Eine Hand mit Arbeitshandschuhen hält eine gerade produzierte Glasflasche – Symbolbild für den PCF
03.07.2025

Understanding and Calculating the Product Carbon Footprint (PCF)

If you take decarbonization, product responsibility and long-term viability seriously, the Product Carbon Footprint (PCF) is essential. This article explains what the PCF is, why it matters, how to calculate it – and why a product’s carbon footprint is the key starting point for effective climate management in your supply chain.

Key Takeaways

  • The Product Carbon Footprint (PCF) captures the total greenhouse gas emissions of a product across its entire life cycle – from raw material extraction to disposal.
  • The PCF is becoming increasingly important for companies, driven by regulations like the CSRD, CBAM, Green Claims Directive, ESPR and sector-specific rules such as the EU Battery Regulation.
  • A reliable PCF enables:
    • Comparison and management of products based on climate impact
    • Identification of emission hotspots in the supply chain
    • Informed decision-making in procurement, product development, strategy and communication

What is the Product Carbon Footprint (PCF)?

The Product Carbon Footprint refers to the greenhouse gas emissions (measured in CO₂ equivalents) generated by a product throughout its entire life cycle.

It is also known as the product’s CO₂ balance or product-related carbon footprint. Several standards define the methodological requirements for calculating the PCF:

Independent Standards Industry-specific rules Product-specific rules
ISO 14067 TfS PCF Guideline Environmental Product Declarations (EPD) mit Product Environmental Footprint Category (PEFCR)
ISO 14040/44 Catena-X PCF Rulebook
GHG Protocol Product Standard PACT Pathfinder Framework
etc.

Various industries have developed their own sector-specific guidelines for calculating the PCF, some of which are internationally recognized. These include the PACT Pathfinder Framework, the TfS PCF Guideline or the Catena-X PCF Rulebook.

If you calculate your PCF according to ISO 14067, the scope of the assessment depends on the chosen system boundary:

  • Cradle-to-Gate: From raw material extraction to the factory gate.
  • Gate-to-Gate: Covers only your own manufacturing process.
  • Cradle-to-Grave: Extends through use and end-of-life disposal.
  • Gate-to-Grave: From distribution to disposal.
  • Cradle-to-Cradle: In circular models – includes recycling.
Overview on PCF System Boundaries

Why Is the PCF Important for My Company?

Regulatory requirements

The PCF plays a key role in ensuring compliance and meeting reporting obligations. Climate-related product data is required in many European regulatory contexts, including:

  • CSRD
  • CBAM
  • Green Claims Directive
  • Empowering Consumers for the Green Transition Directive (EmpCo Directive)
  • Environmental Product Declarations (EPDs) and the Construction Products Regulation (CPR)
  • Digital Product Passport / Ecodesign for Sustainable Products Regulation (ESPR)
  • Battery Regulation
  • Coming soon: EU Strategy for Sustainable and Circular Textiles

Market Expectations and Long-Term Business Value

Even beyond regulatory requirements, the PCF is a valuable tool for any company pursuing a climate strategy.

  • Climate change is putting global supply chains at risk. To respond with more sustainable business practices and reduce emissions, companies first need to understand their own impact and identify hotspots. Low-emission products carry fewer risks.
  • In general, ESG data is becoming increasingly important in financing and procurement decisions.
  • Customers also expect honest and credible information about product sustainability.
  • The PCF brings climate action out of the abstract and into daily operations. With reliable PCF data, you can benchmark your value chain, compare products on the market, prioritize investments and base decisions on measurable impact.

The PCF as a Steering Tool

If your company is just starting out with climate management, it may be unclear where to focus first. You may already have ambitious climate goals—but still lack the data to confidently say how and whether those goals can be achieved.

This is exactly where the PCF comes in:

  • It provides reliable and transparent data
  • It pinpoints where emissions occur across a product’s production and use
  • It enables data-driven decisions in procurement and product development
  • It lays a solid foundation for your decarbonization strategy

The PCF as a Strategic Lever

A PCF is more than just a single emissions figure. It creates transparency at the product level—and becomes a strategic lever across multiple areas of the business:

  • Product development: The PCF helps identify emission-intensive components and evaluate alternatives. This allows you to systematically reduce the carbon footprint of individual products.
  • Procurement: Knowing where your emissions hotspots are enables you to take targeted action and make your supply chain more climate-friendly.
  • Sales and marketing: A traceable PCF can strengthen a product’s sustainability profile – provided the communication is honest and well-founded. It gives you a solid basis for credible green claims.
  • Strategy and planning: The PCF highlights where emission reduction potential lies within components and the value chain. It also shows which products are environmentally viable and how to systematically decarbonize your portfolio.

