What the CSRD Means for Food Companies’ Scope 3 Projects
Time is critical for food companies as they work to align their sustainability strategies with the requirements of the EU Corporate Sustainability Reporting Directive (CSRD). This article offers a current overview of the CSRD, explores its implications for the food industry, and outlines what your company needs to know to successfully integrate insetting projects and regenerative agriculture into your compliance approach.
Key messages:
- The CSRD is extending sustainability reporting requirements to approximately 50,000 companies across the EU. It mandates detailed disclosures on environmental, social, and governance (ESG) factors.
- A double materiality assessment is mandatory. Companies must evaluate both their impact on ESG issues (inside-out) and how ESG factors pose risks and opportunities for their business (outside-in), covering the entire value chain.
- Scope 3 initiatives are central to meeting CSRD standards. For food companies, investments in regenerative agriculture are particularly relevant—they contribute to climate goals, address climate-related risks, and help stabilise supply chains.
- When reporting on insetting and offsetting activities, companies must clearly distinguish between emissions reductions, CO₂ removals, and CO₂ certificates to remain compliant with CSRD requirements.
What is CSRD and which companies are affected by it?
The EU Directive on Corporate Sustainability Reporting Directive (CSRD) It came into force on January 5, 2023. It is part of the European “Green Deal,” a series of initiatives aimed at helping EU member states achieve their climate goals and master sustainable transformation. Until now, large companies of public interest have been required to prepare sustainability reports in the form of the Non-Financial Reporting Directive (NFRD; also known as CSR Reports). With the CSRD, more companies are and will be required in the future to disclose how they deal with social and environmental challenges and what effects sustainability risks have on companies.
The aim of the Directive is to ensure that affected companies provide comprehensive information on sustainability impacts, risks and opportunities in relation to EU rules and standards. They must create policies, set goals, and report on their performance. The guideline also emphasizes the integration of financial and sustainability reporting and underlines the financial relevance of sustainability reporting. It encourages companies to the term “non-financial exchange information “with “sustainability information,” to reflect the change:
“Many stakeholders find the term “non-financial” inaccurate, particularly because it indicates that the respective information has no financial relevance. However, the information is becoming increasingly financially relevant.” Description 8 on CSRD
The CSRD is leading to a significant increase in the number of companies that are required to report on sustainability. While the NFRD covered around 11,700 companies and groups in the EU, the number is expected to rise to around 50,000 as a result of the CSRD. That is around 75% of all companies in the EU.
The introduction is gradual:
- Large companies subject to the NFRD: Reports for fiscal year 2024 must be published in 2025.
- Large companies that were not previously subject to the NFRD: Reports for fiscal year 2025 must be published in 2026.
- Listed SMEs, small and non-complex credit institutions and so-called “captive” insurance companies: Reports for fiscal year 2026 must be published by 2027.
- Companies outside the EU with significant business activity in the EU (net turnover > €150 million): Reporting begins for fiscal year 2028, to be published in 2029.
What do the new reporting requirements include?
In the past, companies lacked specific sustainability reporting requirements, which is why most resorted to standards such as those of the Global Reporting Initiative (GRI). Under CSRD, companies must comply with EU sustainability reporting standards (European Sustainability Reporting Standards, ESRS) report, which expands reporting requirements in terms of format, audit, and scope.
The CSRD builds on previous frameworks to improve the accuracy and comparability of sustainability reporting. The goal of CSRD is to integrate sustainability reporting more closely into financial reporting. For example, it must be included in a separate section of the annual report. The uniform, electronic format and identification are intended to improve comparability with other companies for investors. In contrast to the NFRD, there will be a mandatory external audit.
Under CSRD, companies must disclose comprehensive sustainability information on their social, governance and environmental impacts. In addition to reporting on sustainability policies and initiatives, the policy requires companies to set clear sustainability goals and to disclose progress towards achieving them. Sustainability risks are also playing an increasingly important role. And this is exactly where the double materiality analysis comes into play.
Dual materiality analysis along the entire value chain
The so-called double materiality analysis is a key focus for companies that are just starting their CSRD compliance journey. This increases complexity, as a company must recognize not only ESG effects (inside-out) but also ESG risks and opportunities for the company (outside-in). Topics must be classified as relevant if they are for business success or are important from an environmental or social perspective. In the past, topics were only considered relevant if both were true. The CSRD is also expanding the application across the entire value chain, including suppliers, logistics service providers and consumers.
