Keeping up with ESG - Summer Edition

43% More Spent on Reporting vs. Innovation | $1.6B CBAM Problem | CDP Toolkit & New Deadlines

Anastasia Kuskova
August 22, 2024

Hello reader 👋🏼

This edition read time: 8-10 minutes

Today we cover:

Companies spend 43% more on sustainability reporting than innovation
CBAM: actual data reporting is now mandatory
India faces $1.6B impact from CBAM
CDP Toolkit and extended 2024 reporting deadlines
Key mining and metals events this September, and other news

KEY REPORTS

Reporting spending outpaces innovation by 43%

A study from the IBM Institute for Business Value, initially published in February, has recently gained traction, revealing that companies are now spending 43% more on sustainability reporting than on innovation. This shift underscores a growing emphasis on compliance, driven by demands from CBAM, CDP, CSRD, and other regulations, potentially stifling long-term progress and innovation in sustainability. As sustainability teams across Europe struggle to meet these mounting demands, the imbalance highlights the urgent need for more efficient solutions.

Technology is the answer?

In response to these challenges, Deloitte’s 2024 Sustainability Action Report shows that 75% of public companies plan to invest in new technology to enhance ESG disclosures. This investment surge is driven by increasing regulatory pressures and persistent data quality challenges. Supporting this trend, a Nasdaq report confirms that companies adopting ESG software can reduce reporting time and costs by 30%, improve data accuracy by 20%, and boost investor interest by 25% through enhanced transparency and risk management.

The rise of the ESG data controllers

As regulatory demands intensify, companies are focusing more on regulatory preparation, leading to the rise of the ESG Controller role. This role, responsible for data gathering and governance, typically reports to the CFO and is becoming increasingly vital. At Sirius, we tackle this challenge by creating a unique Sustainability Twin for each company, capturing all quantitative and qualitative data in one place to streamline

QUOTE OF THE MONTH

“What does it mean to be a responsible business? Putting aside all the florid rhetoric, this is the challenge facing corporate leaders today. They need to be clear about how their companies create value for shareholders and how their ESG initiatives contribute. They need to be equally clear about what their companies cannot do with ESG to make the world a better place and what belongs in the realm of public policy.”

– Robert G. Eccles, Moving Beyond ESG

CBAM ESSENTIAL UPDATES

The biggest CBAM news: Actual data reporting is now mandatory!

In the latest update from the EU Commission’s CBAM FAQ on August 8, 2024, it has been confirmed that the use of default values will no longer be extended. Starting July 2024, importers are required to report actual embedded emissions for all CBAM-covered imports.

Key Takeaways:

Mandatory Actual Data: Importers must now submit actual emissions data for all CBAM goods, with very limited exceptions.
When Data is Unavailable: If your supplier hasn’t provided the necessary emissions data:
💡 Document all efforts to obtain the data, including regular follow-ups.
💡 Explore alternative methods to gather or estimate the data.
💡 Justify any use of default values if actual data remains unavailable.
Default Values Limit: Default values are capped at 20% of the total specific embedded emissions and are only permissible under exceptional circumstances, with clear justification required in your report.

See the link to the updated FAQ in the Regulatory Updates section👇

$1.6 billion problem: India CBAM challenges and EU collaboration

India could face economic losses of up to $1.6 billion annually due to the EU's Carbon Border Adjustment Mechanism (CBAM), potentially costing 0.05% of its GDP. To address these challenges, EU and Indian officials are collaborating to harmonise carbon pricing strategies and minimise the impact on key sectors like steel and aluminium. This collaborative effort is part of a broader initiative to enhance trade relations and promote sustainable practices by reducing carbon emissions in both regions.

McKinsey report: CBAM could drive aluminium costs up 70%, steel 40% by 2030

CBAM could dramatically increase costs, with primary aluminium potentially rising by 70% and steel by 40% by 2030, slashing EU companies' profits by 20-40%. However, businesses that accelerate emission reductions could boost earnings by 15-50%. We’ve conducted similar analyses and found that decarbonisation investments might even exclude some high-emission products from the European market entirely. Ultimately, companies face a tough and costly decision. Access the full report here.

Important Links for CBAM reporting:

Updated CBAM FAQ
Updated Transitional CBAM Registry User Manual

REGULATORY UPDATES

Step-by-step CDP Toolkit and deadline extension

In response to technical challenges and public feedback, CDP has extended the 2024 reporting deadlines. Companies now have until October 2, 2024, for scoring and October 16, 2024, for corporate disclosures. This extension provides a crucial opportunity for companies still working on their submissions to refine and finalise their reports.

We’ve created a Step-by-step CDP Toolkit already downloaded by 100+ professionals with a step-by-step approach to help you streamline the CDP reporting process and make the most of this extra time.

New CSRD FAQ released by the European Commission

The European Commission has issued a crucial FAQ to help companies navigate the Corporate Sustainability Reporting Directive (CSRD) ahead of the 2024 reporting deadlines. It clarifies which companies must comply, the specific sustainability information required, and the emphasis on digital reporting formats for better data accessibility.

Access the full FAQ here.

GRI and Dutch AFM offer essential CSRD compliance guidance

To simplify CSRD compliance, the Global Reporting Initiative (GRI) has published a guide that aligns reporting standards, reducing the need for double reporting for those following both GRI and EFRAG frameworks. Complementing this, the Dutch Authority for the Financial Markets (AFM) has provided ten key guidelines focusing on governance, data accuracy, and integrating sustainability into business strategies, ensuring companies are well-prepared for the CSRD.

Explore the GRI guide
Access the AFM guide

SIRIUS NEWS

In the spotlight: This month, we were quoted and referenced in Responsible Investor, CSO Futures, and Eco-business.

Supporting women in metals

We proudly support the Women4Metals, and the team behind recently launched an initiative focused on mentorship and skill development in the metals industry. If you're interested in growing your career or helping others do the same, consider joining as a mentee or mentor. Here is the post with guidance on how to join.

Upcoming events

We’re excited to be part of these key industry events:

Legal Geek: Conference on ESG and Regulatory Updates
📅 September 11 (Amsterdam, Netherlands)

UK Metals Expo: Annual event focused on the entire metals industry
📅 September 11 - 12 (Birmingham, UK)

The Drop: Climate-Focused Event (Spotlight on Metals and Mining)
📅 September 16 - 17 (Malmö, Sweden)

Coiltech Italia: Leading event for coil winding, electric motors, and transformer manufacturing
📅 September 18 - 19 (Pordenone, Italy)

FT Mining Summit: Premier event for industry leaders
📅 September 26 - 27 (London, UK)

LME Week: Major annual metals industry gathering
📅 September 30 - October 1 (London, UK)

2024 OECD Conference of Mining Regions and Cities: Conference on Indigenous initiatives, ESG, green transition and circular economy.
📅 October 8 - October 11 (Sudbury, Canada)

Sirius has been selected as a national finalist at the World AI Summit for our groundbreaking technology. I will be pitching our vision for industry-focused algorithms that drive sustainability in San Francisco at the annual World AI Summit event in October. Wish me luck as we take our innovations to the global stage!