EHSQ Resources – Cority EHSQ Resources – Cority
Menu Close
The Corporate Sustainability Reporting Directive (CSRD) and EU Taxonomy are key instruments to be used for directing capital into sustainable economic activities and increasing transparency about sustainability performance. Get your CSRD and EU Taxonomy questions answered and see how the changes in the EU may impact North America.

Corporate Sustainability Reporting Directive (CSRD) and EU Taxonomy: Top Questions Answered

With the Green Deal, the European Union not only wants to send a signal, but is also putting an ambitious plan for sustainable transformation into concrete terms. The EU Taxonomy and the Corporate Sustainability Reporting Directive (CSRD) are key instruments to direct capital into sustainable economic activities and increasing transparency about sustainability performance. Below we will answer some key questions we regularly encounter about these two instruments.

A Green Deal as an Ambitious Framework

The European Green Deal is a transformation and growth plan which aims to decouple the European Union’s economic growth from resource use. On January 14, 2020, the European Commission presented the European Investment Plan for this Green Deal with the objective to mobilize at least 1 trillion euros in sustainable investments over the next ten years.

Not least through the Investment Plan, the Green Deal addresses core problems such as the lack of a definition for sustainable investments and the high risk of greenwashing. Plus, it looks at the lack of comparability and availability of sustainability data demonstrating relevant corporate performance.

The EU Action Plan on Sustainable Finance is considered to be the central support for the European Green Deal, which was presented at the end of 2019 and will steer private investments to transition toward a climate-neutral economy. This is exactly where the EU taxonomy and the sustainability reporting obligation (old: NFRD; new: Corporate Sustainability Reporting Directive) step in.

The EU Taxonomy: Classification for Sustainable Investments

The EU Taxonomy is a classification system to clearly define sustainable investments and respective economic activities that contribute to the EU Green Deal. This classification will provide guidance to financial actors to make it easier to channel capital into demonstrably sustainable investments.

The EU Taxonomy – as it currently stands – considers the following six goals:

  1. Mitigate climate change
  2. Adaptation to climate change
  3. Protection of water and marine resources
  4. Transition to a circular economy
  5. Pollution prevention and control
  6. Protection and regeneration of biodiversity and ecosystems

The idea is for each of these six goals to define the technical screening criteria, KPIs, and thresholds to declare that an economic activity of a specific sector is taxonomy aligned. So far, criteria have been developed for “mitigate climate change” and “adaptation to climate change.” Criteria for the other four environmental goals will follow.

In addition, the current status of the Taxonomy Regulation focuses on specific sectors and their economic activities, namely the following:

  • sewage, water, waste
  • education
  • construction & real estate
  • energy
  • finance & insurance
  • forestry
  • health & social issues
  • information & communication
  • art & entertainment
  • manufacturing
  • transportation
  • environmental protection
  • scientific & technical activities

How the EU Taxonomy Works

To be EU Taxonomy aligned, an economic activity must contribute significantly to one of the six defined goals above. Additionally, it must not significantly affect any of the other five goals. And since the EU Taxonomy currently focuses exclusively on the six environmental goals, compliance with minimum requirements according to the OECD Guides on Multinational enterprises and UN Guiding Principles on Business & Human Rights is required as well. These three spheres, “substantial contribution,” “do no significant harm,” and “minimum safeguard,” must be positively assessed or answered for an economic activity to be considered aligned with EU Taxonomy.

The extension of the Taxonomy to include social aspects and additional classification levels is currently in discussion.

One Article Brings Together Corporate Sustainability Reporting Directive and EU Taxonomy

Article 8 of the Taxonomy Regulation will increase transparency in the market and help prevent greenwashing by providing information to investors about the environmental performance of assets and economic activities of financial and non-financial undertakings.[1]

Thus, the taxonomy will impact real economy companies. First of all, it will affect companies that are already required to report non-financial information under the Non-Financial Reporting Directive (NFRD). These will be subject to additional disclosure requirements in 2022 for the reporting year 2021. Later, the Corporate Sustainability Reporting Directive (CSRD) will expand the circle of those affected by a significant factor.

The NFRD, since 2018, has required many companies to report on non-financial aspects of their business such as environmental protection, social responsibility, respect of human rights, anti-corruption, and bribery. This reporting obligation (NFRD) is now being revised due to Article 8 of the Taxonomy Regulation and an adapted proposal has been developed under the name “CSRD.”

The CSRD will replace the NFRD in the future. The CSRD will come into force in 2024, so that companies will have to report in accordance with it for the first time for the 2023 financial year. In 2022 – based on existing standards (such as GRI and Co.) – a uniform reporting standard is to be published by the EU, according to which reporting is to be carried out. This standard will initiate more in-depth reporting, align how corporations in the real economy report on sustainability, and how financial market players approach ESG.

The scope of the reporting obligation will be significantly expanded. Where previously only large companies of public interest with more than 500 employees (e.g., capital-market oriented companies, banks, and insurance companies) were subject to the reporting obligation, the CSRD will affect all companies that meet two of the following three criteria:

  • 250 employees and/or
  • 40 million euros turnover and/or
  • 20 million euros in total assets

This means that instead of the current 11,700 corporations, almost 50,000 companies across the EU will be subject to reporting requirements and will also have to demonstrate their taxonomy compliance. The CSRD also extends the reporting requirements. In the future – in addition to the existing requirements – double materiality will need to be integrated in the management report.

Additionally, reports will need to contain future-oriented information such as goals and indicators and will need to be digitally extractable in a format like XHTML. Finally, limited assurance of the reports will become mandatory three years after the CSRD comes into force.

Common Questions About Corporate Sustainability Reporting Directive and EU Taxonomy

Let’s look at a few frequently asked questions that have reached us recently:

What are the implications and conclusions if a company is not taxonomy-aligned with its economic activities?

When evaluating a company’s activities, if one concludes that an activity is not aligned with the Taxonomy, there is currently no immediate sanction. However, one should think about how to get this activity aligned with the Taxonomy in the future in order to be attractive to the financial market.

As well, aligning one’s own economic activities with the Taxonomy will provide value in the form of a deeper understanding of one’s own sustainability performance, attractiveness to the financial market, as well as the future knowledge of one’s own impact on the environment, climate, and society.

How can a company best prepare for the upcoming requirements of the EU Taxonomy and/or CSRD?

Companies can prepare themselves for the upcoming requirements by establishing processes, data management, and a robust documentation of decisions regarding their own sustainability performance. Because, ultimately, this will be the basis for answering the EU Taxonomy and being compliant with the CSRD.

Which specific reporting standard is recommended in preparation for upcoming requirements?

This depends on the maturity of the company in terms of sustainability and reporting. The GRI standard is a good start for many companies, as it is holistic and approaches the relevant sustainability topics via double materiality. If your company is further along in your sustainability maturity journey, a standard that helps integrate financial and non-financial aspects in one consistent and coherent document may be of value.

According to the GHG Protocol, it’s also advisable to prepare a solid carbon footprint because the EU Taxonomy expects concrete information on the climate impact of a company’s activities through the first two goals.

92% of organizations are shifting their business strategy to be more sustainable. Experts are anticipating that because of the new Corporate Sustainability Reporting Directive, we'll see a new dynamic emerge around sustainability performance and reporting.

