees, so the reporting requirements are still relevant to many readers here.
The deadline has been relaxed. Instead of needing to report beginning in 2026 or 2027, companies will now have until July of 2028 to gather the required data and create reports.
Large companies won’t need to collect as much data from their supply chains. This reduces compliance costs, including those for small and medium enterprises (SMEs) but also makes it harder to estimate Scope 3 emissions. How can we have transparency without knowledge from up and down the supply chain?
The reduced CSRD scope worries banks that rely on climate impact data to assess credit risk. If companies don’t have to disclose ways that their operations might affect flood risk, for example, that’s a problem for banks and insurers.
The Carbon Border Adjustment Mechanism (CBAM), a carbon tax on imports to the EU, will also get modified. Smaller importers will be exempt from CBAM requirements, while large companies will see a more streamlined process. The CBAM currently only applies to high-emissions materials that are usually purchased in massive quantities, like steel and cement.
Thinking Long Term
Adopting a longer view of the reasons behind sustainability reporting requirements can help the individuals in charge of reporting avoid the feeling of whiplash. Forget about the specific requirements for the moment. Looking at the bigger picture means considering how you can use data to improve your operations in ways that save energy, reduce reliance on fossil fuels, and control costs. Doing so will make your company more resilient to climate impacts, supply chain pressures, and market volatility.
It might be a suitable time to revisit your ISO certifications. If your company is certified to ISO9001 (quality), ISO14001 (environmental management), or ISO45001 (health and safety), how are you using those certifications to improve your workplace rather than merely for marketing purposes? The framework of ISO makes it a useful tool for risk mitigation regardless of what’s in your sustainability report.
Initiatives designed to reduce waste and improve efficiency, while well-intentioned, can misfire if transparency or performance suffers. Saving time by not having to draft lengthy reports may be a good thing. However, it depends on how you spend that time. If you can automate data collection and use that data to streamline operations without sacrificing performance, that’s great. But if the new rules mean you don’t have access to the data you need to figure out how to do that because the SMEs in your supply chain aren’t providing the needed inputs, it’s a problem.
It’s necessary to keep up with regulations to ensure that your company is compliant. However, I caution against making regulations your benchmark. Forward-thinking companies aim to go well beyond compliance with policies that support healthier workplaces and communities for the long term. They also share their progress with others in their industry to encourage peers, suppliers, and even competitors to control emissions and pollution. Is your company on board with this approach?
