The CSDR directive takes effect in 2024. There is a knock-on effect that world-wide farms can expect to feel in the seasons ahead.
ESG reporting directives in Europe are common-place. Over the past decade, European businesses have become familiar with the Non-Financial Reporting (NFR) Directive, which supports transparency on environmental and social issues.
In 2022, an updated version of this directive was approved in the form of the Corporate Sustainability Reporting Directive (CSRD). The CSRD is a mandatory reporting directive to be adopted by all EU member states and the first reporting year is 2024.
What’s changing with CSRD?
Here are three important changes between the historical NFR directive and the recently approved CSDR.
1. Broadened Scope:
CSRD directly applies to an estimated 50,000 organisations, and will indirectly impact many more. By comparison, the NFR directive impacted approximately 11,000 businesses. CSRD includes both listed and unlisted businesses; as well as companies outside the EU with significant turnover (>150M EUR) inside the EU.
2. More Details Required:
Companies must report detailed information on various social and sustainability factors. One of the biggest changes here is a new requirement to report on ‘Scope 3’ emissions. Scope 1 and 2 have been required historically; but what is meant by Scope 3 emissions?
Scope 1: Direct emissions from sources owned/controlled by the company
Scope 2: Indirect emissions from a company’s purchased electricity or other forms of energy.
Scope 3: Indirect emissions from activities in a company’s supply chain (for major food manufacturers, processors, retailers and wholesalers; this means farms)
3. Auditable Reports:
Companies will be required to obtain external audits for the data they submit to ensure it is credible. This means a new type of auditor will emerge to assess the validity of data reported from the businesses supply chain. (Yes, one more auditor knocking on your farm gate)
Key Takeaway for the Farm:
If your farm supplies products to European owned businesses such as a retailer, wholesalers or food manufacturers, you can expect to be indirectly impacted by CSRD reporting requirements and audited respectively.
No matter where your farm is located.
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Directly, more than 50,000 businesses will need to comply with CSRD.
The requirements will be phased in from 2024 to 2028, depending on the size of the business.
1) Starting January 1, 2024:
Large, listed companies with more than 500 employees, these businesses are already covered by NFR directive. In the Agri-food sector, this will mainly be larger retailers and food manufacturers.
2) Starting January 1, 2025:
Essentially all other large companies, listed or unlisted, which meet at least 2 of the following criteria:
- Over 250 employees
- More than €40 million in annual revenue
- More than €20 million in total assets
In the Agri-food sector, think wholesalers and food processors.
3) Starting in January 1, 2026 (with an opt-out option until 2028)
Publicly listed SMEs with more than 10 employees or €20 million revenue
In the Agri-food sector, think distributors, exporters, wholesalers.
4) Starting in January 1, 2028
Non-EU businesses with large subsidiaries with > €150 million annual revenue within the EU market.
In the Agri-food sector, think of global food manufacturing businesses.
Are farms really in scope for CSDR?
Yes. And in a big way. When food companies evaluate emissions from their supply chain, farms are at the top of the list of contributors.
I’ll borrow a nicely done infographic here from Regrow which shows the impact of farm activity in the Scope 3 emissions for a food company.
What’s more? Of the 3 different scopes that cover emissions in CSRD, these Scope 3 emissions (from the supply chain) represent approximately 90% of a food companies’ total emissions.
Quick math: 71% of 90% = 64% of emissions from food companies are generated on farm.
And these companies are mandated to start reporting on these emissions from 2024.
Retailers, wholesalers, food processors and food manufacturers of a certain size will be required to comply already in 2024.That means auditors of the FY2024 reports may request data from farms as early as 2025.
Bottom line for the farm? Expect to be sharing data relating to your farm’s environmental footprint including the usage of chemicals, fertilizers, water and energy.
Beyond CSRD
While the CSRD will impact data being demanded from farms this season, this is just one of several drivers increasing the need for data management on your farm.
1. International Sustainability Standards Board (ISSB) Standards: IFRS have launched ISSB, which were announced in June 2023. The purpose of the ISBS is to create a common, international standard for sustainability reporting which can support decision making in the capital markets. The CSRD is Europe’s plan to keep aligned with ISSB standards and the two frameworks are clearly united. ISSB standards are not mandatory; however, they have already been adopted by 5 nations and 11 more have made plans to adopt the framework either on a voluntary or mandatory basis, according to S&P Global. Globally, we can expect the large public and private companies to feel pressure, and soon necessity, to report in accordance with ISSB standards. Meanwhile, industry leaders are already volunteering to adopt these standards for their FY2024 reporting.
2. CAP Subsidies: In Europe, while the details are not concluded, it is clear that in the near future CAP subsidies will be linked to environmental performance indicators. If you want to be first in line for CAP payments and maximize your eligibility, farm owners should be prepared to report on the usage of chemicals, water and energy consumption.
3. Reporting for EU Member States: While the SUR legislation was voted down last year, the trend to disclose crop treatments through official government channels hasn’t slowed down. Across the EU, national teams are building and deploying tools with incentives for farms to report on their usage of pesticides and fertilizers. While these programs are incentivized, voluntary programs today will become mandatory for farming businesses as early as 2026.
- Learn more about Cuaderno Digital via the SIEX project in Spain
- See how Switzerland is preparing for digital farm reporting with DigiFLUX
4. Climate Corporate Data Accountability Act (California SB 253): The economy of California is one of the largest in the world. As of October 2023, any company that does business in California and exceeds annual revenue of $1 billion, will need to report scope 1,2 and 3 emissions starting in 2026. That means big businesses like food retailers and manufactures will be pushed to collect and share data on the sustainability of their supply chains.
All of this to say, there is a surge of regulations taking hold around the world. Each of them will require sustainability data from the farm. But the last thing the farm needs is more administrative work.
Paper is the real challenge for the farm
The real pain point is that the majority of farms are still using paper and spreadsheets to manage their data.
At Farmable, surveys of European farms indicate that more than 80% of fruit and vegetable growers are using paper and spreadsheets are their primary tools for data management.
This has to change.
With legislative changes like CSRD, even more farm data will be subject to audits. Data quality for chemical, fertilizer and water usage will be under regular scrutiny. Paper records are not only time consuming, but prone to error and difficult to share securely.
In an effort to drive farms to adopt digital data management processes, the EU has passed legislation stating that agricultural companies need to use electronic forms of documentation for crop applications effective January 1, 2026.
How to prepare your farm for compliance
Farming teams need easy to use, mobile-first solutions that can be used from the field.
Pushing compliance to the farm level has historically created an administrative burden (ie.non-value added cost) to the farm. The risk of additional sustainability reporting adding cost to the farm (and to our food) is real.
If we want farms to produce affordable and sustainable food, we need to give them affordable, user-friendly tools for their work processes.
Farmable offers simple, mobile-first compliance reporting for water usage, chemical reporting and fertilizer applications. You can download it for free and generate GlobalGAP compliant reports for a flat rate of 99 EUR/year; unlimited hectares, unlimited team members.
Legislation changes, like CSRD, don’t need to add cost or administrative burden to your farm. Farmable can give you peace of mind. Stay compliant in your daily operations and share sustainability data quickly and easily with any stakeholder you choose.
Ready to get started with Farmable? Download the app.