What impact will the EU regulations (EU Taxonomy and Corporate Sustainability Reporting Directive) have beyond Europe in the rest of the world?

At this point, it’s still highly speculative how this regulation will affect the rest of the world. But in the past, we’ve seen European standards become a worldwide benchmark. Experts are anticipating we’ll see a new dynamic around sustainability performance and reporting.

Cority recently engaged with independent research firm Verdantix to conduct a study, The Way Forward for ESG: Firms Are Adapting Business Strategy and Boosting Technology Investment, that found that 92% of firms are adapting their business strategy and model to be more sustainable.

Moreover, it’s well known that globalization is turning the world into a village where market mechanisms are moving closer together.

Sustainability Software Solutions as a Central Cornerstone

As companies begin adapting to meet the requirements of the EU Taxonomy and the Corporate Sustainability Reporting Directive, external auditing will become essential, which is why managing data accurately and efficiently is becoming a critical need.

Decisions and changes in sustainability management must be comprehensible and transparent to a third party. In addition, as the need for more granular data expands, larger volumes of data are being collected, which then needs to be aggregated – not always an easy task to handle manually without introducing errors.

Sustainability software solutions can play a central role in helping meet these goals. To do this, you need a resilient software system that supports you and checks plausibility, thus reducing errors. Check out our guide, Finding the Right Technology in a New Era of Sustainability for more info on what to look for when considering sustainability software to help navigate common sustainability reporting challenges. Improving sustainability performance and demonstrating the accuracy of the information to meet requirements will call for data-driven insights that software can help companies uncover.

Still have questions on EU Taxonomy or Corporate Sustainability Reporting Directive?

Watch our webinar on this topic or reach out to us, and we’d be happy to have a conversation.

[1] Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088 (OJ L 198, 22.6.2020, p. 13–43).

When it comes to manufacturing, smart companies are always looking for a competitive advantage. One way they can do so is to optimize their business’ value chain.

A value chain is a term that Michael E. Porter came up with in his 1985 book, Competitive Advantage, to describe the steps that need to be taken, from start to finish, in order to produce a product, or deliver a service.  

So, what does value chain mean in manufacturing? If you analyze your own company’s value chain, you may be able to figure out ways to make the process simpler and cheaper. For example, if you do not spend enough time and money in product planning, you may save money in the short run, but you may end up with products that end up being recalled, or that simply do not sell well. By paying closer attention to your value chain, you can increase communication and cooperation, and increase your customer satisfaction.

5 Major Components of the Value Chain

According to Porter, a successful value chain must contain the elements below. Without these components, the company will not succeed. Here is how they break down when it comes to manufacturing.

The five major components in the value chain:

  • Inbound logistics: In manufacturing, raw materials are needed to produce products. A warehouse may be needed to store the products, and a system of getting the materials to the warehouse must be running well, in order for this part to work.
  • Operations: This is the process of taking those raw materials, and manufacturing them into a product. For example, if you had a business making anti-gravity chairs, you would need to take the metal and plastic needed for the chairs, and then process them into the chairs.
  • Outbound logistics: This is the process of storing and distributing the finished products for sale. It is important that this runs well – for example, if your company manufactures artificial Christmas trees, but you are unable to get the trees into stores until mid-January, you will not sell many trees.
  • Marketing and sales: If potential customers do not know a product exists, they will not be interested in buying it. This is why companies pay to market and advertise their product – in order to increase sales and revenue. Anything from traditional advertising to in-store displays to social media marketing falls into this category. Some companies have an in-house sales team to sell their products directly to customers, while others simply get the products into stores, which are then sold by others to customers. This category also involves figuring out what customers want.
  • Service: If a customer buys a watch that stops working after three months, they are going to want to get the watch serviced – or get their money back. Ideally, the better the product is manufactured, the less time and money needs to be spent on service.  But companies who do not offer good service may see sales decrease, as word gets around about their policies.

4 Support Components in the Value Chain

Porter also identified the following as the four support components in the value chain:

  • Company infrastructure: This can include anything from the buildings themselves, to the equipment used to manufacture products.
  • Human resources: Even though you are manufacturing products, you need policies and procedures in place to handle people. This can include things like hiring and firing people, as well as offering benefits like health insurance.
  • Technology development: Companies that do not keep up with the latest in technology may find themselves lagging behind competitors. This category includes things like having the right systems and solutions in place, like quality management software.
  • Procurement: Who takes care of ordering the raw materials, paying for things like computer tables and chairs, and buying the things that need to be purchased to keep a business running smoothly? Without procurement, a business can fall apart.

Where the margin comes in

Porter also talked about how the profit margin would be larger if these categories provided more value – at lower cost. For example, a company may find it more profitable to outsource some of the support activities to others, rather than have an in-house technology department. On the other hand, businesses may be willing to make bigger expenses in the short term to increase profits over the long haul.

For example, they may want to hire an outside advertising firm to market their product and increase consumer awareness. While this will be an expense at the beginning, it will result in many more sales, particularly if the advertising hits a nerve with customers’ needs. The same rationale goes for spending more time researching consumers’ needs for a new product – the short-term expenses could result in long-term sales.

Other manufacturing resources you might like:

Quality management professionals in the manufacturing sector know all too well how Failure Mode and Effects Analysis (FMEAs) and control plans can positively impact your operations, reduce the cost of poor quality, and decrease the number of defects in your product and processes.

But, the concept can be challenging to convey to company stakeholders who may not have as deep of an understanding. In this post we’ll walk through what exactly FMEA is and how you can leverage it to create a control plan to commit to continuous improvement.

What is Failure Mode and Effects Analysis (FMEA)?

Failure Mode and Effect Analysis (FMEA) is a continuous improvement mechanism used to identify all possible or actual defects, errors, risks, or failures in a product, process, or service. Once these failures have been identified, they are ranked by the gravity of their consequences, frequency of occurrence, and ease of detection, and, assigned a Risk Priority Number (RPN). In short, the higher the risk, the higher the priority when it comes to resolving the issues.

Failure Mode and Effects Analysis should first be implemented during the earliest possible design stages of a product or process and then continuously throughout any redesign processes. The goal of FMEA is to identify critical issues as early on in the development lifecycle as possible to make them easier to mitigate and overcome — this also includes anticipating potential problems.

When you can predict what might go wrong with a product, you can plan to address it before it affects your stakeholders and improve its long-term performance and reliability.

What Are Control Plans?

A control plan is an end output of the FMEA process. It’s a written document that contains critical information on how you intend to control, or avoid, the identified risks from the FMEA, starting with those that have the highest priority (as identified by their RPN).

The elements of a control plan include:

  • part information
  • process steps
  • methods of control
  • measurements
  • inspections
  • quality checks.

Control plans, like many of your quality records, are a living document that you will revise and edit over time as you refine your quality processes or change your product or process, including its characteristics, specifications, design, control methods, or integrated systems. At their core, control plans allow your company to reduce production waste and maintain consistency, so identified issues don’t snowball into something more detrimental.

Where Do Failure Mode and Effects Analysis and Control Plans Fit into the APQP Process?

