Companies operating in the European Union will have to deal with new non-financial and sustainability reporting requirements starting January 2024 with the EU’s Corporate Sustainability Reporting Directive (CSRD).

The CSRD advancement shows a change in how governments are regarding the reporting of Environmental, Social and Governance (ESG) data, which include a company’s carbon emissions. 

ESG reporting is crucial in helping stakeholders, particularly investors, evaluate the risk of their investments by knowing the company’s impact on the people and the planet. It also helps them understand how climate change disasters can impact the business. Robust sustainability reporting is also vital in establishing trust and enhancing a company’s reputation.

In the U.S., the Securities and Exchange Commission is busy fine-tuning its own climate disclosure regulations. This new climate rule, which will get finalized this fall, requires companies to report climate risk for the first time.

What is the EU CSRD and Its Objectives?

The CSRD, which came into effect in January, is a significant expansion of the required sustainability or ESG reporting. In July this year, the European Commission adopted the first of the European Sustainability Reporting Standards (ESRS) for entities subject to the CSRD. 

The ESRSs are now under a 2-month scrutiny period during which the EU Council and the EP will deliberate it for approval (or rejection). Once approved, it will replace the current Non-Financial Reporting Directive (NFRD) framework. 

CSRD aims to improve the quality of sustainability reporting throughout the region, both for EU and non-EU businesses. It will replace the existing reporting framework and broaden the scope of companies covered, from 11,000 initially to now 50,000.

Businesses earning $166 million or €150 million a year and have listed securities on the bloc’s regulated market fall under the Corporate Sustainability Reporting Directive scope.

From 2024 onwards, the new directive will extend the scope of the EU taxonomy and mandate disclosure against ESG indicators. 

Objectives of the CSRD:

The CSRD will help channel capital flows into sustainable businesses, playing a critical role in the region’s Sustainable Finance Strategy. This is essential to ensure that the European Green Deal goals are achievable, particularly:

Reduce net GHG emissions by at least 55% by 2030 versus 1990 levels
Reach climate neutrality by 2050 (net zero emissions)

Meeting these targets are possible only if financiers have access to sufficient information on the company’s sustainability data and performance. Only by having enough information that they can decide accordingly and invest in sustainable businesses, which the CSRD will provide.

The binding framework creates a comprehensive, transparent, and uniform reporting for the companies in the EU. Developing the directive has been informed by international references, such as the TCFD, CDP and the EU taxonomy.

The EU taxonomy is key in promoting investments in sustainable activities to enable the region to achieve net zero targets. It allows the sustainability assessment of economic activities that represent over 93% of GHG emissions in the bloc.

Failure to comply with the new reporting framework will lead to significant fines.

CSRD Focus and Key Principles

The ESRS are the ESG quantitative and qualitative indicators to report under the new directive. The reporting requirements are breakdown into three major ESG categories:

Source: eco-act.com

The major reporting guidelines and principles under the ESRS are the following:

Double materiality: Materiality assessment on topics relating to matters that are either significant for the business (financial) or from ESG (impact).

Scope: Company’s entire value chain.

Time horizon: Qualitative and quantitative information that covers short-term, medium-term, and long-term periods, when necessary.

Due diligence: Procedures for identifying, preventing, mitigating, and accounting for the impacts on the planet and people.

Verification: Must be verified annually by third-party, independent audit firm accredited by each member state.

Who Is Impacted by the CSRD?

The directive will apply to large EU companies, listed or not, and non-EU large companies listed on EU regulated markets. These businesses often have 250+ employees and have a total balance sheet of >€20 million. 

EU and non-EU small and medium enterprises (SMEs) listed on the region’s regulated markets are also affected. Micro-enterprises are exempted but small and non-complex credit providers and captive insurance companies are not. 

Lastly, the CSRD mandate will also impact large non-EU entities with significant activity in the bloc, with turnover of >€150 million, and have a large branch or subsidiary in the region.

When, Where, And How to Report?

