How GNFZ certification helps compliance with EU Taxonomy, CSRD and CSDDD
This is Part Two in a three-part series on EU sustainability regulations.
GNFZ certification assists in compliance with each of the EU sustainability directives/ schemes introduced in part 1 by providing a credible, verified framework for emissions reporting that aligns with EU criteria. The certification provides the data, processes, and third-party validation needed to demonstrate substantial environmental contributions and prevent "greenwashing" claims.
In the following sections, we dive deeper into how the GNFZ net zero certification assists in compliance with each of the (currently) mandatory EU sustainability regulations.
GNFZ and EU Taxonomy
The EU Taxonomy classifies which economic activities are environmentally sustainable. GNFZ certification enables EU Taxonomy reporting and compliance by:
Providing a data-driven, auditable framework
GHG Protocol alignment: GNFZ's methodology is based on the Greenhouse Gas (GHG) Protocol, the same industry-standard used for EU Taxonomy reporting. This provides a recognized, credible, and compatible system for measuring and managing emissions.
Comprehensive emissions data: The GNFZ certification process requires the collection and tracking of Scope 1, 2, and 3 emissions for buildings, portfolios, or entire businesses. This detailed, quantified data is exactly what companies need to fulfill the EU Taxonomy's disclosure requirements.
Ease of reporting on environmental objectives
Substantial contribution: The EU Taxonomy requires economic activities to make a "substantial contribution" to at least one of its six environmental objectives, including climate change mitigation. The GNFZ certification provides a structured roadmap and verified milestones for emissions reduction, serving as proof of a substantial contribution to climate mitigation.
"Do No Significant Harm" (DNSH) principle: GNFZ certifications are holistic and focus on multiple categories, such as energy, water, waste, and emissions. This comprehensive approach helps companies demonstrate that their efforts in one area (e.g., climate mitigation) do not significantly harm other environmental objectives, thereby meeting the EU's DNSH principle.
Article 8 disclosures: GNFZ data can be directly used to calculate Taxonomy-aligned turnover, CapEx, and OpEx.
Enhancing transparency and credibility
Third-party verification: The EU Taxonomy aims to prevent greenwashing by requiring transparent and verifiable reporting. GNFZ provides independent, third-party validation of a company's net-zero plan and progress, adding credibility to its sustainability claims in annual reports and investor communications.
Incremental reporting: GNFZ offers milestone certifications that document progress towards net-zero. Companies can include this independently verified data in their EU Taxonomy disclosures, showcasing a credible and structured pathway for decarbonization.
Providing significant business advantages beyond compliance
Access to green finance: EU Taxonomy-aligned assets are more attractive to sustainable investors and lenders. Proving compliance with GNFZ certification can help companies secure green loans and bonds, which often come with more favorable terms.
Competitive advantage: As sustainability becomes a core expectation, a strong EU Taxonomy profile verified by GNFZ can differentiate a company from its competitors. It demonstrates market leadership and an advanced approach to sustainability.
Risk reduction: By systematically assessing and reducing environmental risks through the GNFZ framework, companies can future-proof their assets and mitigate potential regulatory and financial risks associated with climate change.
Improved stakeholder relations: Clear, verified sustainability reporting builds trust with investors, tenants, and other stakeholders who increasingly prioritize environmental performance.
GNFZ and CSRD
The CSRD requires companies to report on sustainability impacts, risks, and opportunities using ESRS. GNFZ certification streamlines CSRD compliance by:
Supporting double materiality assessments
Identifies impacts, risks, and opportunities (IROs): The CSRD requires a "double materiality" assessment, which analyzes a company's impact on people and the environment ("impact materiality") and how sustainability issues financially affect the company ("financial materiality"). GNFZ certification helps companies identify climate-related IROs by thoroughly assessing their environmental footprint. By disclosing emissions and climate impacts, GNFZ provides evidence for both financial materiality and impact materiality under CSRD.
Enables data collection: The GNFZ platform facilitates the collection of environmental data, which is crucial for determining what topics are material for CSRD reporting.
Providing auditable and transparent emissions data
GHG Protocol alignment: GNFZ certification is based on the Greenhouse Gas (GHG) Protocol. This ensures that the emissions data collected for certification is consistent, credible, and compatible with the European Sustainability Reporting Standards (ESRS) under the CSRD.
Comprehensive scope: The GNFZ process requires companies to account for emissions across their full value chain, including Scope 1 (direct), Scope 2 (indirect from electricity), and Scope 3 (indirect from value chain) emissions. Reporting on these scopes is a mandatory component of CSRD.
Third-party verification: GNFZ certifications include independent, third-party verification of a company's net zero progress. This directly addresses the CSRD's requirement for external assurance of reported sustainability information.
Creating a clear pathway for compliance and strategy
Actionable roadmap: GNFZ certification offers a structured pathway for companies to achieve net zero. This provides a clear roadmap and action plan, which helps a company demonstrate its progress toward climate goals—a key element of CSRD's disclosure requirements.
Target setting: GNFZ certification requires setting a science-based net zero pathway, aligned with the ESRS requirement to disclose transition plans.
Strategic planning: The certification process encourages companies to build a robust climate strategy aligned with the Paris Agreement, which is increasingly expected under CSRD rules. This can help inform disclosures regarding a company's business model and strategy in the face of sustainability issues.
Enhancing credibility and stakeholder trust
Reduces greenwashing risk: By validating net zero claims with an independent third-party GNFZ certification, companies can minimize the risk of greenwashing and enhance trust with stakeholders.
Strengthens investor and stakeholder communication: The detailed documentation and milestones provided by GNFZ can be leveraged to enrich CSRD reports. This offers stakeholders transparent and credible insights into a company's sustainability journey.
GNFZ and CSDDD
The CSDDD is focused on corporate due diligence for environmental and human rights impacts across the value chain. GNFZ certification directly addresses the environmental due diligence aspects of the directive through:
Comprehensive emissions measurement: GNFZ's process starts with a full assessment of a company's Scope 1, 2, and 3 greenhouse gas (GHG) emissions, using the GHG Protocol. CSDDD requires companies to adopt a climate transition plan, and this data provides the necessary baseline.
Value chain due diligence: GNFZ requires companies to account for Scope 3 emissions, which cover their full "chain of activities," including upstream suppliers and some downstream activities like transport. This aligns with CSDDD's requirement to identify and address environmental risks throughout the value chain.
Development of transition plans: The GNFZ process requires a company to draft a net-zero plan with clear, incremental targets for emissions reduction. This helps a company fulfill the CSDDD's mandate to create a climate transition plan that is compatible with the Paris Agreement goal of limiting global warming to 1.5°C.
Structured, auditable roadmap: GNFZ provides an incremental roadmap with milestone certificates for demonstrating progress toward net-zero targets. This creates a documented, auditable process that can serve as evidence of a company's diligent efforts to comply with the CSDDD's due diligence obligations.
Risk management evidence: GNFZ certification demonstrates that the company has identified and mitigated climate-related risks, which is a due diligence obligation in the CSDDD.
Third-party validation: The GNFZ certification is independently verified by a third party, which provides enhanced credibility and transparency. This supports CSDDD's reporting requirements by ensuring stakeholders can trust the disclosed information regarding the company's sustainability efforts.
Explore Part 1 of this series on “GNFZ enables compliance with EU sustainability regulations,” and keep an eye out for Part 3 of this series to dive deeper into mandatory EU Taxonomy, CSRD and CSDDD.
Reach out to learn more about how GNFZ net zero certification can help with the EU regulations.