Advanced Product Quality Planning (APQP) is a structured process to ensure quality and customer satisfaction from conception through manufacturing. APQP is important because it provides a framework for developing, producing, and maintaining quality products that satisfy your consumers.

APQP has five key phases:

  1. Product Planning and Quality Program Definition
  2. Product Design and Development
  3. Process Design and Development
  4. Product and Process Validation
  5. Product Launch, Assessment, and Improvement

Of those five phases, FMEAs apply directly to Phase 2 and Phase 3. In Phase 2, Design Failure Mode and Effects Analysis (DFMEA) is used, which ensure defects are addressed, root causes are identified, and preventative actions are in place for the product design and development phase.

In Phase 3, Process Failure Mode and Effects Analysis (PFMEA) is used, which addresses the potential failure modes in production processes to ensure everything is in place for productivity, efficiency, and consistent quality. As mentioned above, once the defects from the DFMEA and PFMEA are identified, a control plan can be created and implemented to fix those identified issues.

Why Use Failure Modes and Effects Analysis?

While it may be clear that Failure Modes and Effect Analysis can have significant benefits to your quality processes, it’s worth noting that there are major quality risks to not implementing FMEAs as you introduce new products or adapt existing ones.

The overarching goal of FMEAs and control plans is to proactively identify, mitigate, and address risks before they happen, which every company can benefit from. Having the ability to catch failures before they have a significant impact on your manufacturing operations means that you can reduce potential threats, improve product reliability and quality, and increase customer satisfaction. Mitigating, eliminating, or reducing these risks also means quicker production time, and thus, a faster turnaround to launch a new or updated product.

Furthermore, implementing FMEAs in your operations can substantially reduce the cost of quality. Rather than waiting until your system breaks down completely, fixing failure points incrementally as they are identified or anticipated can eliminate the risk of a complete assembly or production shutdown.

FMEAs can also improve safety. The ability to identify and anticipate parts that may become outdated or are at the end of their natural lifecycle can mean less risk and safer equipment for your employees who use or service the equipment.

FMEA and Quality Management Software

Manual methods of tracking revision histories to living documents make APQP a cumbersome task, especially for quality managers that simply do not have the time to track down improperly filed documents from several years ago. In an ideal scenario, changes to one APQP document should trigger an alert that reminds you to revisit the subsequent or previous steps in the APQP cycle.

That’s where having a streamlined and automated solution for your APQP processes is beneficial. Failure Modes and Effects Analysis and control plans improve when you can manage all the necessary APQP documents (flow diagrams, FMEAs, and control plans) in one holistic enterprise quality management solution.

Think of a scenario where your company adds new machinery to the shop floor. If you have a sound APQP software solution in place, you will be able to anticipate the changes you need to make to FMEAs and control plans to accommodate updated production processes.

Since APQP is a continuous process that contains various elements, having a centralized location for your processes provides you the benefit of having a broader, enterprise-wide perspective on quality.

Cority provides a solution to the APQP puzzle by offering process solutions, FMEA software, and control plan software solutions. As a result, using these modules within our enterprise quality management solution can allow for reduced risk, increased productivity, and reduced costs while meeting your quality standards. 

When it comes to documenting and meeting compliance requirements, many environmental teams rely on in-house tools, spreadsheets, calendars, and sticky notes, but these archaic processes can cause a lot of headaches and environmental compliance challenges.

These manual processes often lead to error-prone, inconsistent data and missed compliance deadlines, which often come with hefty fines. This is especially true for retailers, which have their own unique set of environmental compliance challenges, such as tracking storm water​ activities, conducting site-level inspections​, keeping up with regulatory issues, managing service providers, and renewing licenses.

However, retailers don’t have to use these out-of-date methods to manage their compliance program. Today’s software innovations can help retailers not only improve compliance performance but also significantly reduce costs and streamline operations.

Here are three ways EHS software can solve some of the biggest environmental compliance challenges retailers face.

Variability among multiple locations

Retailers with multiple locations face different compliance requirements based on their jurisdiction and location. Even service needs, assets, and required activities can vary from store to store.

Take, for instance, storage tank capacities. While one location may require a certain tank size, it may be unnecessarily large for another urban site with a smaller geographic footprint, which means wasted costs.

In fact, we work closely with a major retailer that had 500 locations scheduled for remodeling in a single year. Before using environmental compliance software, the retailer automatically replaced the tanks with a larger model because it didn’t have the insight to see that these tank upgrades were unnecessary. By using our compliance software, the EHS team provided data to the remodel team that revealed historical tank usage. Rather than blindly upgrading all tanks, the retailer could make a data-driven, informed decision about how to proceed. 

For every store that didn’t upgrade tanks, the retailer saved about $10,000. Considering that about half of the 500 remodels didn’t require a tank upgrade based on data, this resulted in a significant cost savings and gave the EHS team an opportunity to play a critical role in identifying a reduced-cost outcome for the business. 

Poor data collection and quality

Relying on paper data collection, email, and individual spreadsheets makes for a cumbersome and error-prone tracking process, which often leads to poor data quality with missing information and documentation. Without a central, in-house data repository, work is often duplicated, resulting in hours of wasted labor. The lack of transparency also becomes an issue when teams across sites don’t have access to full data sets, especially when a regulator is on-site and asking to see compliance records.

One of our major retail clients used to struggle with this when tracking storm water process management. Relying on spreadsheets, email, and eight different contractor websites, the retailer wasted hours digging through emails to determine what work occurred at each facility, and even approved the same work order multiple times. 

After the retailer implemented compliance software, contractors could identify work orders through the software, allowing the retailer to track, approve, and review the work prior to payment in one centralized location. In some cases, the retailer used that capability to outbid multiple contractors for better pricing, resulting in 20 percent savings in the first year alone. The compliance software helped the retailer create a defined workflow for storm water, ensured accurate record keeping, and provided contractors with better visibility to inspection requirements.

Related: That Thing No One Wants to Talk About: Dirty EHSQ Data

Incomplete reporting and analysis

Beyond data collection, many retailers struggle to conduct an in-depth analysis across their environmental programs without a centralized data source. Often multiple data sources span the company, making it difficult to track thousands of permits and certifications as well as the various environmental programs, such as waste, storm water, and grease management. Data discrepancies become a real issue without a sophisticated tracking system. Retailers must make important decisions about their operations without adequate data – and sometimes with inaccurate information. 

One retail customer of ours dealt with this same problem before implementing Cority, which automates these processes and creates a single data source for improved visibility and accountability. With this critical data at the retailer’s fingertips, the EHS team could quickly look up service data, generate key program metrics, and proactively identify seasonal trends and estimate program usage around those dates. The software even allowed the retailer to create reporting reminders to avoid noncompliance penalties, including fines, additional obligations, and negative media attention that comes with those missed deadlines. Perhaps most importantly, when a regulator paid a surprise visit to a store, the manager on-site had the right information available.

With the right software, you can easily manage site variability from a single source, access better operational data, and work more efficiently when analyzing data and creating reports. Digitizing your processes and maintaining your critical EHS data in cloud-based software helps you reduce risk, streamline operations, and lower costs for overall improved compliance performance.   