Same with the existing framework, the new directive requires reporting for non-financial information in companies’ annual reports. 

The report can be in single consolidated format or in 4 separate sections – general information, Environmental, Social, and Governance. Or companies may also use references from the ESRS guide, for example ESRS E2-5, par. 22.

So, the ESG reporting is annual, adhering to the following timeline:

Source: European Commission

Moreover, a major difference between the existing reporting framework and CSRD is how the information is shared. There are certain digital formats in which CSRD mandates that companies must use to share their reports.

They must also use digital tags so it’s machine-readable under the European Single Access Point (ESAP). Digitalization is important to enhance access to and reuse of the data. ESAP will handle information accessibility, analysis and comparability of these reports.

Finally, companies that have been following the CDP may find it easier to align their reporting with the Corporate Sustainability Reporting Directive. That’s because of the 140 indicators in the new climate change reporting standard, up to 90% align with the CDP Climate Change 2023 Questionnaire. 

IN summary, the EU’s Corporate Sustainability Reporting Directive represents a significant shift in ESG reporting, expanding the scope and depth of sustainability disclosures. By providing comprehensive and transparent reporting guidelines, the CSRD aims to channel investments into sustainable businesses, contributing to Europe’s ambitious net zero goals.

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Microsoft has inked one of the largest carbon dioxide removal (CDR) deals to date with Direct Air Capture (DAC) startup Heirloom, which involves 315,000 metric tons of carbon removal estimated to be worth $200 million. 

Heirloom focuses on building a DAC technology that speeds up the natural process of limestone absorbing CO2 from the air. The company enhances this carbon capture process from years to merely days, attracting large buyers of CDR credits. These include Stripe, Klarna, Shopify, and Microsoft. 

The tech giant had previously invested in Heirloom through its $1 billion Climate Innovation Fund. But this recent CDR deal is at magnitude the startup needed in project financing to rapidly scale-up its DAC technology. 

Microsoft Senior Director of Energy and Carbon Brian Marrs noted why they’re investing such amount in Heirloom:

“…we believe that Heirloom’s technical approach and plan are designed for rapid iteration to help drive down the cost of large-scale Direct Air Capture at the urgent pace needed to meet the goals of the Paris Agreement.”

Advancing Early Markets for CDR and DAC

Large companies have been showing strong support for the sector, pumping funds to startups with innovative CDR technologies like DAC. Microsoft has been at the forefront of carbon removal aiming to be carbon negative, removing more than it emits, by 2050.

Its recent financial support for Heirloom is one of the first “bankable” CDR agreements. It unlocks a critical funding mechanism for the DAC company to finance future carbon removal facilities. It works similar to how other large-scale infrastructure projects have been financed to scale up.

Speaking for Heirloom, CEO Shashank Samala remarked that this deal allows them to raise project finance that can help fuel the company’s rapid growth like what happened in the renewable energy industry. 

Their agreement follows the U.S. Department of Energy’s DAC Hub award selection which included Heirloom as one of the winners. The subsidy is worth up to $600 million for the startup’s Project Cypress in Louisiana in collaboration with Climeworks. 

It’s one of the 2 hubs to win the highest level of public funding. The other is the Oxy DAC plant in Texas which will employ Carbon Engineering’s (CE) DAC technology. 

Heirloom’s DAC Technology Explained

Heirloom provides a DAC solution that’s basically speeding up a process that happens naturally. The climate tech company uses a powder made from crushed limestone, a rock that forms using CO2. 

In nature, this carbon mineralization process takes millions of years, but Heirloom does it in only 3 days. How? By mixing the powder with water, which then acts like a sponge that absorbs CO2 very quickly.

The captured CO2 can then be safely and permanently stored for good, providing a low-cost, durable carbon removal with limestone. 

Microsoft believes that funding Heirloom will result in building an early market for high-quality carbon removal, on top of helping the tech giant achieve its carbon neutrality goal. 