PCF, CCF and LCA: Differences and How They Relate

When working on your company’s or products’ carbon footprint, you’ll often come across the abbreviations PCF, CCF and LCA. These three concepts are closely connected but differ in focus and scope:

Corporate Carbon Footprint (CCF) Product Carbon Footprint (PCF) Life Cycle Assessment (LCA)
Definition Total greenhouse gas emissions of a company Greenhouse gas emissions of a product across its entire life cycle  Comprehensive environmental footprint of a product across its entire life cycle 
System boundary All company activities (operations, vehicle fleet, supply chain, etc.)  The complete product life cycle (raw materials, production, use, disposal)  The complete product life cycle including upstream and downstream processes
Objective Overview of company emissions, management of climate targets and reduction measures Determining the climate impact of a product, basis for ecodesign and supply chain requirements Analysis and evaluation of all environmental impacts of a product (not just CO₂)
Relevance Basis for climate strategy, carbon footprint, CSRD reporting, climate targets Relevant for customer requirements, product development, ecodesign, supplier assessments Basis for EPDs, life cycle assessments, ecodesign standards and environmental labeling 
Data sources Energy data, business trips, vehicle fleet, procurement, production, suppliers, distribution Material and process data, supplier data, usage scenarios, end-of-life treatment  Extended product and process data, including water, energy, raw material and land use
Scopes Scope 1, 2 and 3 according to GHG Protocol Scopes not applicable; based on the product life cycle  Scopes not applicable; based on the product life cycle 
Addressees Executive management, investors, banks, regulatory authorities, general public  Customers, procurement, product development, suppliers, end consumers  Sustainability managers, LCA specialists, environmental officers, building and product certification bodies 

In short: The PCF focuses solely on the climate impact of a product within this broader framework. If you’re calculating emissions at the product level, you’ll often use the same methods, data and system boundaries as for an LCA – but the PCF narrows the analysis to greenhouse gas emissions only.

How to Calculate Your PCF in 7 Steps

A reliable PCF lays the foundation for strategic decision-making, targeted decarbonization, compliance with CBAM and other regulations, and credible sustainability communication.

Our practical guide shows you how to get started – step by step, with a clear structure

Download our free guide now:

Guide: 7 Steps to Calculating Your Product Carbon Footprint

Determine the emissions of your products in 7 steps: This guide takes you through the PCF calculation in an understandable way.

*This information is summarized editorial content and should not be considered legal advice. VERSO assumes no liability.

Corporate Carbon Footprint berechnen und reduzieren
26.06.2025

How is the Corporate Carbon Footprint (CCF) calculated?

What are your company’s CO₂ emissions—and how can they be reliably calculated? This article explains why the Corporate Carbon Footprint matters—and how to approach it step by step.

Introduction and content overview

The Corporate Carbon Footprint (CCF) refers to the total greenhouse gas emissions a company causes, both directly and indirectly—from office heating to global supply chains. It is calculated based on Scopes 1, 2, and 3 as defined by the Greenhouse Gas Protocol. Scope 3 is particularly critical, as it often accounts for more than 70% of total emissions. Calculating the CCF is a prerequisite for setting effective climate targets, implementing reduction measures, and communicating sustainability efforts credibly. For many companies, it is increasingly becoming a requirement—whether driven by legislation, market expectations, or customer demands.

Content:

Why the Corporate Carbon Footprint matters now

The pressure on companies to understand and reduce their emissions is increasing. Not only due to legal requirements such as the EU Climate Law, CBAM, or the CSRD: More and more companies are being asked to provide climate-related data – whether in tenders, across supply chains, or as part of voluntary sustainability reporting.

Especially for mid-sized businesses, the Corporate Carbon Footprint is becoming a key competitive factor. Those who know their carbon footprint can take targeted action, reduce risks, and position themselves sustainably in the market.

What is the Corporate Carbon Footprint?

The Corporate Carbon Footprint (CCF) refers to the total greenhouse gas emissions a company causes – both directly and indirectly – from office energy use to the entire supply chain.

The CCF illustrates how much CO₂ and other greenhouse gases a company emits through its business operations. It typically follows internationally recognized standards such as the GHG Protocol, which categorizes emissions into three scopes: Scope 1 (direct emissions), Scope 2 (indirect emissions from purchased energy), and Scope 3 (other indirect emissions).

Die drei Scopes zur Berechnung der Klimabilanz (CCF) nach GHG Protocol

What is the difference between the CCF and the PCF?