Overcome your Environmental Compliance Challenges

Keeping up with constant regulatory change and proactively identifying issues before they become incidents isn’t easy. That’s why we teamed up with Trinity Consultants, to answer five of the most frequently asked questions we get about how to create a culture of compliance, minimize risk, and overcome common environmental compliance challenges. Check our eBook, How to Reduce Environmental Risk and Create a Culture of Compliance to learn more.

The start of a new year is always a great time to kick off a new EHS software solution project. Consider this post a primer on what to ask to get a better sense of your organization’s buying processes before engaging with prospective EHS software solution providers.

So, you want to purchase a new EHS software solution. First of all, congratulations! Whether you’re an EHS manger or a member of the executive team, you’ve made a decision that has the potential to transform the way your organization does business and empower healthier, safer, smarter, and more sustainable outcomes.

Now, where to begin?

Ideally, your software buying process should start with a review of your organization’s overall process. A little preparation can save you a lot of time, money, and headache. Here, we’ve outlined the most critical questions you should be able to answer before you embark on your EHS software purchase process.

Have I defined my problems, opportunities, and priorities?

Before you start evaluating EHS software solutions, you need to know exactly what you’re looking for and how these needs align with your organization’s strategic, operational, sustainability, and risk management objectives. Define your solution requirements and make sure you understand what the priorities are within your organization. This means consulting your potential end users and subject matter experts. Get them involved in the project as early as possible so you can better understand organizational challenges and where the real pain points and procedural gaps are.

In addition, you should identify key stakeholders among your executive team – we call them “Champions” (people who have power and influence to drive programs) and “Economic Buyers” (an Economic Buyer – a person who can ultimately say Yes or No and determine whether or not a project has the proper impact). Their input is key to ensuring that the outcomes the solution delivers meet your organization’s strategic objectives, and will impact downstream requirements and objectives in the buying process. Executive sponsors will also be needed downstream when it comes to funding and approval, so the sooner these stakeholders are identified, the better.

In some cases, it may be worthwhile to consider engaging an outside consultant to help with this process. It can be beneficial to get a neutral third-party opinion of where your areas of risk are. For instance, if you’re managing your safety program using spreadsheets, where does that leave you open to fines or other disciplinary action?

Have I engaged IT?

IT is the stakeholder that’s forgotten most often. Having IT on board and engaged early in the process is a huge help when purchasing an EHS software solution. Even if your potential vendors include multi-tenant SaaS providers and there’s a light load on the IT department, your IT staff will be an invaluable resource about technology requirements at your organization. We recommend engaging them early, rather than hoping they don’t get in your way.

Related: 5 Reasons to Embrace SaaS for EHS Software

For any software project, there are a couple of IT workflows you must familiarize yourself with. The first are the IT architecture requirements. Your organization may have specific requirements as to how software must be structured and your IT staff will be deeply familiar with them. This includes everything from supported web browsers and mobile devices to the location of servers. Second are the IT security requirements. Typically, IT will provide a highly detailed security questionnaire to prospective vendors in order to establish if they meet the organization’s standards for digital security and protection. Familiarizing yourself with both of these sets of requirements ahead of time will allow you to quickly screen potential vendors, as well as expedite IT security approvals.

Regardless of how much involvement IT will have after implementation, get them involved early and often in the buying process. IT can’t always give you the thumbs up, but they can always give you the thumbs down.

Do I understand my organization’s buying process?

Every company is a little different when it comes to the nuts and bolts of the software procurement process. Some companies require you follow a formal buying procedure that involves screening vendor presentations and obtaining detailed quotes. Others look for an RFI, followed by an RFP. Some companies also require the formation of a buying committee.

Related: The Ultimate RFP Template for EHS Software

Understanding the unique buying process for your organization is critical. You can do this by engaging your procurement contacts and talking through the process. Tell them what you want to do, and see what procedures dictate how you can get from Point A (identification of need) to Point B (software purchase).

Have I established executive sponsorship?

As we mentioned earlier, identifying and engaging Champions and Economic Buyers as executive sponsors early in the process is key. Larger corporate projects typically require a sponsor or supporter at the VP level or higher, so be sure to get approval from your Champion and/or Economic Buyer before you engage vendors. It may be the entire executive team or just one person, but without an executive sponsorship, you are not going to be successful in your purchase.

So how do you convince your potential sponsor to get on board? Create a compelling business case. Remember, for the executive team, numbers typically speak louder than words. Make sure you tie your justification to the bottom line and other objective metrics that your executive team cares about. Software vendors, EHS consulting firms, and independent analyst firms such as Verdantix can assist you in building ROI justifications to help with this process. If members of the executive team can clearly see the business value in your proposition, they will be much more likely to support you through the project.

Do I have funding?

This question is pretty straightforward. You need to ensure you have sufficient funds to purchase your chosen software solution, and that means contacting whoever is responsible for the budget within your department or organization.

It’s important to note that there’s typically two types of budgets involved in a new software purchase: a software licensing budget and an implementation budget. Make sure you understand how the numbers break down and confirm that you have money for both. You might have money to purchase the software, but if you don’t have the funds to implement it, you’re wasting your time.

Related: Global EHS Software Implementations: Tips & Tricks from a Professional Services Project Manager

In addition, be sure you understand the true cost of your problem. Do you have a $10,000 problem or do you have a $100,000 problem? No one wins if the buyer or EHS manager comes into the buying process under-educated about the real world cost of the issue they’re trying to solve. For instance, a comprehensive air emissions management program at a large enterprise is not a $10,000 problem. Avoid sticker shock by doing your research and understanding the market.

What is the contract negotiation timeline?

Getting a contract negotiated and approved can take weeks, or even months. Prepare yourself ahead of time by having a conversation with your legal and/or contracts department to better understand the process. Having a handle on estimated turnaround times for contracts and what the department’s current workload is will help you set out a realistic timeline from initial evaluation to contract close and beginning of implementation. The earlier you can get contract discussions started with the vendor, the faster this process will go.

Who signs on the dotted line?

This is the simplest, but most critical step in the entire EHS software solution purchasing process. Know who signs the contract as it can vary tremendously depending on contract size and scope. Signatory requirements range from executives, to budget holders (IT or business users) and procurement personnel. In some cases, the process may involve several people from multiple levels of management.

Even more importantly, be sure to prepare your signatories ahead of time. Let them know that the project is coming – you may even want to engage them from the beginning of the buying process. Even after the ink is dry on the contract, getting the final sign-off can hold up final procurement and implementation for weeks.

At the end of the day, it’s all about knowing your buying process. Software procurement is a team effort, and as the project facilitator, you need to be prepared and engage with the right people from the outset. Doing your due diligence is key to streamlining the software buying process, as well as saving yourself and your organization time and money.

Everything you need to know to select and implement the right EHS Software Solution

Ready to take the next step in your journey? Check out The Ultimate Guide to EHSQ Software Success, which walks through everything you need to know to secure buy-in, choose the right EHS software solution, and ensure your initiative is a success:

Evaluating EHS software solutions? Read this guide for a comprehensive look at everything you need to know

As the backbone of many other industry-specific quality management standards, the ISO 9001 series of standards is critical to helping you manage quality processes from a company-wide point of view. In one manner of speaking, too many manufacturers today view ISO 9001 certification as an afterthought – until these companies fail an audit, which only raises total cost of quality.