Their CDR deal will provide guaranteed cash flow needed to construct Heirloom’s next 2 commercial DAC facilities. 

Advancing America’s Climate Leadership Globally

The agreement between Microsoft and Heirloom won’t only scale up CDR and DAC, but it will also advance the country’s leadership in climate actions. 

At the 2021 COP26, the US launched the First Movers Coalition – a program for carbon removal and reduction initiatives. It aims to bring together large private companies to commercialize innovative clean technologies through advanced purchase agreements. The program sends the strongest demand signal in history for clean tech crucial in achieving net zero emissions targets. 

Since its launch, the coalition forwarded massive public and private sector commitments in carbon removals.

Last year, three tech giants which included Microsoft, along with Alphabet and Salesforce, together committed $500 million to a CDR program as members of the First Movers Coalition.

Other large companies are also pouring millions of dollars into advanced CDR credits purchase deals. 

For example, JP Morgan announced earlier this year intent to buy carbon removal credits that are worth the same – $200M. Apple also invested the same amount on CDR credits as an expansion of its Restore Fund, but it focuses on nature-based CDR, not technological.

Microsoft, by far, is the largest buyer of carbon removal credits, according to CDR.fyi. The platform also reported that CDR purchases went up 437% in the first half of 2023 vs. full-year 2022.

Microsoft made its first long-term purchase last year in an agreement with Climeworks to remove 10,000 tons of CO2. Climeworks launched the world’s first commercial DAC facility in Iceland, which uses giant fans to capture CO2 and bury it underground. 

Earlier this year, Microsoft also agreed to buy carbon removal credits from another California-based DAC startup CarbonCapture. The amount of the agreement wasn’t disclosed though.

Its current deal with Heirloom reinforces the leading role of the US in its massive efforts to fight climate change. One focus area of such efforts is scaling up carbon removal and other clean technologies for net zero. 

This partnership not only accelerates Heirloom’s DAC innovation but also showcases how big players like Microsoft are driving the urgent pace needed to meet climate goals. As corporate support for CDR technologies grows, the world inches closer to achieving climate targets.

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People are generating ever-increasing waste, producing ever-increasing plastic, and releasing ever-increasing carbon emissions. Addressing these three problems is what a climate tech developer UBQ Materials focuses on in partnership with large companies like McDonald’s.

Israeli-based UBQ Materials employs advanced conversion technology to turn residual waste, including organics and hard-to-recycle materials, into a renewable resource. Subsequently, it announced the recent expansion of its partnership with Arcos Dorados, the world’s largest independent McDonald’s franchisee.

Arcos Dorados runs the largest quick service restaurant chain in Latin America and the Caribbean and has the right to own, operate, and grant franchises of McDonald’s restaurants. It’s the first to create building components “Made with UBQ” in its São Paulo McDonald’s restaurant. 

A New Standard for Sustainability in the Restaurant Sector

Since 2019, the biggest McDonald’s franchisee has been partnering with UBQ Materials as an integral part of its sustainable materials strategy. Together, they’re able to integrate UBQ into serving McTrays in McDonald’s restaurants across Brazil and the Caribbean in 2021. These sustainable trays achieved climate positivity for their estimated climate impact for over 20 years. 

Building on this initial collaboration, Arcos Dorados is now expanding the use of UBQ materials into building components, including electrical conduits, connection boxes, and modular wooden boards.

Highlighting the importance of their deal, Arcos Dorados Head of Social Impact and Sustainability in Brazil, Marie Tarrisse, remarked that:

“…Our collaboration has been an important part of our approach to building sustainable operations and is setting a new standard for environmental responsibility in the restaurant sector.”

Moreover, this project aligns with the McDonald’s franchisee’s overarching plan to replace carbon-intensive materials and significantly reduce emissions to meet ambitious sustainability goals. Investing in a circular economy, the initiative can reduce carbon emissions by 36% in McDonald’s restaurants and offices by 2030. It can also lower its footprint by 31% across the company’s supply chain by the same year.   

