The April 2022 draft of the EU’s Corporate Sustainability Reporting Directive (CSRD) signaled a step change in what is expected from large companies operating within, or with significant exposure to, the European market. It expands environmental, social, and governance (ESG) disclosure obligations in ways that many compliance teams are still grappling to interpret fully. With formal application slated for fiscal years beginning on or after January 1, 2024, the window for preparation is narrowing. What seems clear, even at this stage, is that the days of high-level, narrative-driven sustainability reports—untethered from rigorous supply-chain data—are drawing to a close.
The draft rules set out under the CSRD bring Scope 3 emissions and supply-chain transparency into sharp focus. The requirements are no longer satisfied by declarations of intent or broad targets. Instead, companies will have to demonstrate credible data-gathering processes, including emissions from upstream activities and raw materials. The emphasis on double materiality—whereby companies must report not only how sustainability issues affect their business, but also how their business affects people and the environment—compounds the challenge. And this, naturally, extends beyond their direct operations and deep into supply chains that, in many cases, remain only partially mapped.
One of the first practical steps compliance teams can take is piloting the collection of supply-chain emissions data using publicly available EU tools. The EU Emissions Trading System (EU ETS) offers an extensive, open database of verified emissions from thousands of installations across Europe. It can serve as a useful starting point for identifying significant upstream emitters in industrial supply chains. Similarly, Eurostat emission inventories provide aggregated data that, while not granular to the level of individual suppliers, can support the estimation of sectoral or regional emission intensities where direct data is not yet accessible.
For many companies, the first pass at this exercise will necessarily involve estimation rather than direct measurement. This is not ideal, but it reflects the current reality of supply-chain data availability. What matters is that firms establish a documented methodology that explains the basis of their estimates, identifies key assumptions, and sets out plans for improving data accuracy over time. Overly polished or artificially precise figures may, paradoxically, raise more red flags with regulators and stakeholders than honest, transparent approximations paired with clear improvement roadmaps.
Parallel to the emissions data exercise, it is becoming increasingly urgent for firms to construct internal raw-material traceability registries. These registries will form the backbone of supply-chain disclosures under the CSRD, aligning with the European Financial Reporting Advisory Group (EFRAG) draft European Sustainability Reporting Standards (ESRS). The concept sounds simple enough on paper: track the raw materials that flow into production, link them to specific suppliers, and capture relevant ESG attributes along the way. But in practice, building such a registry is rarely straightforward.
An effective raw-material traceability registry needs to be flexible enough to accommodate different levels of supplier transparency, yet robust enough to support verifiable reporting. The architecture might start with a tiered structure—Tier 1 direct suppliers at the top, with successive tiers representing deeper layers of the supply chain. Each material entry should record supplier identity, sourcing location, material type, quantity, and any available ESG certifications or audit results. Where data gaps exist, they should be flagged explicitly, not left hidden in the system. It may feel counterintuitive, but highlighting uncertainty in these early stages builds credibility, provided there is a plan in place to address it.
There is, of course, a tension between ambition and feasibility here. Compliance teams will need to manage internal expectations carefully. Senior management may push for fast, clean solutions that “tick the box” ahead of 2024. But meaningful compliance with the CSRD is not about box-ticking. It is about constructing systems that can stand up to scrutiny—not only from auditors, but from investors, civil society groups, and, increasingly, regulators armed with data of their own. The pilot phase should be used to map the contours of what is possible now, while laying the groundwork for deeper supply-chain integration in subsequent reporting cycles.
One pattern that has already begun to emerge among companies in the vanguard of CSRD preparation is the use of hybrid data models. These models combine direct supplier disclosures, publicly available data sets like EU ETS and Eurostat inventories, and industry benchmarks to create a composite emissions or traceability profile. It is not perfect. Few would argue that it is. But it represents a pragmatic response to the reality that direct supplier data is, for now, patchy at best in many sectors.
To support teams embarking on this journey, it may help to think about a phased template for building the traceability registry. Begin with direct Tier 1 supplier data—names, locations, contract volumes, any existing ESG certifications. Add in publicly available data on these suppliers’ sectors or regions to build out an emissions intensity picture. Then identify the key raw materials that account for the largest shares of input value or environmental impact, and work progressively to map these back through the supply chain. Document sources, methodologies, and gaps at each stage. And—this is important—resist the temptation to overstate certainty or precision.
These efforts will, inevitably, place strain on compliance and procurement teams. The CSRD’s scope and ambition are orders of magnitude beyond prior reporting regimes. But there is also an opportunity here. Companies that invest early and seriously in these capabilities will be better positioned not just to comply, but to shape the emerging standards and stakeholder expectations that will define sustainability reporting for years to come. Others may find themselves playing catch-up in a regulatory environment that, while still taking shape, seems unlikely to retreat.