To give you a refresh on ISO 9001, this post covers the most important facts you should remember and the most common pitfalls to avoid when preparing for your next ISO 9001 management review.

Certified To ISO, Not By ISO

Your job as a quality management expert during your next ISO 9001 management review is to remind your colleagues that manufacturers become certified to ISO standards – not by ISO (the International Organization for Standardization). This distinction is very important to make to coworkers who may or may not have a deep understanding of what ISO certifications actually mean.

This common misconception is understandable because many of your coworkers may still believe that “quality is a three-letter word,” meaning that ISO certification is just another overused buzzword from their point of view. Also, the ISO standard does not refer to the quality of a specific product. It’s the processes that matter most in the ISO 9001 series, and as a quality management professional, your task is to stay focused on this process-centric approach.

Today, the global manufacturing industry moves forward at an astounding pace. The ISO 9001 approach (ideally) allows your company to be able to adapt to fast changes in quality standards domestically and abroad, which leads into the topic of ISO certification.

Breaking Down the Three Types of ISO Certification

Manufacturers are certified to ISO standards in part because there is no agreed upon international enforcement mechanism, and this fact has been one of the main critiques of the ISO series in general. Depending on how your company operates from a global perspective (i.e., outsourcing, supply chain management, etc.), you may have to find new ways to weave different certification procedures into a holistic quality management system.

As a quick example, you should remind your coworkers that some countries have nationally regulated accreditation procedures, but others rely completely on privately owned firms to certify companies to ISO 9001. In general, there are three basic ways to meet ISO standards: first-party certifications, second-party certifications and third-party certifications.

A first-party declaration is simply a self-declaration of ISO compliance, but second-party certification involves one company auditing another company. The issue with these two types of certifications is that they may or may not actually involve formal certification. As such, third-party, independent certifications are the type that most of your coworkers will recognize when reviewing ISO 9001 standards.

Top Three Pitfalls of ISO Certification: What to Avoid Before Your Next ISO 9001 Management Review

Without a doubt, the ISO 9001 series of standards are business-critical. Becoming certified to ISO gives your company credibility as a sound, responsible business partner, but there are several common mistakes to avoid during the ISO 9001 certification process.

Let’s take a closer look at the top three pitfalls to avoid when preparing for your next ISO 9001 management review:

Poor Document Management

Poor document management is still one of the top reasons why your company might fail its next ISO 9001 audit on first inspection. The reason is that the entire series of standards constantly emphasizes the importance of documentation. Your engineering change orders and revision histories may seem complete until an auditor visits a site and cannot retrieve all of the required documents in a reasonable amount of time – if at all.

Differences Between Certification Bodies

The second certification pitfall you need to avoid revolves around understanding the differences between the certification bodies of different countries. Simply put, being certified to ISO in the US does not necessarily mean your company will be certified in another country, even if you choose a well known certification firm to guide you through the process. 

You will have to work closely with several different government-regulated accreditation bodies if your company operates many manufacturing sites around the world.

Employee Awareness of Quality

The ISO 9001 series states very clearly that it is management’s responsibility to make sure all employees understand their role in a quality management system. You can present ISO 9001 auditors with a wonderfully formatted quality management manual, but if your employees don’t buy in to building a culture of quality, auditors will reveal this shortcoming during their interviews with employees.

Since the ISO 9001 series is the backbone of your company’s quality management system, you should review your certification posture carefully with upper management. To make the conversation more constructive, this refresh of ISO 9001 facts and pitfalls will help make the case for improvements easier.

We are honored to have a guest author on our blog, Mary Foley, Expert Services Strategy Director from Enhesa. Partner to multi-national corporations that want to help make the world a better place, Enhesa empowers businesses through comprehensive EHS and product compliance intelligence. Mary Foley has been working directly with these companies to enhance their risk management and compliance programs for over 20 years. Most recently, she’s led them in the challenge of deciphering the myriad elements of Corporate Reporting and charting a way forward by managing risks of non-compliance. 

ESG as easy as 1,2,3? If you’ve even thought about implementing Environmental, Social, Governance reporting in your business, you already know that it’s not that simple. While reporting might not yet seem a clear-cut process, you can have a clear view of the best next steps. That includes preparing for the future of ESG. Below, are my top takeaways from tracking ESG trends – and what they mean for tomorrow’s Corporate Reporting. 

1. Hard-and-fast rules are on the horizon.  

Technically, this area isn’t widely regulated – yet. But that’s changing quickly. Of course, there’s already a plethora of guidance, standards and principles, lining the path to reporting requirements. But the biggest trend we see today is the advancement toward regulations related to Corporate Reporting. This is especially evident through instruments such as the current European Union (EU) NFRD (Non-Financial Reporting Directive) taxonomy regulation and the forthcoming Corporate Sustainability Reporting Directive (CSRD). The game-changer, at the moment, however, is the formation of the International Sustainability Standards Board (ISSB), whose intention it is “to deliver a comprehensive global baseline of sustainability-related disclosure standards.” Altogether, ESG and Sustainability Corporate Reporting is hurtling down the road and moving rapidly from voluntary to mandatory.  

The CSRD is set to firm up today’s guidance and frameworks-based approach. This proposed Directive will extend the scope to all large companies as well as all publicly-traded ones. When adopted, companies operating in the EU will need to meet even more detailed reporting requirements based on current financial reporting standards.  

On the other side of the Atlantic, the US Securities and Exchange Commission is in the process of reviewing disclosure rules and guidance, and we await the publication of its approach. The feedback could mean modifications to existing requirements, the emergence of new ones, or even cite new frameworks for companies to adhere to. What we can be fairly sure of is that they’ll be closely aligned with the ISSB standards and the Task Force for Climate-Related Disclosure (TCFD) recommendations. 

2. Make way for standardized (and verifiable) metrics. 

All the forward movement toward regulation brings forth not only the need for standardization but an official call for it. As part of the CSRD, businesses’ reported information will be required to be taggable – right from its initial collection. Eventually, those tags will need to roll up into a European-wide single access point. That means standardization needs to start at the source, usually at the operational level. Both reporting methodologies and how you track your metrics in the first place will need to follow a uniform format.  

That track also leads back to transparency. More and more, verifiable and evidenced-based information is key when it comes to successful corporate reporting. Where aspirational goals (and achievements therein) were once an acceptable approach, the status quo will instead soon call for verifiable data – and nothing short of it. As we move into a more advanced era of ESG and Sustainability Corporate Reporting, your business will need to be transparent about your initiatives as well as your processes for measuring them.  

If you already have a framework for tracking your EHS compliance metrics, then you’re more than one step ahead. Records on how well you meet your regulatory requirements and how you provide evidence-based data – that can be both measured and verified – will be crucial.  

As such, it’s important to build on what you already have. This isn’t a case of reinventing the wheel. Most companies already understand what’s material to them. You know your business, you know your risks, you know your EHS compliance obligations, you know what’s important to your stakeholders. Use this information to form the basis for your eventual ESG and Sustainability Corporate Reporting. 