A Sustainable Material Substitute for Oil-based Plastic

Waste: The global municipal solid waste generation is over 2 billion tons a year and it will double by 2050. 

Plastic: The current global annual production and consumption of plastics is 350 million tons, which will quadruple to more than 1.35 billion tons by 2050.

GHG emissions: The world generates greenhouse gas emissions at around 50 billion tons a year. Landfill waste emits huge amounts of methane, 11% of global methane emissions, and will increase about 70% by 2050. 

In response to these alarming statistics, UBQ Materials is proactively addressing these triple concerns through its breakthrough conversion technology. The Israeli-based climate tech company closes the loop between the ecosystems of waste and materials by producing UBQ. It is the first bio-based thermoplastic made from 100% unsorted household waste including all organics and unrecyclable materials. 

The recycled material has been implemented to replace oil-based plastic resins in use across industries. 

1 kilogram of UBQ replaces 1 kg of fossil fuel-based plastic. It also diverts 1.3 kg of waste from landfills while avoiding around 11.7 kg of carbon emissions. Calculations are based on a 20-year timeline. 

UBQ Breakthrough Close-Loop Technology 

One of the key benefits of using UBQ is the significant reduction in carbon emissions coming from landfills. Producing sustainable materials uses unsorted, residual solid waste that’s converted into a new resource through an energy-efficient process. 

Therefore, the UBQ solution offers substantial environmental net benefit in the form of avoided GHG emissions of >14 kg/CO2eq.

Not only does the company contribute to reducing landfill emissions, but it also plays a pivotal role in accelerating the transition to a circular economy. Through waste diversion, conversion, and resource efficiency, the UBQ process upcycles municipal waste into a valuable resource.

Its innovative waste conversion process replaces the linear cradle-to-grave system with a closed-loop ecosystem. 

As a testament to its versatility, various companies have demonstrated that mixing UBQ with existing composites can indeed produce eco-friendly alternatives to everyday materials and products. And McDonald’s is the first to use UBQ materials into building components thereby avoiding carbon emissions significantly.  

The McDonald’s franchisee is working with a Latin American pipe manufacturer to make electrical parts using UBQ. UBQ Materials has partnered with Brazilian manufacturer Madeplast to integrate UBQ into modular wood boards in McDonald’s bench structures.

Emphasizing the significance of these partnerships in reducing carbon emissions and tackling climate change, UBQ Materials Chairman Albert Douer noted:

“Collaborations like these are driving meaningful change, showing that sustainability does not have to come at the cost of performance or companies’ bottom lines…Arcos Dorados and McDonald’s are taking on this responsibility within their industry.”

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Oman Energy Development subsidiary, Hydrom, invites global energy companies interested in sustainable energy to take part in the second round public auction for green hydrogen development in Dhofar Governorate.

Hydrom (Hydrogen Oman) was launched in 2022 to lead and manage Oman’s hydrogen strategy. In this auction, Hydrom will provide participating firms 3 prime blocks from 340km2 – 400km2 especially allotted to green hydrogen production. 

The goal is to take advantage of the largest Governorate’s renewable energy resources to establish a strong green hydrogen industry in the sultanate.

Driving Oman’s Green Hydrogen Growth 

Interested companies will go through a 3-stage evaluation process to find suitable applicants with robust financial, development, and operational capabilities: 

1st stage – Minimum Qualification Criteria for financial and expertise
2nd stage – Minimum Bid Criteria for project proposals aligning with Oman’s green hydrogen goals
3rd stage – Evaluation Framework

This process is to ensure a transparent and fair auction where qualified bidders with the right expertise and alignment are necessary for driving Oman’s green hydrogen growth. 

The next phase of the auction will begin this month, with a bid submission due in January next year. Companies wanting to join can find detailed information for the green H2 auction on Hydrom’s website. 

