A European Union (EU) reporting law is changing how many companies talk about climate and sustainability. The Corporate Sustainability Reporting Directive (CSRD) requires covered companies to include detailed sustainability information in their annual reporting. That information must follow the European Sustainability Reporting Standards (ESRS), which include climate-related disclosures, targets, and transition plans.
As companies prepare for these requirements, many are turning to the Science Based Targets initiative (SBTi) to help show that their emissions-reduction targets are credible, align with a 1.5°C pathway, and based on recognized methods. SBTi is a corporate climate action organization that enables companies and financial institutions worldwide by developing standards, tools, and guidance that allow companies to set greenhouse gas emissions reduction targets.
What Is Changing?
CSRD moves sustainability reporting closer to financial reporting. Covered companies must report information about environmental, social, and governance (ESG) topics, including climate change. The rules also require companies to look at sustainability from two directions: how sustainability issues may affect the company, and how the company may affect people and the environment. This is known as “double materiality.”
Why Are Companies Looking at SBTi?
CSRD does not require companies to register with SBTi or obtain SBTi validation. However, the new ESRS require covered companies to disclose climate-related information, including policies, actions, targets, metrics, and transition planning where those topics are material. Because of that, some companies may choose SBTi validation as a means to support the credibility of their climate targets.
For companies preparing for CSRD reporting, science-based targets can help with:
- Climate transition planning;
- Greenhouse gas reduction goal setting;
- Consistent emissions accounting;
- Credible stakeholder communications; and
- Increased confidence in reported climate commitments.
What Should Companies Do Now?
Companies that may be covered by CSRD should start preparing before reporting deadlines arrive. Some practical next steps include:
- Assessing whether the company falls within the scope of CSRD;
- Reviewing greenhouse gas inventory methodologies and data quality;
- Evaluating existing climate targets and transition plans;
- Determining whether SBTi validation would support corporate sustainability objectives; and
- Strengthening governance and data management processes needed for ESG reporting and assurance.
Key Takeaway
CSRD does not make SBTi validation mandatory. But it does raise the bar for climate-related reporting. Companies that may be subject to CSRD should review their climate data, targets, and reporting processes now. For some companies, SBTi validation may be a useful way to show that climate goals are credible and supported by recognized methods.
How EHS Support Can Help
EHS Support can play a key role in helping companies prepare for these requirements by supporting greenhouse gas inventories, emissions data management, climate target development, internal controls, and documentation needed for sustainability reporting and assurance. Companies with EU operations, EU customers, or upstream and downstream business relationships in Europe should consider whether their existing ESG program is ready to support more detailed climate-related reporting.
For support preparing for these requirements or to discuss any questions or concerns you may have, please contact Liz Hoerning.
References
European Commission. (2026, July 3). Corporate sustainability reporting. Finance – European Commission.
European Commission. (2023, December 22). Commission Delegated Regulation (EU) 2023/2772. Official Journal of the European Union, L 2023/2772.