These “hard” metrics, such as EHS legal obligations and, for example, requirements for energy efficiency of buildings and processes, emissions trading, waste management, etc, all give you a leg up on providing a clear picture of your efforts. This data’s generation, capture, and management at each step of the process is vital. Having a robust mechanism to meet, monitor and provide evidence of your progress on these requirements is no longer just a nice to have.  

3. Skip the silos: Collaborate based on clear-cut roles. 

From beginning to end, ESG and Sustainability reporting is only as strong as the bridges you build across your business. While your reporting will need to have a clear leader to keep it moving forward, you won’t get far without inter-team collaboration. Its importance will continue to increase as Corporate Reporting evolves. 

Determining materiality is where the rubber hits the road, and there aren’t any shortcuts. When first starting out, you’ll need to understand how your ESG and Sustainability reporting processes fit with your strategic objectives and embedded risk management programs. This will mean consulting with teams across your businesses, including your EHS, ESG/Sustainability/Corporate Social Responsibility (CSR), Financial, HR, Risk Management, and Governance teams (among others).  

At the same time, you’ll need to ensure your reporting has one clear, collective voice behind it. This means choosing definitive roles for teams: who will own the information and who will lead the reporting. Later in the process, eliminating potential blurred lines between business teams will keep your processes clear – and transparent – for both stakeholders and regulators. 

Of the different teams involved in Corporate Reporting, EHS has historically had one of the foundational roles. While some may think that ESG and Sustainability initiatives fall solely to the Sustainability teams to work out, in reality, EHS professionals play a big part. To confirm this, in a poll during Enhesa’s recent ESG reporting webinar, over half of the respondents reported that ESG and Sustainability responsibilities already fall within their EHS teams. 

Successful Sustainability Reporting starts with where you stand on EHS regulatory compliance 

The bedrock of ESG and Sustainability Reporting should be evident in your EHS compliance metrics. With the right approach,  these metrics will cleanly feed into your Corporate Reporting, disclosures, and then into your ESG ratings. The time to transition is now. If regulators are moving forward, you need to be ready. While it’s good news that you can begin from where your business already is, to move forward, there will be some decisions to make and actions to take.

To learn more about how to best use your EHS compliance information to inform your Corporate Reporting and to keep track of emerging guidance and regulations, watch the Enhesa Webinar Replay of ESG reporting: How you can leverage your EHS insights. 

There’s never been a more critical time to invest in a quality management system (QMS) to help elevate the quality of your business. But creating a successful business case to justify a quality management system means you have to approach it holistically. Every stakeholder in the value chain must buy into the business case you present to justify QMS implementation and maintenance costs. At the very least, your business case should include these elements:

  • Organizational alignment/impact of quality
  • Stakeholder engagement
  • Maturity and readiness
  • QMS data (current versus future state)
  • Communication of value

By following these steps, your company can realize the cost benefits and savings of improved quality management throughout the enterprise.

1. Organizational Alignment and the Impact of Quality

In the past, QMS has been relegated to a lower status than monolithic ERP, MOM or PLM systems. To overcome this hurdle and elevate the importance of investing in quality, you need to analyze quality from an organizational alignment perspective and its impact on quality overall.

Here are some key questions to answer:

  • What is your company’s current state of quality?
  • Do current quality management processes align across departments?
  • Can quality enable improved alignment with strategic objectives?
  • How does cost of quality affect operational planning?
  • What data do you possess to support your assertions?

Essentially, this step amounts to assessing your current QMS capabilities and their effectiveness from a holistic point of view.

2. Stakeholder Engagement

Of all the steps discussed in this blog post, many would consider stakeholder engagement the most important. Without top-down buy-in, any QMS software implementation will most likely fall short of its potential. Creating a business case to justify a quality management system requires stakeholders to see how quality affects the value chain.

Here are some key questions to answer:

  • How do the costs of quality affect a stakeholder’s domain?
  • Do stakeholders think of a QMS on a functional basis or as a value chain?
  • What motivates stakeholders to engage in the QMS discussion?
  • What data must you present to engage stakeholders?

Far too often, quality departments provide treasure troves of data, but they neglect to place this data in context. To build a winning quality management system business case, you need to engage and educate your stakeholders.

3. Maturity and Readiness

Despite its quantifiable cost of quality reductions, a holistic QMS implementation may not be feasible. If your company lacks the maturity and readiness to embrace an improved QMS, any implementation will be incomplete.

To gauge your company’s maturity and readiness, you should include the answers to these questions in your quality management system business case:

  • What role does improved QMS play in best-in-class organizations?
  • How far must your company go to achieve best-in-class status?
  • Are stakeholders poised to lead and embrace a QMS?
  • Is your organization making progress in closing the maturity and readiness gap?

Maturity and readiness relates very closely to stakeholder engagement. Raising the bar on quality can actually expedite QMS maturity and prepare your organization to join best-in-class companies.

4. QMS Data

Not surprisingly, executives are going to demand that you present data to justify QMS implementation and maintenance costs. By presenting the right data in the right context, stakeholders can reach their own conclusions on why improved QMS is a sound investment. Numbers are certainly important, but context is key when presenting data to justify an improved QMS.

At the very least, you should include these data elements in your business case:

  • Site-level data
  • Production metrics
  • Supplier performance metrics
  • Compliance and auditing data
  • Cost savings over time

This data affords you the benefit of highlighting a stakeholder’s pain points and where an improved QMS can enable cost of quality reductions.

5. Communication of Value

Ultimately, you want to build the business case to justify improved QMS by building a consensus. Without multiple stakeholders’ buy-in, your business case will not be successful. Adopting the value-chain perspective is one way to communicate with stakeholders on a granular level. As companies learn to do more with fewer resources, improved QMS steps forward as a viable option to lower cost of quality. To start creating a business case to justify QMS, these steps will point you in the right direction.

Create a Compelling Quality Management System Business Case

For more tips to create a compelling business case for a quality management system, read Preparing Your Quality Management System Project for Quick Capital Approval.

Most organizations have programs for tracking, managing, and communicating the hazards of their workplace chemicals. While these programs help maintain a safe environment, many organizations could do more to prevent hazardous exposure from becoming an issue in the first place through the hierarchy of controls for chemical management and a corresponding chemical materials approval and screening process. With a defined process to screen, authorize, and purchase new and existing materials, your organization can better control and mitigate employee health and safety risk.

What is Hierarchy of Controls for Chemical Management?

As a guideline, many organizations follow the hierarchy of controls to identify the most effective and least effective methods to reduce chemical hazards. The National Institute for Occupational Safety and Health defines the five layers of hierarchy of controls for chemical management as elimination, substitution, engineering controls, administrative controls, and personal protective equipment:

Hierarchy of Controls

How Chemical Approval Process Works With Hierarchy of Controls

Clearly, eliminating hazardous chemicals from even entering the workplace is the most effective way to keep your employees safe. If a dangerous chemical never enters the workplace, employees don’t face any risks. But without a strong chemical purchasing approval process in place, organizations lack the necessary visibility to know which chemicals to ban.

Additionally, if a chemical undergoes any hazardous changes, most environmental, health, and safety (EHS) professionals do not learn about these alterations until the material is in use. Without a material purchase screening processes, they have no way to prepare – whether it be complete elimination or adding PPE requirements.