Hydrom was officially formed last June when the minister of energy and minerals, Salim bin Nasser Al Aufi, also chairman of Hydrom, signed 6 green hydrogen contracts worth $20 billion from various partners. These include large oil and gas companies such as BP and Shell. These first auction deals aim to produce 500,000 tonnes of green hydrogen each year in Oman. 

Now, the overall production target moves up to 1 million tonnes of green H2 by 2030, 3.75 million by 2040, and 8.5 million by 2050, which is more than Europe’s total current H2 demand. If met, Oman will become the world’s 6th biggest exporter of hydrogen by 2030. 

Oman’s 2040 hydrogen target is equivalent to 80% of its current LNG exports, while its 2050 goal doubles the volume. 

In July, Hydrom revealed that commitments from their green H2 deals increased to $30 billion. In December last year, Oman and the International Energy Agency (IEA) partnered on green hydrogen projects. 

Why Hydrogen? 

According to the World Bank, the global hydrogen market was valued at $130 billion in 2022. Industry estimates project it to grow by over 9% each year until 2030. 

First Hydrogen (FHYD) brings hydrogen vehicles to North America, Europe, and the UK

Currently, the hydrogen energy sector is still in its early stages of growth. Producing clean H2 or green hydrogen cheaply remains the biggest challenge for the industry to scale rapidly and globally. Fortunately, hydrogen is highly in demand in some industries and there are incentives in producing green H2.

Mckinsey & Company estimated that the total hydrogen production capacity announced by companies by 2030 increased by over 40% to 38 metric tons per year. This capacity is about half the volume needed to be on track to net zero (75 Mt p.a.).

Source: McKinsey & Company

Total announced direct investments in hydrogen also jumped from $240 billion to $320 billion to date.

While there are plenty of different hydrogen in rainbow colors, green hydrogen is the most desirable in terms of emissions. Green hydrogen refers to H2 produced entirely from renewable sources and in a process using water electrolysis. Other types are blue, gray, yellow, red, pick, and violet, depending on how the gas is produced. 

Oman’s hydrogen projects will use electrolysers powered by renewable energy to extract hydrogen from desalinated sea water. 

With the country’s bountiful solar and onshore wind resources, plus its huge land sizes for large-scale H2 projects, it can be the largest producer of H2 in the Middle East by 2030, as per IEA analysis. 

Additionally, Oman is situated along significant market routes between Europe and Asia, with existing fossil fuel pipelines that transport fuels. This available infrastructure and the country’s expertise in exporting LNG and ammonia benefit Oman in producing and transporting green hydrogen.  

Hydrogen is Key for Oman’s Net Zero Goal

Oman’s huge green hydrogen potential plays a crucial role in its net zero target it seeks to reach by 2050. 

The sultanate dedicates an area the size of Slovakia to solar power projects to produce green hydrogen. To date, 1,500km2 of land has been earmarked by Oman for green H2 development by 2030. Up to 40x more land has been identified for long-term potential production. 

Other Gulf nations are taking a different path by leaning towards a more private sector approach. Qatar outsources H2 production while Bahrain focuses on carbon capture and storage more than hydrogen. 

While Saudi is also developing hydrogen, it will not export the gas but use it mostly for steel production. Kuwait, on the other hand, doesn’t have a hydrogen strategy yet in place. 

Source: IEA Report

Achieving 2030 production target of renewable or green hydrogen in Oman requires a total investment of around $33 billion. As seen above, this goal also needs 50 TWh of renewable electricity generation, which is more than today’s total capacity. 

That needed capacity calls for a massive investment in renewable power in the Sultanate. Yet, it will also bring the benefits of reducing domestic use of natural gas by 3 billion m3 and avoiding 7 million tonnes of CO2 emissions each year. 

Reaching its green hydrogen targets would significantly contribute to Oman’s clean energy transition and net zero emissions goal. The Gulf nation’s ambitious initiative signifies that major fossil fuel producers can also make key changes to their energy mix and embrace a more sustainable and greener strategy. 

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