Last Updated:
February 14, 2024
CSRD explained
The transition to a low carbon economy is on every CEO's agenda nowadays. The impacts of climate change and responses to it will transform every business sector in the coming decades. Although Climate change will affect a majority of companies, all will be expected to contribute to its solution.
Nevertheless, it is challenging for most companies to devise and implement a credible decarbonisation strategy. The transition requires new ways of doing business, including new ways of displaying capabilities and resources and new ways of thinking. But despite the challenges, companies around the world are scaling up their decarbonisation commitments.
We can see this trend with the number of companies committing to reducing emissions. More than 2000 companies have confirmed emissions reduction targets under the Science Based Target initiative (SBTi). Additionally, more than 370 have committed to The Climate Pledge, pledging to achieve net zero emissions by mid-century or sooner.
For most companies and investors, carbon credits play a crucial role in their Net-Zero strategy. They allow companies to make earlier and more ambitious commitments. Credits allow companies to reduce their current emissions through offsets, while taking cost-effective steps to reduce future emissions through asset rotation and business model development. In the long term, credits can play an essential role in offsetting difficult-to-avoid emissions from products for which no low- or zero-emission options exist.
The growing interest in recent years is also reflected in the Voluntary Carbon Market (VCM), which organises the pledging and trading of carbon credits. In 2022, the demand for carbon credits is at its peak. Prices have increased by more than 140% since 2021 and forecasts assume that demand for credits will increase 15-fold by 2030, to $50 billion per year.
But the voluntary carbon market has a problem. It cannot cope with demand. Access, which plays a crucial role in the global effort to combat climate change, is often limited to large organisations and is characterised by opaque pricing and market inefficiencies. Furthermore, due to a lack of transparency and credibility, it has faced a number of problems in recent years.
This report examines the key role for on-chain carbon credits as part of net zero strategies and the VCM. It was prepared by senken to help business decision makers identify and understand the best use of credits for their business.

What is the CSRD?

The Corporate Sustainability Reporting Directive (CSRD) is a new EU legislation that significantly extends the scope of sustainability reporting compared to the previously existing Non-Financial Reporting Directive (NFRD). It is not just a standard or guideline, but a directive that legally requires companies to report on their sustainability performance, encompassing environmental, social, and governance (ESG) aspects.


The CSRD expands upon the NFRD by:

  • Widening the range of companies that need to comply.
  • Enhancing the detail and scope of required reporting.
  • Introducing the need for an audit of sustainability information.
CSRD timeline

Which Companies are Subject to CSRD?

The CSRD applies to:

  • All large companies, meaning those with more than 250 employees and more than €50 million in turnover and/or more than €25 million in total assets.
  • All companies listed on stock exchanges (except micro-enterprises).

Reporting Requirements Under CSRD

Companies need to disclose information related to:

  • Environmental Protection: Reporting on aspects like carbon emissions, resource usage, and environmental impact. This includes not just accounting and reduction efforts but also offsetting strategies. Companies are encouraged to set ambitious Net Zero goals.
  • Social Responsibility and Treatment of Employees: Including workforce policies, health and safety measures, and labor rights.
  • Respect for Human Rights: Ensuring that operations and supply chains are free from human rights abuses.
  • Anti-Corruption and Bribery Measures: Implementing and reporting on robust policies to prevent corruption and bribery.
  • Diversity on Company Boards: Promoting diversity at the highest levels of company governance.

Examples of Company’s CSRD Reports

A notable example from Germany would be Siemens AG, which provides comprehensive sustainability reporting, covering all aspects required by the CSRD, including detailed environmental strategies, social responsibility initiatives, and governance practices.

How Can My Company Set CSRD Targets?

To align with CSRD requirements, companies should:

  1. Conduct a thorough analysis of current sustainability practices.
  2. Develop a detailed reporting strategy that covers all CSRD aspects.
  3. Implement necessary changes and policies to improve sustainability performance.
  4. Prepare for regular and transparent reporting, including audits of the provided information.

The CSRD represents a significant step forward in corporate sustainability reporting, aiming to standardise and increase the transparency of sustainability practices across the EU. By adhering to its requirements, companies not only comply with legal obligations but also demonstrate their commitment to responsible and sustainable business practices.