On January 1, 2023, the European Union’s Corporate Sustainability Reporting Directive (CSRD) came into force, marking the start staged adoption rolled out over a specific period of time. CSRD is one of the four most influential sets of regulations that will force organizations to address their environmental posture. CSRD is designed to enhance and standardize the reporting of sustainability data and is an extension of another set of rules called the Non-Financial Reporting Directive (NFRD). CSRD essentially demands more disclosure on sustainability and paves the way for standardized reporting. EU regulators say CSRD should eventually help stakeholders have more visibility on the organization’s ESG position. Among those they say would benefit from the law are consumers, employees, investors, regulators, etc. The first targeted by CSRD are naturally public companies that listed in markets, regardless of their size. That is the moment a company is listed in an EU stock market; it has to comply with CSRD. To do so, CSRD requires the use of an existing template that would standardize reporting based on common measurement metrics. The template comes from the European Sustainability Reporting Standards (ESRS), a set of standards developed by the European Financial Reporting Advisory Group (EFRAG). The EU wants the data to be public and so it mandated companies to release their report to the public through accessible digital format.
While CSRD was officially released on January 1, 2023, this year of 2024 companies with more than 500 employees are required to adopt the law on the data collection front but will have to release its data beginning 2025. These companies are called Public-Interest Entities (PIEs) based on the metrics of more than 500 employees. The smaller entities, defined as having more than 250 employees, have until 2025 to begin data collection and then release it the subsequent year. That year, 2026, will see the inclusion of small and medium-sized enterprises (SMEs), following the same pattern of data collection in year one and release in year two.
The process of complying with CSRD is not going to be an easy one. Data gathering at the corporate-wide level is a tedious process to implement, requiring resources, skills and the contribution of relevant departments and business units. Furthermore, the gathered data will have to be verified to meet the standard requirements regarding how it is presented, in addition to ensure that it can withstand regulatory auditing.
At Compliance Standards we anticipate CSRD to have a significant impact on Europe’s IT Asset Disposition (ITAD) industry. ITAD firms are at the center of the movement of electronics and IT equipment headed to either a secondary lifecycle or the recycling stream. Companies in the EU are expected to enhance their reporting of their ITAD disposition practices, putting additional strains on their service providers. In this context, we expect ITAD companies with resources and willingness to adjust will eventually gain a competitive advantage against reluctant competitors. ITAD companies willing to endorse CSRD will have to commit investments in new technologies and infrastructure, including advanced tracking systems, data management tools, and reporting software to meet the reporting demands of their clients and those of the CSRD.
Specifically, ITAD service providers will be asked to report detailed sustainability metrics, and greater visibility on the fate of their electronic waste. Many ITAD providers already have some ability and processes to track treated devices and e-waste, but currently most of them do not match the CSRD template required by law. Each company has different ways of displaying data in a way that does not comply with the European Sustainability Reporting Standards. Such a lack of compliance is likely easy to fix with changes in ITAD companies’ own reporting systems. However, the biggest challenge for ITAD companies will be disclosure and transparency. Most ITAD companies, including those tied to OEMs and leasing and financing firms do not have any experience in transparency. They are either private and family-owned firms or units buried deep inside large corporate structures. Move to more disclosure is expected, we believe, to lead to some consolidation.