What role does CSRD play for your company's Scope 3 projects?
Projects that address companies' Scope 3 emissions are becoming increasingly important as the CSRD introduces new legal requirements. A central element of CSRD is the quantification of climate impacts through greenhouse gas inventories, including indirect Scope 3 emissions, for example from raw materials, transportation and waste. These calculations enable your company to set scientifically based climate goals for 2030 and 2050.
Under disclosure requirement E1 — Climate Change, the ESRS provides clear framework conditions for Disclosure of emissions, emissions reductions, CO2-Distances (removals) and CO2-Certificates and thus ensures transparency and comparability between organizations. According to the Directive, companies must report on greenhouse gas emissions (E1—6), reduction targets for greenhouse gas emissions (E1—4) and the use of CO2-Distances and CO2-Clearly separate certificates (E1—7) This separation ensures that emissions reductions within the value chain are not confused with certificates from projects outside the value chain, which are used to compensate for unavoidable emissions.
How to report on your insetting and offsetting initiatives
When reporting on your CSRD initiatives, your company must differentiate between three types:
In addition, under ESRS Disclosure Requirement 1, your company is required to report on your policies for managing identified impacts, risks, and opportunities related to climate change, planned measures, and your progress in implementing the plan. In addition to the goals of the E1—4 disclosure requirement, is your company also setting goals for reducing gross greenhouse gas emissions Net zero target Fixed, you must explain the scope, methodology and standards used and how the unavoidable emissions should be compensated, for example through CO2-Distances within your own value chain.
SBTI goals for CSRD compliance
Under CSRD, companies must disclose which guidelines or standards they use to set reduction targets. The so-called Science-Based Target Initiative (SBTi) is considered as “Gold standard” for setting climate goals and implementing and strategies for reducing them. If you align your climate strategy with the SBTi guidelines, you not only support the goals of the Paris Agreement, but also ensure compliance with CSRD requirements.
For land-intensive sectors, the SBTi has an additional FLAG Directive: Forestry, Land and Agriculture. It is tailored to emissions from land use and agriculture. The Agriculture, Forestry and Land Use (FLAG) sector counts with a share of around 23% among the most important sources of global anthropogenic greenhouse gas emissions. Since this is such an important lever for achieving the 1.5-degree target of the Paris Agreement, a separate FLAG guide has been developed.
The FLAG guide focuses on companies in the food production, food and beverage processing, food retail and tobacco industries. As part of the SBTI validation, affected companies are required to set themselves a FLAG-specific target for reducing emissions from this sector in addition to the general, non-FLAG targets. Die Implementing regenerative practices, such as diverse crop rotations and reduced low levels of fertilization, is a strategy to reduce emissions in agriculture and thus also to achieve FLAG goals.
Financial significance of a resilient agricultural supply chain
Following the dual materiality logic of the CSRD, agricultural productivity and the sustainability of food companies are important not only from an environmental perspective, but also from a financial perspective. In addition to the significant impact of the agricultural sector on climate change, the potential financial impact of climate-related risks on your business is also likely to be significant.
The effects of the climate crisis and degraded soils are reducing the productivity of agricultural land. This leads to unstable earnings, price fluctuations and falling profitability for companies in the food industry. These developments can be counteracted by using regenerative practices. In this way, healthy soil structure and function can be restored and maintained, which improves water storage and reduces erosion from wind and water.
Investments in regenerative practices help to minimize climate-related financial risks and Profitability in agricultural supply chains to secure. By promoting these practices, food companies are not only reducing their Scope 3 emissions but also demonstrating their resilience to investors, banks, and other stakeholders. This increases confidence in their ability to manage climate risks and ensure long-term profitability.
At Klim, we have a scalable, strategic approach tailored to farmers' needs developed to support the decarbonization of agricultural supply chains. Through our digital platform for farmers and the support of our dedicated project teams, we help your company achieve the following goals:
- Overcoming obstacles for farmers, such as limited agronomic support and limited access to transitional capital
- Improving soil health, strengthening the resilience of farms and promoting biodiversity
- sequestration of carbon as well as reducing agricultural emissions
Ready to future-proof your supply chain? Together, we'll find out how Klim can accelerate your transition to regenerative practices.
Get more information about using the potential of regenerative agriculture in your company.