While the CCF looks at a company’s overall carbon footprint, the Product Carbon Footprint (PCF) focuses on a single product. It analyzes the emissions generated throughout the product’s entire life cycle, from raw material extraction and production to transportation, use, and disposal. Both concepts complement each other and are essential building blocks for credible climate action within companies.

 

Aspect Corporate Carbon Footprint (CCF) Product Carbon Footprint (PCF)
Definition Total greenhouse gas emissions of a company Greenhouse gas emissions of a single product throughout its entire life cycle
System boundary All company activities (operations, vehicle fleet, supply chain, etc.) The complete product life cycle (raw materials, production, use, disposal)
Objective Overview of company-wide emissions, management of climate targets and reduction measures Assessment of a product’s environmental impact, foundation for eco-design and supply chain requirements
Relevance Foundation for climate strategy, carbon accounting, CSRD reporting, climate targets Relevant for customer requirements, eco-design, product development, supplier assessments
Data sources Energy data, business travel, vehicle fleet, procurement, production processes, suppliers, distribution Material and process data, supplier data, usage scenarios, disposal routes
Scopes Scopes 1, 2, and 3 according to the GHG Protocol Scopes not applicable; assessment based on the product life cycle (e.g., cradle-to-gate, cradle-to-grave)
Target audience Executive management, investors, banks, regulatory authorities, general public Customers, procurement, product development, suppliers, end users

 

Step by step toward a reliable PCF

Want to know how to accurately calculate the emissions of your products—and what it really takes? You’ll find everything you need in the practical PCF guide.

Why is Scope 3 so important?

Many companies start with Scope 1 and 2 – and that often makes sense. These data points are usually easier to access: energy consumption, vehicle fleets, or heating systems can typically be tracked internally without much effort.

Scope 3, on the other hand, is more complex but also critical. Why? Because it covers everything that happens outside a company’s direct operations. And that’s usually where the majority of emissions occur: for many companies, Scope 3 accounts for over 70% of total CO₂ emissions and in some industries, it can be as high as 95%.

Despite the challenges, it’s essential to include all three scopes to gain an accurate picture. Ignoring Scope 3 often leads to a serious underestimation of a company’s climate impact and means missing out on valuable opportunities.

Why? Because Scope 3 often holds surprisingly straightforward levers for reduction, such as switching suppliers, optimizing logistics, or improving product design. These opportunities only become visible when Scope 3 is systematically included in the assessment.

Our tip: Even if you don’t have precise data yet, rough estimates can still provide valuable insights. And they’re far better than doing nothing at all.

Which companies is Scope 3 especially relevant for?

Scope 3 is relevant for all companies including mid-sized businesses. Why?

Many mid-sized companies have:

  • complex or global supply chains,
  • components and materials they don’t produce in-house,
  • transport and logistics structures over which they have limited direct control.

All these emissions fall under Scope 3. For these companies, this means: even if their own operations are energy-efficient, the majority of emissions may occur in upstream or downstream processes – precisely where gaining insight and influence becomes particularly important.

How is the Corporate Carbon Footprint calculated?

Calculating the Corporate Carbon Footprint (CCF) involves several clearly structured steps. The goal is to create a reliable and plausible CO₂ balance for the company that serves as a foundation for management decisions, reduction measures, and external reporting.

1. Scope screening: Defining system boundaries

  • Determining the systematic, organizational, and operational boundaries in line with the GHG Protocol.
  • Deciding which emission categories (Scopes 1, 2, 3) and subcategories will be included.
  • Defining the consolidation scope: Which sites, entities, and company sizes are covered?

2. Responsibilities and project organization

  • Defining who is internally responsible for data collection and preparation.
  • Aligning on the approach, responsibilities, and timeline
  • Holding a joint kickoff meeting with all relevant departments.

3. Data collection within departments

  • Gathering relevant activity data from the departments involved.
  • Closing data gaps through extrapolations and well-founded assumptions.
  • Reviewing whether reliable emission factors are already available or need to be added.
  • Collecting specific data, such as employee commuting patterns, and sending targeted supplier requests to capture upstream emissions.

4. Data validation

  • Reviewing and verifying the collected data, ideally with support from external experts to ensure data quality.

5. Evaluation and interpretation of results

  • Joint analysis of the results with the company.
  • Identification of emission hotspots and priority areas.
  • Discussion on whether additional data needs to be gathered in more detail (e.g., follow-up supplier requests).
  • Discussion on whether additional data needs to be gathered in more detail (e.g., follow-up supplier requests).

What happens after the carbon footprint has been calculated?

