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What Does the EU Corporate Sustainability Reporting Directive (CSRD) mean for the Shipping & Logistics Industry?

October 31, 2024
By CSE
CSRD

CSRD: Why It Matters for Shipping

The Corporate Sustainability Reporting Directive (CSRD) is the European Union’s latest move to advance corporate transparency and accountability regarding sustainability. As an enhancement to the Non-Financial Reporting Directive (NFRD) established in 2014, the CSRD raises the bar by mandating sustainability reporting from more companies, expanding disclosure requirements, and applying a “double materiality” perspective. Under double materiality, companies must report both on how sustainability issues affect their financial performance (financial materiality) and on the impact of their operations on society and the environment (impact materiality).

For the maritime and shipping industry, this regulation represents both a challenge and an opportunity. Maritime operators, including tugboat operators, are among the sectors most affected, given the growing global commitment to reducing emissions and operational carbon footprints. With the CSRD in place, the maritime industry faces a future where sustainability reporting becomes standard practice—a shift that will affect companies across the sector, regardless of size or direct involvement in EU markets.

 

CSRD Implementation Timeline and Scope

The CSRD will be implemented in phases, expanding gradually over the next several years:

 

2024: Companies already under the NFRD must comply.

2025: All large EU-incorporated companies and parent companies with large EU-based subsidiaries are included.

2026: Listed Small and Medium-sized Enterprises (SMEs) will be subject to reporting.

2028: Non-EU parent companies with significant EU business must comply, encompassing their global operations.

“Large companies” include those with a turnover above €50 million, assets over €25 million, or more than 250 employees. As the scope widens, shipping companies worldwide will increasingly feel the indirect effects of this directive, as it begins to impact entire value chains, from suppliers to service providers.

 

Why CSRD and ESRS Matter for the Shipping Sector

The European Sustainability Reporting Standards (ESRS), which underpin the CSRD, establish uniform reporting standards for Environmental, Social, and Governance (ESG) metrics, facilitating transparency and comparability. This is especially significant for the shipping industry, which is under pressure to reduce emissions as part of its decarbonization journey. The ESRS also promotes internationally recognized standards, simplifying reporting for companies operating across jurisdictions.

The ESRS requires companies to report their emissions across three scopes:

Scope 1: Direct emissions from owned sources (e.g., fuel used in vessels).

Scope 2: Indirect emissions from energy purchased.

Scope 3: Indirect emissions from the value chain, which includes emissions from tugboats and port operations.

For tugboat operators and other maritime entities that serve as third-party service providers, this Scope 3 emissions tracking can have profound implications, particularly if their emissions are deemed material to the environmental impact of larger vessel operators.

 

Key Impacts and Challenges

Administrative Burden and Data Requirements

Tracking emissions, especially for complex and varied maritime operations, presents significant logistical and technical challenges. Tugboats, for example, operate under diverse conditions and often rely on older, less efficient fleets. Collecting consistent data across various operational scenarios demands significant investment in tracking technology and training. Companies will also need robust verification systems to ensure reported data meets regulatory standards.

 

Supply Chain Transparency and Reporting

The maritime industry will face pressure to increase data transparency, especially from larger partners in the value chain who are mandated to report Scope 3 emissions. As tugboat and small vessel operators serve as contributors to these emissions, they may find themselves having to share emissions and operational data with other companies to enable compliance with the CSRD. This shift underscores the importance of accurate data collection and management systems, as these will ensure compliance while potentially reducing administrative strain.

 

Sector-Specific Guidelines

While the ESRS is currently general, sector-specific standards are anticipated by mid-2026. These will address the maritime industry’s unique challenges more directly, including the particularities of emissions from deep-sea, coastal, and riverway shipping. For now, maritime operators must rely on the general CSRD guidelines, which may result in some uncertainties, particularly around Scope 3 emissions.

 

Opportunities in the Transition to Sustainability

Although meeting CSRD requirements may initially be resource-intensive, it also provides several benefits:

Competitive Advantage: Companies that embrace transparency can distinguish themselves by showcasing robust sustainability practices. This can enhance reputation, attract investors, and align with the increasing demand for eco-friendly services.

Operational Efficiency: Accurate data collection will allow companies to identify inefficiencies and reduce fuel consumption, resulting in cost savings and potentially reducing emissions over time.

Improved Stakeholder Trust: Transparent reporting can build trust with stakeholders, including customers and regulators, and strengthen relationships with eco-conscious clients, improving the likelihood of securing contracts and partnerships.

Action Steps

Early Compliance and Data Management

To navigate the CSRD effectively, shipping & logisticscompanies should consider early alignment with ESG standards. Investing in data management tools and emissions tracking will streamline compliance and position companies to adapt to future regulations.

 

Evaluate Materiality and Indirect Emissions

Understanding which emissions are “material” in relation to larger partners’ Scope 3 emissions is essential. This requires careful evaluation of the environmental and financial significance of specific emissions sources, such as tugboat operations, and determining whether current fuel consumption and emissions data systems are adequate.

 

Continuous Monitoring of Regulatory Changes

The CSRD framework is dynamic, with regulatory reviews scheduled every three years. Staying informed about evolving standards, including sector-specific guidelines, will be critical. By monitoring these developments and adjusting reporting practices accordingly, maritime companies can reduce compliance risks and seize new opportunities related to sustainable innovation.

 

Collaboration and Knowledge Sharing

Open communication with larger companies in the value chain will help smaller operators understand expectations and meet reporting requirements. Collaboration on data transparency and emission reduction strategies can benefit all parties involved by promoting a unified approach to sustainability.

 

Although compliance poses challenges, especially in terms of data collection and emissions reporting, the CSRD offers a pathway for the shipping & logistics industry to contribute meaningfully to global sustainability goals. By adopting a proactive approach to ESG standards, you can enhance transparency, meet stakeholder demands, and secure a competitive edge.

Attend our upcoming Global | Certified Sustainability (ESG) Practitioner Program, in Shipping & Logistics, Advanced Edition, on January 23-24 & 27, 2025. Gain essential skills to navigate the complex data requirements of the CSRD and stay ahead in the evolving regulatory landscape.

Register here

 

 

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