ESG Sustainability Reporting Requirements in 2023

January 30, 2023

4 minutes, 51 seconds read

ESG Sustainability Reporting Requirements in 2023

Environmental, social, and governance (ESG) data has become a standard part of reporting for many companies, but has increasingly become a mandatory requirement. ESG factors describe a company’s sustainability and ethical impact to help investors make socially responsible choices. Now, the EU Council has approved a Corporate Sustainability Reporting Directive (CSRD) that expands the number of companies required to provide sustainability disclosures from 12,000 to more than 50,000. 

This updated requirement is expected to be felt globally, as it impacts non-EU companies that operate within Europe. As a result, corporations around the world should be considering how they can take steps to ensure better tracking and more transparent reporting of sustainability actions. 

Why is ESG important?

ESG sustainability reporting provides transparency into a corporation’s operations. These reports have become an essential tool for ensuring that companies’ commitments to the environment, communities, and their workforce go beyond lip service. More recently, ESG reporting requirements have become a tool for driving corporate commitments to reducing emissions and other actions that contribute to climate change. 

Companies that don’t consider these risks in their reporting are more likely to face unexpected financial risks and more intense investor scrutiny.

What to include in ESG reporting

ESG reporting consultant Sphera breaks down the criteria typically included in these reports. 


The environmental criterion describes how a company’s operations impact the environment. It addresses factors including energy efficiency, carbon emissions, water usage, deforestation, and waste management. It also increasingly addresses upstream and downstream resources through requirements around Scope 1 through Scope 3 emissions

Scope three emissions include indirect emissions generated as a result of a company’s operational decisions. Experts indicate that scope 3 emissions amount to as much as 90% of an organization’s overall emissions. Food waste is a significant example of scope 3 emissions. By reducing food purchasing to mitigate waste, organizations can reduce carbon emissions generated through agricultural activities, food production, and distribution. And, by disposing of food waste through environmentally friendly strategies such as biodigesters, organizations can reduce the amounts of methane emitted through the anaerobic decomposition of organic waste at landfills.


The social criterion describes the company culture, how it supports its people, and its broader impact on the surrounding community. This emerges through factors such as diversity, equity, and inclusivity initiatives; employee engagement; customer satisfaction; human rights impacts; and data protection and privacy.


Governance addresses a company’s internal system of controls, practices, and procedures for ensuring regulatory compliance and industry best practices. This includes factors around board composition, executive compensation, internal controls, shareholder rights, political contributions, and whistleblower programs.

New requirements for ESG reporting 

ESG reporting has become mandatory for certain companies. In early 2022, the U.S. Securities and Exchange Commission proposed updated rules that would require ESG disclosures. However, the EU’s ESG reporting rule approved in Nov. 2022 goes much further with its requirements. 

The new Corporate Sustainability Reporting Directive expands the scope and content of existing EU non financial reporting obligations. Not only does this capture a wider range of organizations, but it requires reporting on a broader range of ESG topics in more detail. ESG reports will be subject to mandatory audits and will feed into a publicly accessible website. These requirements go into effect over time: 

  • In 2024, CSRD requirements will apply to large public-interest companies with more than 500 employees. 
  • In 2025, CSRD reequipments expand to include companies with more than 250 employees or €40 million in revenue. 
  • Certain listed small and medium enterprises will be subject to CSRD requirements beginning in 2026. 

These requirements apply to EU companies and public and private non-EU companies that meet these thresholds. As a result, U.S.-based and other international companies with EU subsidiaries may be required to comply with the EU’s ESG reporting requirements, reports law firm Cooley LLP

How to simplify ESG reporting

Data will be key for demonstrating compliance with this new requirement. In its report on the CSRD, global consultant Deloitte advises that companies take three steps to prepare: 

  1. Create a baseline assessment. This is the time to understand your current state, current practices and partners, and how you compare to peers in the industry. With clear data on today’s emissions, organizations can effectively demonstrate future change. 
  2. Get assurance ready. Create a schedule and a plan for ensuring compliance with the CSRD. This should include factors around your internal controls and employee training. 
  3. Build a roadmap. Your plan for future ESG improvements should provide actionable steps. Deloitte advises that companies consider digital solutions to help more efficiently manage data. 

Organizations will find tools and equipment that provide clear data on waste management and emissions to be invaluable in supporting these efforts. Solutions like the LFC biodigester from Power Knot provide clear metrics for tracking and reporting via the LFC Cloud.

This cloud-based data analytic program provides visibility into an organization’s organic waste stream.

Larger LFC biodigesters come equipped with an NFC card reader that allows an individual to account for the type or source of waste entering the biodigester. 

As the biodigester breaks down food in an environmentally friendly way, it collects data on the types and quantity of waste digested. Users can easily identify trends over time. This insight can help organizations to adjust their food purchasing, making this a two-pronged strategy for effectively mitigating Scope 3 emissions. In addition, data generated on the LFC Cloud can be easily exported from multiple machines into a single comprehensive report. 

Whether or not your organization is impacted by the new CDSR requirements, they are a sign of the more stringent requirements companies of all sizes face for reducing carbon emissions. If you’re ready to learn how an LFC biodigester can help you control your Scope 3 emissions, contact Power Knot today.