The carbon footprint is a key part of any decarbonization strategy – but it’s only the beginning. Calculation alone is not enough. It’s the foundation for taking the next targeted steps:

  • Define measurable climate targets and actions
  • Effectively reduce greenhouse gas (GHG) emissions
  • Responsibly offset unavoidable emissions
  • Responsibly offset unavoidable emissions
    Communicate progress and potential transparently

We support you: with software and expertise

Whether you’re working on a Corporate or Product Carbon Footprint or developing a decarbonization strategy: We support you wherever you need it.

Our software is built for both climate professionals and beginners. It lets you structure your data in the way that works best for you, whether for reporting, internal management, or external requirements related to communication or compliance.

And if you’re looking for additional sparring or targeted guidance, our Climate Experts are here to help. Because one thing is clear: only those who truly understand their emissions can take effective action.

Questions and answers about the Corporate Carbon Footprint (CCF)

What’s the difference between the Corporate and Product Carbon Footprint?

The Corporate Carbon Footprint (CCF) shows how much CO₂ a company emits overall, from office heating to the supply chain. The Product Carbon Footprint (PCF) focuses on a single product, from raw materials to disposal. Simply put: CCF = company perspective, PCF = product perspective.

How often should the carbon footprint be calculated?

At least once a year, ideally as part of the sustainability report. This makes it easier to track progress and manage measures effectively. Those with ambitious goals can also reassess quarterly.

Is the Corporate Carbon Footprint mandatory?

Not in general, but for many companies, it effectively becomes mandatory due to reporting obligations such as the CSRD, CBAM, industry-specific requirements, or customer expectations. And without knowing their footprint, companies will struggle to speak credibly about climate targets.

Which companies is the CCF relevant for?

For all companies that want to act responsibly and build a future-proof business. It becomes especially relevant when investors, customers, or regulations demand transparency – and that’s happening more and more often.

How accurate are the results?

In general, the calculation is only as accurate as the data it’s based on. Scope 1 and 2 data are usually solid, while Scope 3 tends to be more complex. What matters is this: even rough estimates provide valuable insights – and they’re far better than doing nothing.

Is it enough to calculate just Scope 1 and 2?

As a starting point: yes. For a complete picture: no. In many companies, the majority of emissions fall under Scope 3, such as those in the supply chain. Ignoring them means missing out on key levers for reduction.

What is the Greenhouse Gas Protocol?

The GHG Protocol is the global standard for corporate carbon accounting. It defines what belongs to Scope 1, 2, and 3, and ensures that carbon footprints are consistent, comparable, and transparent.

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

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Nachhaltiges Wirtschaften im Mittelstand
23.04.2025

Sustainable Business Practices: The Business Case for SMEs

Stakeholders, ESG obligations, or simply conviction – For many reasons, sustainability is on the agenda of companies. Whether mandatory or voluntary: sustainability must not only be promised, it must be implemented. This article explains why sustainable business practices are important for all companies – from SMEs to large corporations.

Why is Sustainable Business Important for Small and Medium-sized Enterprises (SMEs)?

Sustainability creates transparency in the supply chain

Sustainable business practices are becoming a prerequisite for medium-sized companies to remain supply-capable and competitive in the long term – as large companies today expect full transparency across the entire supply chain.

Many small and medium-sized enterprises (SMEs) supply products or materials to larger companies that are subject to legal requirements such as the Supply Chain Due Diligence Act (LkSG), the Corporate Sustainability Reporting Directive (CSRD), the EU Deforestation Regulation (EUDR), etc. These companies are often also bound by industry-specific guidelines that demand sustainability information from the supply chain.

Large companies must not only disclose their own ESG information but also that of their suppliers. This means that you, as a supplier, are also affected by the regulations and will be asked for extensive sustainability information:

  • You will need to undergo thorough due diligence processes, such as the EcoVadis sustainability assessment, which identifies potential risks to people and the environment in the supply chain.
  • Proof must often be provided not only by suppliers but also by sub-suppliers.

Sustainability as a factor for financing

Sustainable business practices not only improve the ESG rating but also provide access to better financing terms – whether for loans, investments, or insurance.

Medium-sized companies seeking capital from investors or loans from banks should be prepared for ESG inquiries. In practice, the ESG rating directly influences credit terms – the better the rating, the more favorable the loan conditions.

Investors are also increasingly incorporating ESG criteria into ratings and M&A decisions. At the latest, during transactions or investment decisions, robust sustainability metrics will be expected from you.

In addition, (re)insurers also require ESG information from their clients. Sustainability risks are increasingly being incorporated into the risk assessment during contract negotiations, which can directly impact insurance premiums and coverage.

Sustainability expectations from customers and business partners

Anyone who wants to have a say, collaborate, or bid today needs a clear sustainability position – because ESG criteria are increasingly determining partnerships and contract awards.