Of course, your organization can’t eliminate all hazardous chemicals. Some hazardous chemicals inevitably end up in the workplace, which is why those alternative control mechanisms are needed. A chemical approval and screening process does just that by giving a health and safety team the information they need to monitor requests, provide chemical information for expert review, offer feedback, and prepare for adjustments in chemical hazards to their operations and employees. From there, the health and safety team can effectively implement engineering controls, administrative controls, and PPE requirements that support a safe work environment.

For example, a chemical approval process may identify a dangerous yet necessary workplace chemical. This gives the health and safety team a chance to implement new processes to minimize contact workers have with the chemical, such as using wet methods to reduce dust generation, improving ventilation, or introducing fume hoods. Or in other cases, the health and safety team may decide to require protective clothing or respiratory protection or rotate job assignments to prevent overexposure.

You might also like: Reducing Chemical Management Risk with Trusted Chemical Property and Safety Data

Implementing an Effective Chemical Approval Program

With your employees’ health and safety riding on an effective chemical approval program, it’s important to invest in a robust system that can automate cross-checking regulatory lists, track inventories, and oversee location management. While organizations traditionally relied on spreadsheets to handle these functions, this type of manual system can lead to errors, require excessive hours of manpower, and lack central oversight. Instead, today’s most sophisticated organizations rely on SaaS-based chemical management software for their chemical approval process.

Your chemical management questions, answered

Chemical management is a priority for so many organizations. Yet, running an effective chemical management program remains challenging due to the degree of complexity involved. That’s why we teamed up with our friends at Verisk 3E to answer five of the most frequently asked questions we get about managing chemicals effectively. Check out the answers here: 5 Keys to Best-in-Class Chemical Management

Placing the cost of poor quality (COPQ) in context to all stakeholders (particularly, stakeholders in IT) requires that you’re able to turn to the right data at the right time to make your business case. The cost of poor quality (i.e., scrap, rework, returns, external failures, and so on) can give upper-level decision makers a stark reminder of the cost of neglecting quality from an enterprise point of view. As such, these metrics are critical to making your business case, but they should not overshadow other variables in the overall cost of quality equation.

In this post we’ll walk through what the cost of poor quality is, and how to improve the accuracy of your data as it relates to the cost of poor quality.

Cost of Poor Quality Criteria

Defining the Cost of Poor Quality (COPQ)

The Cost of Poor Quality (COPQ) refers to the costs that are generated as a result of producing defective material. The direct costs are easy to identify, such as labor, rework, disposal, material and recall costs. However, the indirect costs can also significantly impact your company’s profitability. These costs include:

  • Excessive overtime
  • Warranty costs
  • Returns
  • Excess inventory
  • Lost sales
  • Compliance failure
  • Increased audits
  • Brand reputation damage

COPQ for an average company is about 20% of sales. So a company that generates $100M in revenue can waste $20M in addressing poor quality. It’s in your brand’s best interest to identify to identify problems early to reduce the impact on costs, operational resources, brand reputation and, most importantly, your consumers’ health and safety. One of the best ways to ensure product quality and reduced costs is by implementing a quality management solution.

Contextualizing the Cost of Poor Quality

The costs of poor quality are very high-profile, and speaking broadly, they are well understood by researchers. The hard statistics vary from sector to sector, but the overall trend is clear: cost of quality rises substantially as defects come to light closer to the consumer.

Conversely, cost of quality is most favorable as quality issues surface earlier in the value chain. The need to mitigate non-conformances as early as possible is clear. IT’s role in enabling timely resolution of quality concerns is key to your organization’s quality management success. Without the ability to sift through accurate historical data to pinpoint root causes, any quality management professional would struggle to identify and mitigate issues consistently before products move through the value chain.

Unfortunately, it’s at this point where the shortcomings and limitations of your company’s current IT infrastructure and software tools may come into play, and the real-world situation is too often very less than ideal. Research by the Aberdeen Group has shown that a significant amount of organizations still struggle to effectively measure quality metrics.

You may view this finding as contradictory since your organization has likely made substantial investments in new technology and IT architecture over the last few years, specifically to address this issue. Your organization’s cost of quality metrics tie directly into your IT team’s ability to deliver timely and accurate data to the right personnel before products move on to manufacturing and downstream to your consumers.

IT Sprawl As a Real Phenomenon

As a quality management professional, you should never forget that IT sprawl is a very real phenomenon, particularly among large enterprises with multiple manufacturing sites and offices around the world.

Today, critical quality management related data may reside in fragmented silos of data sources, enterprise applications, and proprietary (i.e., expensive to maintain) solutions. Integration is absolutely critical to success in today’s leaner manufacturing environment. Integrating an IT architecture of such complexity is a daunting task, to say the least. Truly, your organization may be very efficient at collecting and storing financial data and quality management related data, but consolidating additional disparate data sources in the face of emerging quality management issues leaves much to be desired in today’s manufacturing environment.

In the end, your company may rely on wholly paper-driven processes to pinpoint and escalate quality management concerns to upper-level decisions makers, which allows inefficiencies to dilute quality management processes overall.

Improving the Accuracy of Data Tied to the Cost of Poor Quality

In one worst-case scenario, less than ideal IT systems may actually be the root cause of quality issues, especially with respect to an extended supply chain. The fact of the matter is that your organization may not have the most optimal IT architecture in place to collaborate among supply chain partners very effectively – if at all.

Your company may be missing a very important piece of the quality management puzzle: real-time visibility into supplier quality concerns. As such, your organization may not be measuring cost of quality as well as you might assume.

Large, incredibly complex enterprise software systems require careful implementation (and proactive maintenance) to ensure that all components of your software stack can coexist peacefully and at a reasonable cost to executives. Context is key when discussing the cost of poor quality to stakeholders in IT since this data often resides in silos of applications that are not inherently interoperable. For example, your enterprise’s software stack may include multiple ERP or MOM instances among disparate manufacturing sites as the result of mergers and acquisitions activity.

In a data-saturated manufacturing enterprise, critical quality management intelligence may fall between the cracks of your organization’s disjointed corrective and preventative actions (CAPA) processes, having an adverse effect on the cost of poor quality overall.

Learn more

Today, data quality is a mission-critical endeavor. Without timely, accurate, and ideally, real-time visibility into quality management issues throughout the value chain, your organization may see minimal gains in cost of poor quality metrics. 

An integrated quality management system is one strategy to consider in the face of such challenges. For more on that read Balancing the Cost of Quality, Technology Investments, and Integrated QMS.

Corporate carbon footprinting – especially for scope 3 emissions – is becoming an important responsibility for companies. The aim is to record, measure and understand their own climate impact in order to make an effective contribution to climate protection. Read on for insights into the practice of carbon accounting.

The call for ambitious climate protection is getting louder


An agitated civil society, led by the young climate activist Greta Thunberg, has increased the pressure on politicians and businesses to take bold action against climate change. The Paris Climate Agreement of 2015 manifested the commitment of the global community to limit global warming to below 2 degrees Celsius, and even to no more than 1.5 degrees. The recent COP-26 climate conference in Glasgow has again shown us that achieving this goal will not be a simple undertaking. And yet, we have now entered the decade of implementation. After all, we have enough data and facts; now we need more action.

