The Corporate Sustainability Reporting Directive (CSRD) is reshaping sustainability reporting within the European Union (EU). Life Cycle Assessments (LCAs) are becoming crucial for companies to meet these new standards—whether it’s for data collection, environmental impact analysis, or overall compliance. With increasing pressure from stakeholders and policy, it has become essential for companies to ensure they can adhere to these requirements. By leveraging AI-driven technologies to enhance LCAs, businesses can not only meet regulatory demands but also lead the way in driving sustainability within their industry.

Understanding the CSRD’s Impact

The CSRD seeks to address the shortcomings of previous reporting frameworks by expanding the scope of reporting requirements and introducing stringent standards to combat greenwashing. Companies are now required to report on key indicators such as greenhouse gas emissions, energy consumption, water usage, waste management, employee diversity, labor practices, human rights, supply chain management, ethics, anti-corruption measures, and board diversity. By mandating sustainability disclosures for a broader range of entities, the directive aims to provide stakeholders with a more accurate and holistic view of a company’s environmental, social, and governance (ESG) performance.

Who Needs to Comply?

The Corporate Sustainability Reporting Directive (CSRD) mandates sustainability reporting for a broad spectrum of organizations within the European Union.

Large Undertakings

Companies exceeding at least two out of the following three thresholds are classified as large undertakings and must comply with the CSRD:

  • €40 million in net turnover.
  • €20 million total on the balance sheet.
  • An average of 250 or more employees on the payroll throughout the year.

This encompasses both entities previously subject to the NFRD and those not previously required to report on sustainability.

Listed Small and Medium-Sized Enterprises (SMEs)

Any SME whose securities are listed on a regulated market within the EU is obligated to comply with the CSRD.

Non-EU Companies with a Significant EU Presence

The CSRD’s reach extends to certain non-EU companies with a substantial economic footprint in the European market.  If a non-EU company generates a turnover exceeding €150 million within the EU, they may also be required to comply.

By establishing clear size and economic impact thresholds, the CSRD ensures that organizations with the resources and market influence to significantly impact sustainability outcomes are held accountable for their environmental and social practices.

Key CSRD Reporting Obligations

Under the CSRD, companies must disclose comprehensive sustainability-related information covering environmental, social, and governance (ESG) aspects. This includes:

Environmental Metrics: Companies must report on Scope 3 emissions, energy consumption, water usage, waste management, and efforts to mitigate environmental impacts.

Social Data: Disclosure of workforce demographics, employee health and safety, diversity, labor practices, and community engagement is mandatory.

Human Rights Practices: Transparent reporting on fair working conditions, anti-discrimination efforts, and risk identification processes is essential.

Anti-corruption Policies: Businesses must outline their compliance programs, whistleblower mechanisms, and ethical conduct policies.

Double Materiality: Organizations are required to evaluate both financial and societal impacts of sustainability issues on their business and stakeholders.

By addressing these obligations, companies can provide stakeholders with a transparent view of their ESG performance, enhancing trust and accountability.

Using LCAs to Achieve CSRD Compliance

The CSRD implementation requires proactive steps. Companies should establish reporting frameworks, integrate sustainability into strategy, and leverage technology to streamline data collection and reporting. A Life Cycle Assessment (LCA), also known as a Life Cycle Analysis, is a vital tool to do just that. An LCA analyzes the impact of a product throughout its life cycle with customizable metrics and outputs. Better yet, leveraging AI to drive LCA’s unlocks even more benefits like advanced scenario modeling, addressing data gaps, and generating reports. 

The CSRD requires companies to report ESG data for various metrics like scope 3 emissions, energy consumption, water usage, waste management practices, and efforts to mitigate environmental impacts. Here’s how LCAs align with CSRD obligations:

Scope 3 Emissions: LCAs track emissions across the supply chain, helping businesses identify hotspots and reduce their carbon footprint. AI-driven tools simplify data collection and improve accuracy.

Energy Consumption: LCAs quantify energy consumption across production and logistics, offering insights into efficiency improvements. Advanced AI ensures data reliability and streamlines analysis.

Water and Waste Management: Companies can use LCAs to measure water use and waste generation, driving better resource efficiency and process improvements.

Biodiversity and Land Use: LCAs identify a product’s impact on ecosystems, enabling companies to minimize deforestation and protect biodiversity.

AI-driven LCA helps businesses access this data and generate the necessary information to report by CSRD standards. Leveraging advanced technology helps companies overcome barriers such as high costs to perform LCAs, complex data collection, and a lack of expertise. 

CSRD Compliance Timeline

Large companies (from Jan 1, 2024)

Those already subject to NFRD (typically over 500 employees) must report for 2024 (published in 2025).

Other large companies (from Jan 1, 2025)

Meeting 2 out of 3 thresholds (employees, turnover, balance sheet) but not under NFRD, must report for 2025 (published in 2026).

Listed SMEs & Non-EU companies (from Jan 1, 2026)

Listed SMEs report for 2026 (published in 2027, with a possible opt-out until 2028). Non-EU companies with a €150 million+ EU turnover may need to report for 2029 (published in 2030, with exact requirements under development).

Understanding the timeline is crucial for a smooth transition and effective communication of sustainability efforts. Furthermore, companies must embrace transparency and accountability by engaging with stakeholders, seeking third-party assurance for their sustainability reports, and actively participating in industry-wide initiatives aimed at advancing sustainability practices.

Beyond Compliance: Turning CSRD into a Competitive Advantage

The CSRD represents a significant shift in sustainability reporting within the EU, driving greater transparency, accountability, and alignment with environmental, social, and governance (ESG) standards. By implementing these comprehensive reporting requirements, companies have the opportunity to build trust with stakeholders, enhance credibility, and set a precedent for responsible business practices. For companies—especially those in consumer goods, where Scope 3 emissions play a critical role—adapting to these new standards is not just a compliance challenge, but a pathway to long-term sustainable growth. Embracing Life Cycle Assessments (LCAs) and leveraging advanced technologies like AI can help organizations efficiently gather the necessary data, streamline reporting processes, and position themselves as leaders in sustainability.

Next Steps: Measuring Impact

CarbonBright AI’s AI-powered LCA software helps organizations accurately measure emissions and meet regulatory standards—at a fraction of the time and cost of traditional methods. Contact us to get started!