EU Dispatch: Regulatory Readiness
The EU’s Corporate Sustainability Reporting Directive has hard deadlines approaching. Travel managers everywhere can take notes on how the region is preparing.
New legislation is about to bring greenhouse gas emissions and climate risk reporting under the microscope. Chief among them is the EU’s Corporate Sustainability Reporting Directive, which entered into force in 2023 and requires companies to disclose non-financial information pertaining to the environmental impact of their activities.
Just 35 percent of companies responding to BTN’s 2024 Sustainability Survey said they would be ready to report on CSRD requirements by January 2025. That might be OK for the moment, with the reporting requirement coming due in phases, but some companies aren’t taking any chances on potential issues.
“We’re redefining our global travel program around how best to accommodate CSRD,” said Joel Schneider, sustainability travel specialist for Munich-headquartered global insurance firm Allianz Commercial. “This includes TMC and supplier consolidation and reviewing travel policy that will put us in a position to make us compliant.”
As a large firm whose revenue totaled €9.3 billion in 2023, Allianz Commercial will be part of the first tranche of companies to which the new CSRD rules apply. Such companies are required to report on climate-related risks and opportunities in January 2025, based on activity from the 2024 financial year. This includes Scope 1, 2 and 3 carbon emissions.
Companies will need to outline targets for emissions reduction and ensure all information is externally audited.
The scope of the directive, and the number of companies it will affect, will expand over the next five years so that by 2029 even small- and midsized businesses and non-EU companies that generate revenue of more than €150 million in the EU market will be required to submit annual reporting.
Some 42,500 companies eventually will be subject to CSRD, with mandatory disclosure of non-financial data based on the European Sustainability Reporting Standards.
Getting the Data in Order
Business travel appears as Scope 3.6 and is a single line item among the more than 1,000 required data points. For some companies, like those in service-based sectors where business travel is responsible for most emissions, this single figure will represent the lion’s share of corporate emissions overall. For other companies, like manufacturing, Scope 3.6 is but a drop in larger bucket.
Regardless, if a company is subject to CSRD, “You need to get a 360-degree view of all of your [carbon] data,” said Thrust Carbon director of sustainability Kit Aspen. Here’s how companies in the EU are getting started, and how many companies will need to begin to think about sustainability data as CSRD and emissions reporting regulations in other geographies come to bear on business travel management.
Pick a methodology – Environmental agencies in the U.S., U.K. and France (EPA, DEFRA and ADEME, respectively) provide conversion factors that allow companies to calculate GHG emissions. In Germany, the country’s business travel association, VDR, has developed a standard to calculate business travel emissions. Then there’s the myriad proprietary tools offered by business travel and sustainability specialists and aviation analytics firms.
The trickiest element, however, may lie in the fact that the EU hasn’t specified what will be an acceptable calculation methodology. Plus, the legislation will be implemented on a national basis, so according to FCM Consulting global sustainability lead Glenn Thorsen, “you need to use the methodology that your market dictates.”
Thrust’s Aspen, however, advised travel and sustainability managers to ensure their chosen methodology meets the ISO 14083 standard. Adherence to the ISO 14083 standard is necessary in another proposed piece of environmental legislation, Count Emissions EU, which Aspen says provides “a really good indicator of what the EU is thinking in terms of the quality mark [regulators] want to see.”
Lean on reporting partners – This could be a TMC or a carbon calculation specialist or, if data sources are extensive, a third-party data consolidator. Reporting partners at every level are leaning into sustainability, since the requirements for some companies are just around the corner.
Look beyond TMC data – Aspen reminded travel managers that TMC data isn’t a complete picture of a travel program. A good emissions data strategy, therefore, will have to go outside of that source. “Some [travel] spend may only be coming through expense,” he said, like taxis or other ground transportation. “Another area that is overlooked is leakage. ... Go through [your] supplier list as a check-box exercise to work out where that data is.”
Contracting for carbon visibility – Collecting carbon emissions data “needs to become ‘business as usual’ procurement,” offered Clarity director of corporate responsibility and sustainability Kirsty Given, speaking at BTN’s recent Business Travel Sustainability Summit in London. She urged companies to bake sustainability into their sourcing exercises with all kinds of suppliers, not just TMCs. “Make it part of the contracting and due diligence process … so you have data from the outset,” she said.
Keep it real – Corporate Travel Management head of sustainability Lauren Hook stressed the importance of timing and the frequency of data flows, given that travel data often changes. “We know business travelers have on average two to three changes per itinerary, so it’s really important to focus on actual travel data, not estimates [based on booking data],” she said. The Miles Consultancy president Stuart Donnelly added that spend-based assumptions are another fallacy to avoid “they don’t offer visibility into real impact,” he said.
Allianz Commercial’s Schneider, who also spoke at BTN’s London summit, has learned all these lessons and more as he consolidated the program to rationalize the data sources required for emissions reporting. But there’s still plenty of streams to pull into the reporting suite.
