The havoc unleashed by Hurricane Milton that hit the United States in early October provided unambiguous evidence that we are entering a critical and alarming new phase in the planet’s climate crisis. Together with Hurricane Helene at the end of September, the lives of hundreds of people have been claimed and thousands of homes destroyed.
The burning of fossil fuels has made storms as severe as Hurricane Helene about 2.5 times more likely than they were in the pre-industrial age. Rising fossil fuel emissions have triggered increases in ocean temperatures and sea levels to such an extent that they generated some of the most destructive storms ever experienced, not only in Florida but also in other regions of the world, including Europe.
In fact, in late October, torrential rain brought over a year’s worth of precipitation to several areas, with resulting floodwaters causing the deaths of over 200 people and substantial property damage. It was one of the deadliest natural disasters in Spanish history. Here, too, the flooding was likely more intense due to climate change.
It is time to put effort into the “3 Ms”—Measuring, Managing and Minimizing what we pump into the atmosphere. Europe began action on this front with the European Green Deal five years ago. The European Green Deal is a concept presented by the European Commission (EC) in December 2019 with the aim of reducing greenhouse gas (GHG) emissions in the European Union (EU) to zero by 2050, making it the first continent to become climate neutral.
The Green Deal comprises a series of measures—the most important ones named with acronyms beginning with the letter C—such as Corporate Carbon Footprint (CCF), Corporate Sustainability Reporting Directive (CSRD), Carbon Capture, Utilization & Storage (CCUS) and many more. These C-elements of the European Green Deal ultimately affect all companies, from large global corporations and regional SMEs—inside and outside of Europe—in energy trading as well as in the lubricants business.
Many of the affected companies feel that the implementation of these C-elements is too complex, too bureaucratic, too time-consuming, too cost-intensive or too risky. However, it is much more important to recognize that these measures also represent a major, often previously unused chance for them.
Corporate Carbon Footprint
The CCF (Corporate Carbon Footprint) is the CO2 balance or CO2 footprint of companies. It is made up of the direct and indirect GHG emissions of the entire organization (i.e., in the company itself at a location or a part of the company) and records all emissions generated by the organization’s activities within a year.
This gives companies an overview of their operational GHG inventory, an insight into the carbon footprint of their various locations and the chance to identify their strongest emission drivers. In this way, they can establish measures to reduce them sustainably and thus develop a carbon reduction target with a reduction pathway for their own climate and sustainability strategy.
In addition, a CCF gives organizations the chance to review ecological risks and weak points in the company and to develop optimization processes in climate and environmental management (e.g., in operational energy management). This can also lead to economic improvements in the form of long-term cost savings.
By drawing up a GHG balance sheet, companies also have the chance to differentiate themselves from their competitors and to emphasize their active climate management as a unique selling point (USP). As pioneers, they can also encourage other companies within the industry to initiate a CCF calculation themselves as well as an essential component of their corporate climate protection.
In addition, a CCF gives companies the chance to respond to the increasing demands of politicians, capital market investors and customers in terms of transparency and responsibility and to prepare for future legal requirements at an early stage. Analyses have shown that the creation of a carbon footprint and the associated environmental awareness can result in greater customer loyalty, the acquisition of new target customer segments and can also have an impact on a company’s creditworthiness.
CO2 measurement is not everything—but without CO2 measurement, everything is nothing. What we cannot measure, we cannot manage, and what we cannot manage, we cannot minimize. That is the strategic triad of the “3 Ms.”
The preparation of an annual CCF has reached the status in companies that a financial balance sheet has had for many years, as it serves as the basis for continuous CO2 management at the corporate level and is also a mandatory core component of CSRD-compliant sustainability reporting.
Corporate Sustainability Reporting Directive
The CSRD (Corporate Sustainability Reporting Directive), which came into force on January 5, 2023, increases the accountability of European companies on environmental, social and governance (ESG) aspects relating to sustainability. In 2025, companies above a certain size will have to report on their sustainability performance and how they deal with the associated risks and opportunities.
To this end, the European Sustainability Reporting Standard (ESRS) is the first binding reporting format introduced at EU level, according to which all companies in the EU—including lubricant manufacturers and energy traders—must report for the 2025 financial year at the latest if they fulfil two of the following three criteria:
- Total assets: > €25 million
- Net sales: > €50 million
- Number of employees: > 250
The CSRD applies to large corporations and companies that are already subject to reporting requirements from 2024 and will be extended in phases. Small and medium-sized enterprises will also have to comply if they want to be successful as part of the supply chain with their clients. In total, around 50,000 companies in the EU are affected by the new CSRD obligation. The CSRD also impacts lubricant companies inside and even outside Europe when they operate subsidiaries within the EU market and generate sales of more than €150 million.
