The Corporate Sustainability Reporting Directive (CSRD) is an EU regulation intended to increase and improve the sustainability disclosure requirements of companies. In fact, the CSRD replaced a prior directive – the Non-Financial Reporting Directive (NFRD) – and does, indeed, significantly expand the scope of reporting. It applies to large companies and listed SMEs, and also to non-EU companies with significant operations in the EU – in total, it impacts around 50,000 businesses.
What is the Corporate Sustainability Reporting Directive and who is it for?
The CSRD aims to combat greenwashing, improving transparency for investors and stakeholders and supporting the EU’s Green Deal objectives. It came into effect in January 2023, with phased implementation beginning last year (2024) through to 2028, depending on company size and type.
The directive mandates reporting by companies that fall within its scope on environmental, social, and governance (ESG) factors, aligned with the European Sustainability Reporting Standards (ESRS). Each company must disclose its sustainability risks, impacts, and transition plans, ensuring reliable, comparable, and audited data.
The CSRD promotes sustainable procurement strategies, circular economy models and supplier collaboration – making ESG integration a strategic priority in supply chain management. Thus, wherever it applies, it has a significant impact on an organization's supply chain operations.
Among the detailed ESG disclosures required are data and information on scope 3 emissions (the indirect emissions from a company's value chain, including suppliers, transportation, and product use), human rights, and social impacts. Consequently, companies must assess and report on their suppliers’ sustainability practices, ensuring compliance with environmental and ethical standards.
This represents quite an overhead: businesses must implement due diligence, risk assessments, and transparency measures across their supply chains. And, in turn, there is increased pressure on suppliers, which must themselves provide accurate, verifiable data and align with EU sustainability goals. For companies that fall within the scope of the CSRD, non-compliance can lead to legal, reputational and financial risks.
Yes: the directive imposes stricter environmental, social, and governance (ESG) reporting requirements. Yet the CSRD is not merely another compliance obligation – just another regulatory burden for in-scope businesses to bear. In fact, proactively adapting to comply with the CSRD presents supply chain managers with multiple strategic opportunities, including:
Here’s how.
One of the key outcomes of compliance with the Directive is an improved ability for you to identify and mitigate supply chain risk. By requiring you to assess ESG factors such as climate impact, human rights, and ethical labor practices, the Directive encourages you to evaluate supplier performance beyond the usual cost/quality metrics. This proactive approach can help you to anticipate and address vulnerabilities such as supplier instability, regulatory non-compliance and environmental risks, any of which could disrupt your operations.
For example, businesses that rely on suppliers in regions prone to extreme weather events can use sustainability data to develop contingency plans and diversify sourcing strategies. Similarly, companies that prioritize ethical sourcing and fair labor practices reduce their exposure to reputational damage caused by human rights violations or poor working conditions in their supply chains.
Although compliance with the CSRD mandates additional reporting, it also encourages you to optimize your supply chain, typically leading to cost reductions and improved efficiency. Sustainable supply chain practices such as waste reduction, improved energy efficiency or sourcing from environmentally responsible suppliers, can all lower operational expenses over time.
By way of example: adopting circular economy principles, such as remanufacturing, recycling, and responsible sourcing, reduces raw material costs and enhances resource efficiency. You might also reduce transportation and logistics costs by selecting suppliers that align with ESG standards and are located closer to key markets, minimizing your carbon emissions and fuel expenses.
Transparent ESG reporting can also enhance stakeholder trust and market competitiveness. Research indicates that investors, regulators and consumers increasingly prefer businesses that demonstrate strong sustainability performance; by ensuring compliance with the CSR Directive, you may attract new investment, secure beneficial partnerships, and enhance your brand reputation.
Customers are also becoming more conscious of the environmental and ethical impact of their purchases. Those companies that demonstrate responsible sourcing, fair labor conditions, and emissions reductions differentiate themselves in the market; this can lead to higher customer loyalty and increased sales – and is certainly unlikely to turn customers off.
Your Order Management System (OMS) plays a vital role in complying with the CSR Directive – by enhancing supply chain transparency, ensuring data accuracy, and supporting sustainability reporting.
With the CSRD requiring detailed disclosures on environmental, social, and governance (ESG) factors, your OMS can centralize, analyze, and verify critical data, helping you both to align with regulatory expectations and to identify discrepancies between reported and actual supply chain performance.
A well-implemented OMS will provide data-driven insights that reveal gaps between what a business thinks is happening in their supply chains and what is actually happening. Here’s how:
A high-performance OMS automates the gathering of data from all stakeholders - suppliers, logistics providers, and internal systems, ensuring real-time visibility into orders, shipments, and supplier performance. It can also integrate ESG-related metrics – such as carbon emissions, ethical sourcing and waste generation – providing a holistic view of supply chain sustainability. By consolidating data from multiple sources, your OMS can help eliminate discrepancies caused by fragmented or outdated information.
Set up correctly, your OMS will compare expected supplier performance (including metrics such as emissions reduction targets and commitments such as fair labor certifications) with actual performance (as verified by shipment tracking, audit reports and third-party sustainability certifications).
That is to say: if your supplier claims to use sustainable materials but order data shows increased raw material consumption from non-certified sources, your OMS can be configured to flag such inconsistency for further investigation. Similarly: if logistics data shows higher-than-reported emissions, your system can highlight such discrepancies, preventing misleading sustainability reporting.
Your OMS can be configured to trigger real-time alerts when suppliers fail to meet ESG commitments, such as late sustainability audits, increased emissions, or labor violations. In the context of the CSRD, this ensures you’re able to detect and correct discrepancies quickly – reducing the risk of greenwashing accusations, of regulatory penalties, and of consequent reputational damage. Through audit trails and historical data tracking, your OMS provides not just a transparent record of your supply chain performance but of your efforts to comply with the requirements of the CSRD.
The ability to identify discrepancies enables you to engage in proactive mitigation, such as altering your procurement strategies, prioritizing sustainable suppliers, and optimizing logistics to reduce emissions. In other words, your OMS can help you transition from back-foot reactivity to front-foot, proactive, sustainability management – ensuring continuous improvement in your ESG performance.
We often think of an Order Management System as a powerful solution for tracking, processing and managing orders across supply chains efficiently. But, at a more conceptual level, an OMS provides real-time visibility, discrepancy detection and data accuracy. By using your OMS to analyze your data effectively and identifying gaps between perception and reality, you can turn your sustainability compliance obligations into a strategic advantage, so you can stay ahead not just of regulatory requirements but – just as importantly – customer expectations.