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What the CSRD Means for Food Companies’ Scope 3 Projects
Time is critical for food companies as they work to align their sustainability strategies with the requirements of the EU Corporate Sustainability Reporting Directive (CSRD). This article offers a current overview of the CSRD, explores its implications for the food industry, and outlines what your company needs to know to successfully integrate insetting projects and regenerative agriculture into your compliance approach.
Key messages:
- The CSRD is extending sustainability reporting requirements to approximately 50,000 companies across the EU. It mandates detailed disclosures on environmental, social, and governance (ESG) factors.
- A double materiality assessment is mandatory. Companies must evaluate both their impact on ESG issues (inside-out) and how ESG factors pose risks and opportunities for their business (outside-in), covering the entire value chain.
- Scope 3 initiatives are central to meeting CSRD standards. For food companies, investments in regenerative agriculture are particularly relevant—they contribute to climate goals, address climate-related risks, and help stabilise supply chains.
- When reporting on insetting and offsetting activities, companies must clearly distinguish between emissions reductions, CO₂ removals, and CO₂ certificates to remain compliant with CSRD requirements.
What is CSRD and which companies are affected by it?
The EU Directive on Corporate Sustainability Reporting Directive (CSRD) It came into force on January 5, 2023. It is part of the European “Green Deal,” a series of initiatives aimed at helping EU member states achieve their climate goals and master sustainable transformation. Until now, large companies of public interest have been required to prepare sustainability reports in the form of the Non-Financial Reporting Directive (NFRD; also known as CSR Reports). With the CSRD, more companies are and will be required in the future to disclose how they deal with social and environmental challenges and what effects sustainability risks have on companies.
The aim of the Directive is to ensure that affected companies provide comprehensive information on sustainability impacts, risks and opportunities in relation to EU rules and standards. They must create policies, set goals, and report on their performance. The guideline also emphasizes the integration of financial and sustainability reporting and underlines the financial relevance of sustainability reporting. It encourages companies to the term “non-financial exchange information “with “sustainability information,” to reflect the change:
“Many stakeholders find the term “non-financial” inaccurate, particularly because it indicates that the respective information has no financial relevance. However, the information is becoming increasingly financially relevant.” Description 8 on CSRD
The CSRD is leading to a significant increase in the number of companies that are required to report on sustainability. While the NFRD covered around 11,700 companies and groups in the EU, the number is expected to rise to around 50,000 as a result of the CSRD. That is around 75% of all companies in the EU.
The introduction is gradual:
- Large companies subject to the NFRD: Reports for fiscal year 2024 must be published in 2025.
- Large companies that were not previously subject to the NFRD: Reports for fiscal year 2025 must be published in 2026.
- Listed SMEs, small and non-complex credit institutions and so-called “captive” insurance companies: Reports for fiscal year 2026 must be published by 2027.
- Companies outside the EU with significant business activity in the EU (net turnover > €150 million): Reporting begins for fiscal year 2028, to be published in 2029.
What do the new reporting requirements include?
In the past, companies lacked specific sustainability reporting requirements, which is why most resorted to standards such as those of the Global Reporting Initiative (GRI). Under CSRD, companies must comply with EU sustainability reporting standards (European Sustainability Reporting Standards, ESRS) report, which expands reporting requirements in terms of format, audit, and scope.
The CSRD builds on previous frameworks to improve the accuracy and comparability of sustainability reporting. The goal of CSRD is to integrate sustainability reporting more closely into financial reporting. For example, it must be included in a separate section of the annual report. The uniform, electronic format and identification are intended to improve comparability with other companies for investors. In contrast to the NFRD, there will be a mandatory external audit.
Under CSRD, companies must disclose comprehensive sustainability information on their social, governance and environmental impacts. In addition to reporting on sustainability policies and initiatives, the policy requires companies to set clear sustainability goals and to disclose progress towards achieving them. Sustainability risks are also playing an increasingly important role. And this is exactly where the double materiality analysis comes into play.
Dual materiality analysis along the entire value chain
The so-called double materiality analysis is a key focus for companies that are just starting their CSRD compliance journey. This increases complexity, as a company must recognize not only ESG effects (inside-out) but also ESG risks and opportunities for the company (outside-in). Topics must be classified as relevant if they are for business success or are important from an environmental or social perspective. In the past, topics were only considered relevant if both were true. The CSRD is also expanding the application across the entire value chain, including suppliers, logistics service providers and consumers.