Greta Thunberg, has increased the pressure on politicians and businesses to take bold action against climate change.


Additionally, the financial market is becoming increasingly concerned with the climate impact of industries and is raising the pressure – especially through the EU taxonomy. The EU taxonomy is a classification system to clearly define sustainable investments and respective economic activities that contribute to the European initiative of the Green Deal to lead Europe into a sustainable future. This classification will provide guidance to financial actors in the future to make it easier to channel capital into demonstrably sustainable investments. So far, criteria have been developed for “Mitigate climate change” and “Adaptation to climate change”.


The corporate response is increasingly bold and data-driven

Green house gas

Before companies can set ambitious climate protection targets – such as science-based targets or climate neutrality targets – to answer the call to action, the first step is to identify and assess the corporate carbon footprint (CCF), the so-called CO2 or climate balance. Scope 1, 2 and 3 climate data (according to the Greenhouse Gas Protocol) are used to measure how much CO2 a company emits directly and indirectly along its value chain. In practice, measuring the indirect Scope 3 climate data poses particular challenges for companies.


The Greenhouse Gas Protocol (short: GHG protocol) is the primary standard to provide guidance and structure along Scope 1, 2 and 3 emissions in the corporate carbon accounting process:
• Scope 1: includes the direct release of climate-damaging emissions within the company
• Scope 2: includes the indirect release of climate-damaging emissions by energy suppliers.
• Scope 3: includes the indirect release of climate-damaging emissions in the upstream and downstream supply chain.

As with the development of a sustainability strategy, when establishing a carbon footprint – especially for Scope 3 climate data – it is important to collect and calculate data along the most relevant categories. As a number of companies from different sectors and industries have already embarked on this journey, their materiality assessment of their Scope 3 climate data can provide valuable guidance. As demanded by the financial market, climate risk assessment along the value chain is also playing an increasingly important role.

In recent years, the Carbon Disclosure Project (short: CDP) has established itself as one of the most influential sustainability rating systems, enabling companies, investors, cities, states and regions to report on their environmental impacts. As a result, GHG emissions disclosure has increasingly become a standard process over the past ten years.

Scope 3 data: an undertaking with challenges

The main challenge in collecting especially scope 3 climate data is the prevailing lack of climate-relevant data. From this main challenge, corresponding subchallenges can be derived:

  • Complexity and lack of capacity: the GHG Protocol shows the depth of content and data that a carbon footprint requires. Especially for scope 3, there are various categories as well as calculation and approximation methods in the upstream and downstream value chain. Therefore, there is often a lack of capacity in companies in regard to those who take on this laborious task.
  • Lack of transparency and limited influence: Especially for scope 3 climate data, relevant data sources are not always collected within the organization itself, but come from suppliers, service providers or customers. Therefore, good and trusting relationships in the value chain are needed to create the willingness to collect relevant data and make it transparent.

According to the sustainability experts at Sustainalize, depending on the degree of complexity of the company and the value chain, there are different approaches to obtaining reliable climate data for accounting purposes:

  • Expenditure-based method: Sales multiplied by the average emission factors per monetary unit
  • Average data method: product quantity in kg multiplied by the industry’s average emission factors per kg
  • Hybrid method: a combination of supplier-specific activity data and industry average data
  • Supplier-specific method: inventory data at product level (cradle-to-gate) from goods or service suppliers

The most precise method is the supplier-specific method. The more concrete and valid the data is, the more reliable it is for deriving effective reduction measures.

Practical implications

scope 3 emission

In theory, frameworks and standards as well as initial best practices orient companies to the best methods for gathering and reporting on Scope 3 emissions. However, in practice, there are still some open questions. Therefore, let’s look at some of the most frequently asked questions:

What standard should I apply to create a Corporate Carbon Footprint?


The GHG protocol is more or less the bible for creating a climate footprint. Here, all relevant categories along the scopes are defined and described. In addition, frameworks such as CDP, GRI, SASB and the future EFRAG reporting standard are certainly helpful, although these only address climate protection as one part of an holistic sustainability reporting.

What relevance do scope 3 climate data have for companies that want to set science-based targets?

The Science Based Targets Initiative (short: SBTi) developed a framework several years ago for companies to set ambitious climate targets that are compatible with a 1.5 degree world. These targets are then considered science-based, as they have been calculated on the basis of the latest scientific findings for global warming. The process is as follows: In the first step, companies apply to the SBTi that they want to set Science Based Targets (SBTs). Then they have 2 years to calculate a carbon footprint, based on which the SBTs are calculated. If the result is that more than 40% of the documented CO2 footprint is in scope 3, then companies must also set an SBT for this scope. However, it is sufficient if 80% of the scope 3 data can be reliably determined.

Where should you start when collecting climate data?


The most important first step is: simply start. Start with scope 1 and scope 2 data and concentrate in scope 3 on the categories that are easier to collect or where you can make good assumptions for estimated values. A good example is often business travel, as there is already tracked data due to the travel cost accounting. This can be used for the calculation of the footprint. Later on, new categories can be added step by step and the data quality of existing categories can be improved.

Where can I find the relevant emission factors for calculating the footprint?


This is indeed no simple undertaking. There are many diverse sources, including those that are free or chargeable. It depends mainly on the provider whether they offer regional or country-specific emission factors for calculating the CO2 footprint. Of course, you can also use your own factors from the respective industry associations or, for example, from international energy agencies. Well-known sources are DEFRA (free of charge) or EcoInvent (with costs).

How to deal with partial data?


Of course, this partial data is difficult to compare. Therefore, the GHG protocol provides guidance for each individual category in scope 3 regarding how to best approach data collection and calculation. Basically, one should document consistently and transparently what has been included in the CO2 footprint, what has not and in which quality. Therefore, documenting and making it comprehensible plays an important role.

What should be considered when including suppliers in data collection?


At the heart of the matter is the established relationship with suppliers and how they have already been engaged in sustainability issues. Of course, joint data collection can also be contractually regulated in the future. However, it makes sense, especially at the beginning, to simply concentrate on the top 5 to 10 suppliers and start the dialogue on this joint learning journey. But the more companies will demand this data from their suppliers, the more likely it will be provided, as it becomes an important factor for business attractiveness.

Resilient climate data through software


The more the topic of climate protection and climate footprinting becomes professionalized and incorporated into the operational plans of a company, the more important it is to use reliable tools in order to cope with the complexity. Compared to excel sheets, professional software solutions can significantly increase data quality through automatic input validation and plausibility checks. In addition, a central input system ensures that calculation consistency and clear workflows and approval processes are guaranteed. For instance, Cority’s Sustainability Cloud with its integrated CO2 management is customizable for the individual requirements of companies and enables the inclusion of suppliers through standardized questionnaires.

Learn More

Everything you need to know to find the right sustainability technology for your organization.

To learn more about how a SaaS software solution can benefit your goals, some of the key features to consider when selecting a vendor, and why data matters so much to companies that are innovating sustainability, check out the eBook, Finding the right technology in a new era of sustainability.

Share This

Copy Link to Clipboard

Copy