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The new Corporate Sustainability Reporting Directive (CSRD) is a paradigm shift in how companies report and manage their environmental, social and governance impacts. For plastics manufacturers heavily dependent on fossil-based raw materials, this presents a number of challenges - but also opportunities to transform and future-proof their operations.
In this article, we explore the impact of the CSRD on the plastics industry, the requirements of the directive and how companies can adapt to the new reality.
What is CSRD and how can it affect you?
The CSRD is an update and extension of the previous Non-Financial Reporting Directive (NFRD). The new Directive places higher demands on companies to report on their sustainability performance and integrate sustainability into their business strategy.
The CSRD will be phased in from 2024 and covers:
- All large companies in the EU (more than 250 employees, more than €40 million turnover or more than €20 million balance sheet total).
- Listed small and medium-sized enterprises (SMEs) from 2026.
- Third country companies with significant activities in the EU.
Plastic manufacturers, especially if they have a large share of fossil-based raw material, will have to report on climate emissions, resource efficiency and social impact.
Plastic manufacturers that have customers in any of the above criteria are also affected.
How does CSRD affect plastic manufacturers with fossil-based raw material?
Stricter climate reporting requirements:CSRD requires companies to report emissions in Scope 1 (direct), Scope 2 (indirect) and Scope 3 (entire value chain). Plastic manufacturers must report emissions from raw material extraction, production and use of plastics.
Reduced dependence on fossil raw materials:
Increase the share of bio-based or recycled raw materials and invest in low-carbon technologies andexplore circular business models such as recycling.
Transparency on resource efficiency:
Companies must demonstrate life-cycle responsibility by improving the recyclability of plastics, implementing 'design for circularity' and using sustainability certifications such as ISCC PLUS.
Social impact:
CSRD requires reporting on social factors, such as working conditions, human rights and supply chain impacts.
Challenges to address
Scope 3 reporting is one of the biggest challenges for plastics manufacturers, as it requires mapping emissions throughout the value chain by working with suppliers and customers to account for impacts from raw material extraction, transportation and product use. At the same time, the transition to bio-based raw materials, recycling solutions and energy-efficient technologies involves significant investments, which can be particularly difficult for smaller players in competitive markets.
The detailed requirements of the CSRD also demand expertise in sustainability and reporting, which can lead to the need for external consultants or investment in training for companies that lack internal resources.
Need help navigating these issues?
We have developed a checklist (link here) for those working in the plastics industry to help align their business with CSRD.