It is understandable that the CSRD poses numerous challenges for companies, which can be read about in detail. Unfortunately, far too little or nothing is mentioned on the chances that the CSRD presents for companies. On the one hand, companies can see the CSRD as a chance for innovation and transformation and actively use it to develop, implement and drive forward more sustainable practices. Examples of these innovations include a stronger focus on new technologies for CO2 reduction or staff training in environmental protection.
On the other hand, individual elements of the CSRD—such as the GHG balance sheet, the double materiality analysis or the so-called Scope 3 screening—help companies to identify weaknesses, strengthen their risk management and develop solutions to improve their environmental impact and social relations. This gives them the chance to create both environmental and social value and position themselves as pioneers in sustainability.
The CSRD is also a chance to raise awareness of sustainability issues in corporate management and to promote the integration of ESG criteria into the business strategy. The information collected for the CSRD obligation can be used in the long term for the company’s own strategy process and the expansion of competitive advantages (e.g., to identify potential savings, to further development of the company’s own business model for the long-term or to leverage innovation potential).
The CSRD should not only be seen as an opportunity for a company’s own sustainability performance, but also for its strategic sustainability communication. Transparent reporting can help to improve communication and interaction with various stakeholders and to fulfil various existing and future information requirements in a structured manner, as it is not only a company’s own employees, customers or suppliers who are interested in its sustainability information, but also authorities or financial partners.
In this respect, a CSRD report opens up the chance to meet official information requirements and thus contribute to reducing bureaucracy, while enabling investors to make more informed decisions and better evaluate companies. It is also a chance for companies to attract young professionals, for whom serious and transparent sustainability (communication) is becoming an increasingly important factor when choosing a job. In this way, companies can strengthen the trust of their stakeholders, reinforce their image as a responsible organization and create long-term value for all stakeholders.
Carbon Capture, Utilization and Storage
The EU established a Carbon Capture, Utilization and Storage (CCUS) Forum in 2021. Taking place annually, it brings together representatives from the EU institutions, EU member states and third countries, NGOs, business leaders and academics to facilitate the development and deployment of CCUS technologies.
If we fail or refuse to halt the burning of fossil fuels with sufficient speed, we must find ways to catch the resulting emissions as they are created—or further in the future after they have reached the atmosphere. This means developing ways to extract carbon emissions at factories and power plants, then to sequester them and—wherever possible—use them as a feedstock for creating new products.
On February 6, 2024, the EC presented its Communication on the EU’s 2040 climate target and the path to climate neutrality by 2050. It suggested a 90% net CO2 emission reduction compared to 1990 by 2040. In the view of the Commission, to this end, all renewable energy, zero and low carbon solutions—including energy efficiency, nuclear, industrial carbon removals and CCUS technologies—are a necessary chance to reach the target. Reports from governments and agencies, the EC, the economists’ group of the IPCC, the IEA, and industry personnel and academics, all based on similar economic models, permanently insist that without large-scale CCUS the EU will fall significantly short of its Green Deal objective to be climate-neutral by 2050.
At the moment, it seems that we are failing to halt global warming and we are not stopping carbon in the atmosphere from reaching dangerous levels quickly enough. Thus, we will need ways to remove it once it gets there. We are going to need every weapon we can develop for this purpose, if we are to deal with the greatest threat that faces civilization today. The alternative is the global spread of the carnage that engulfed Florida two months ago.
In addition to CCF, CSRD and CCUS, the European Green Deal includes several other C-elements, such as the CSDDD (Corporate Sustainability Due Diligence Directive), CBAM (Carbon Border Adjustment Mechanism) or CEAP (Circular Economy Action Plan). They all certainly represent a challenge for many companies. But nothing is as bad that it is not good for something. At the same time, they also present a wide range of chances for companies. In any case, these C-elements mean change.
As the Greek philosopher Heraclitus of Ephesus recognized 2,500 years ago, “The only constant in the universe is change.” If he were living today, I am sure he would amend that to say, “The only constant in the universe is climate change.”
STAY SuSTAYnable!
Apu Gosalia is a sustainability expert. He can be reached at apurva.gosalia@web.de.