What role does CSRD play for your company's Scope 3 projects?
Projects that address companies' Scope 3 emissions are becoming increasingly important as the CSRD introduces new legal requirements. A central element of CSRD is the quantification of climate impacts through greenhouse gas inventories, including indirect Scope 3 emissions, for example from raw materials, transportation and waste. These calculations enable your company to set scientifically based climate goals for 2030 and 2050.
Under disclosure requirement E1 — Climate Change, the ESRS provides clear framework conditions for Disclosure of emissions, emissions reductions, CO2-Distances (removals) and CO2-Certificates and thus ensures transparency and comparability between organizations. According to the Directive, companies must report on greenhouse gas emissions (E1—6), reduction targets for greenhouse gas emissions (E1—4) and the use of CO2-Distances and CO2-Clearly separate certificates (E1—7) This separation ensures that emissions reductions within the value chain are not confused with certificates from projects outside the value chain, which are used to compensate for unavoidable emissions.
How to report on your insetting and offsetting initiatives
When reporting on your CSRD initiatives, your company must differentiate between three types:
In addition, under ESRS Disclosure Requirement 1, your company is required to report on your policies for managing identified impacts, risks, and opportunities related to climate change, planned measures, and your progress in implementing the plan. In addition to the goals of the E1—4 disclosure requirement, is your company also setting goals for reducing gross greenhouse gas emissions Net zero target Fixed, you must explain the scope, methodology and standards used and how the unavoidable emissions should be compensated, for example through CO2-Distances within your own value chain.
SBTI goals for CSRD compliance
Under CSRD, companies must disclose which guidelines or standards they use to set reduction targets. The so-called Science-Based Target Initiative (SBTi) is considered as “Gold standard” for setting climate goals and implementing and strategies for reducing them. If you align your climate strategy with the SBTi guidelines, you not only support the goals of the Paris Agreement, but also ensure compliance with CSRD requirements.
For land-intensive sectors, the SBTi has an additional FLAG Directive: Forestry, Land and Agriculture. It is tailored to emissions from land use and agriculture. The Agriculture, Forestry and Land Use (FLAG) sector counts with a share of around 23% among the most important sources of global anthropogenic greenhouse gas emissions. Since this is such an important lever for achieving the 1.5-degree target of the Paris Agreement, a separate FLAG guide has been developed.
The FLAG guide focuses on companies in the food production, food and beverage processing, food retail and tobacco industries. As part of the SBTI validation, affected companies are required to set themselves a FLAG-specific target for reducing emissions from this sector in addition to the general, non-FLAG targets. Die Implementing regenerative practices, such as diverse crop rotations and reduced low levels of fertilization, is a strategy to reduce emissions in agriculture and thus also to achieve FLAG goals.
Financial significance of a resilient agricultural supply chain
Following the dual materiality logic of the CSRD, agricultural productivity and the sustainability of food companies are important not only from an environmental perspective, but also from a financial perspective. In addition to the significant impact of the agricultural sector on climate change, the potential financial impact of climate-related risks on your business is also likely to be significant.
The effects of the climate crisis and degraded soils are reducing the productivity of agricultural land. This leads to unstable earnings, price fluctuations and falling profitability for companies in the food industry. These developments can be counteracted by using regenerative practices. In this way, healthy soil structure and function can be restored and maintained, which improves water storage and reduces erosion from wind and water.
Investments in regenerative practices help to minimize climate-related financial risks and Profitability in agricultural supply chains to secure. By promoting these practices, food companies are not only reducing their Scope 3 emissions but also demonstrating their resilience to investors, banks, and other stakeholders. This increases confidence in their ability to manage climate risks and ensure long-term profitability.
At Klim, we have a scalable, strategic approach tailored to farmers' needs developed to support the decarbonization of agricultural supply chains. Through our digital platform for farmers and the support of our dedicated project teams, we help your company achieve the following goals:
- Overcoming obstacles for farmers, such as limited agronomic support and limited access to transitional capital
- Improving soil health, strengthening the resilience of farms and promoting biodiversity
- sequestration of carbon as well as reducing agricultural emissions
Ready to future-proof your supply chain? Together, we'll find out how Klim can accelerate your transition to regenerative practices.
Appropriate to the topic
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