Currently, he said, CO2 data from air travel is “pretty robust” and that his preferred airline partners “are putting in what we need.” So he’s now focused on understanding “how we disseminate and use that [data],” not just for reporting but also to apply learnings to sourcing and policy decisions. Other data sources aren’t as turnkey. Schneider said calculating car-based CO2 emissions is a “challenge” and currently requires his team to engage ground transport suppliers for “manual collections.”
Practice Makes Perfect?
The EU has seemingly prepared for variances in quality and comprehensiveness in the first few years of reporting compliance. The auditing requirement, for example, can be provided with ‘limited’ assurance until 2028. Listed small- and midsized companies also have the possibility to opt out of reporting altogether for the first two years.
Nevertheless, the implications of CSRD reporting are vast. Beyond reporting and auditing emissions data, companies must also define a CO2 reduction strategy that aligns with the United Nations’ Paris Agreement to limit global warming to 1.5 degrees Celsius.
“All that takes time,” Aspen cautioned. He said EU-based companies “should be very worried because [CSRD] is coming faster than they realize”, while those in the U.S. “have the right amount of time” to prepare, but only if they act now.
CSRD Reporting Timeline
2025
Large, listed EU-based companies with the obligation to report in 2025, based on 2024 data, meet the following thresholds:
- Balance sheet in excess of €25 million
- And/or net turnover in excess of €50 million
- More than 500 employees
2026
Large EU-based companies with the obligation to report in 2026, based on 2025 data, must exceed at least two of the following:
- €25 million balance sheet total
- €50 million net turnover
- 250 employees
2027
EU-based SMEs must comply in 2027, based on 2026 data, albeit with the possibility to opt-out for the first two years.
2028
Companies based outside the EU must comply in 2029, based on 2028 data, if they have:
A report published in May by the Global Reporting Initiative and in conjunction with CSRD rapporteur and member of the European Parliament Pascal Durand estimates some 11,000 companies headquartered outside the EU could be impacted by CSRD’s reporting obligations, including more than 3,000 in the United States.
The directive states that branches or subsidiaries are responsible for publishing the sustainability report of their controlling company and that report should be published in a language accepted by the EU Member State where they are registered.
Penalties for noncompliance will also be decided on a national level. At the time of publication, only France has integrated CSRD into its national laws, with fines of up to €18,750 for not publishing a report, or criminal penalties including jail time and fines of up to €375,000 for not completing or obstructing a third-party audit.
Under Fire: Sustainable Aviation Fuel
The International Air Transport Association this month announced it will establish a SAF registry, expected to launch in 2025, to “authoritatively” account for and report airlines’ emissions reductions from using the alternative aviation fuel.
The announcement is particularly timely given that five weeks prior EU regulators opened an investigation into 20 airlines over “potentially misleading” greenwashing practices, including the use of the term “sustainable aviation fuels” without clearly justifying the environmental impact of such fuels.
The action follows concerns raised by European consumer organization BEUC and is led by watchdogs in Belgium, the Netherlands, Norway and Spain, but the EU Commission has yet to name the 20 airlines in question.
The investigation is focusing on “claims made by the airlines that the CO2 emissions caused by a flight could be offset by climate projects or through the use of sustainable fuels, to which the consumers could contribute by paying additional fees.”
EU authorities are concerned that the claims could be considered as “misleading actions/omissions” under the Unfair Commercial Practices Directive. When the European Commission launched its investigation, it said the airlines have “yet to clarify whether such claims can be substantiated based on sound scientific evidence”.
The commission’s vice president for values and transparency, Věra Jourová, said: “If we want responsible consumers, we need to provide them with accurate information.”
The 20 carriers concerned were invited to provide a response within 30 days of the announcement to address concerns, after which the commission said it will debate and oversee the implementation of agreed solutions and, if the necessary steps are not completed, further action, including sanctions, could be taken.
A statement from the BEUC applauded the action, which it said was a direct result of the complaint it lodged in June 2023 concerning 17 airlines: Air Baltic, Air Dolomiti, Air France, Austrian, Brussels Airlines, Eurowings, Finnair, KLM, Lufthansa, Norwegian, Ryanair, SAS, SWISS, TAP, Volotea, Vueling and Wizz Air.
Responding to the action, EU airline association Airlines for Europe—whose 17 members include Air France-KLM, the Lufthansa Group, Norwegian, Ryanair and TAP—said it recognizes the importance of clear, transparent information about sustainability but that current regulations pertaining to communications on the subject “vary significantly between countries and are still evolving.”
“We are particularly concerned about the remarks on sustainable aviation fuels and the requirement for a clear justification of their environmental impact,” A4E said in a statement.
The organization said it is engaged in discussions with EU bodies to develop a common methodology for airlines to effectively communicate their sustainability efforts and progress.
In a separate greenwashing action, a Dutch court ruled in March that KLM misled customers in what was heralded as a 'landmark' case. A complaint concerning misleading claims about its sustainability activities in a past advertising campaign by the airline had been filed by environmental groups Fossielvrij and ClientEarth.
The court ruled KLM’s past promotion of SAF “paints too rosy a picture” given its limited availability.
IATA recently reported SAF production in 2024 will likely triple compared with 2023, but the 1.9 billion liters produced would account for just 0.53 percent of the global fuel the aviation industry needs for the year.
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