In partnerships, collaborations, and tenders, certifications and ESG information are increasingly being requested to demonstrate a company’s sustainability ambitions. When entering negotiations, you need to be well-prepared:

  • No Open Doors without ESG Certifications: A prerequisite for serious discussions – alongside, for example, well-known standards for information security – are increasingly ESG-related certifications. Undergo the assessments early – they are often time-consuming and cannot be “quickly submitted.”
  • Sustainability and ESG Criteria in Tender Processes: If there is a tender, your company might be excluded from consideration due to the lack of a robust sustainability strategy. This is demonstrated, among other things, through recognized ESG certifications. With sustainability and ESG criteria in tender processes, companies want to ensure from the outset that ecological and social standards are adhered to in the supply chain.
  • Sustainability also plays a significant role in other quality standards, such as Fairtrade, organic certifications, employer rankings, or ISO standards: ESG criteria are also requested here.

Protection against greenwashing accusations

Simply labeling oneself as “green” is a thing of the past. With the Green Claims Directive and the EmpCo Directive, the EU specifically outlines what constitutes greenwashing and what does not.

  • Soon, companies will be required to scientifically verify the accuracy of their environmental claims. Failure to do so will not only result in reputational damage, but also actual legal and financial consequences.

You certainly do not intentionally engage in greenwashing, but it can easily happen unintentionally in small and medium-sized enterprises: many greenwashing accusations originate from marketing activities that portray the company in too favorable a light. This often happens when a company’s sustainability data is not transparent.

A climate and sustainability strategy ensures transparent sustainability communication: through a data-driven strategy, KPI tracking, and a CO2 balance, you can communicate numbers, facts, and goals in a verifiable manner.

Improved risk management and resilience

A solid sustainability strategy helps you identify ecological and social risks early – not just within your company but throughout the entire value chain. The foundation for this is the Double Materiality Analysis, which adds a holistic ESG perspective to your existing risk management – including the consideration of opportunities.

This allows risks to be assessed in a targeted way, measures for avoidance or reduction to be derived, and their impact in ESG management to be systematically monitored. This makes your company more resilient to climate impacts, geopolitical changes, or resource shortages – while also saving costs and preventing future losses.

Efficient resource use and optimized processes

A well-thought-out sustainability management system helps you use resources more efficiently. It drives process optimizations and innovations – for example, through energy-saving machines or the recycling of production waste. This saves raw materials, reduces costs, and protects the environment.

With effective ESG management, you not only reduce waste and energy consumption but also save time: you focus on the truly important issues – and can drive them forward in a targeted way. A clear advantage for the future viability of your company.

Holistic corporate strategy and future viability

Individual measures are of little use if the strategic connection is missing. A sustainability strategy provides the necessary overall view: All measures are part of a larger plan – rather than isolated individual initiatives.

The foundation for this is the Double Materiality Analysis, which helps you identify the most important topics. This results in a long-term, systematic strategy – ideally integrated into your corporate strategy. In this way, sustainability becomes a top priority and is managed, measured, and communicated in a targeted manner – for example, with a suitable software solution like the VERSO ESG Hub.

How do you embed sustainability in your company?

For sustainable business practices to be more than just a good intention, they must be deeply embedded in the company. This is achieved with the following building blocks, which demonstrate how small and medium-sized enterprises can move into action in a structured and impactful way.

1. status quo and material topics

Before developing a sustainability strategy, a solid status-quo analysis is needed as a foundation – it provides transparency on data, processes, and challenges within the company. Building on this, a materiality analysis highlights which ESG topics are truly material and where the greatest impacts, risks, and opportunities lie.

2. Setting SMART goals and appropriate measures

Goals are the heart of any sustainability strategy and should be scientifically grounded, formulated in a SMART way, and closely linked to the corporate strategy to avoid conflicts of interest. The development of appropriate measures is crucial for implementation – ideally in collaboration with employees and relevant stakeholders who can contribute practical solutions.

3. Creating awareness for sustainability across the company

Sustainability is a company-wide team project – and that’s why it requires a shared awareness and clear alignment. When developing your sustainability strategy, you should define vision, mission, and values to provide direction, motivate employees, and anchor the topic effectively in the overall strategy. Being transparent about ambitions and strategically using internal communication lays the foundation for living sustainability throughout the company.

4. Moving into implementation: Control is key

After the strategy, the real work begins: Implementing ESG measures is a long-term process that requires continuous adjustment and perseverance. To maintain an overview and be able to respond flexibly to new developments, structured ESG management, regular monitoring, and transparent communication – both internally and externally – are essential. Only in this way will progress remain visible, stakeholders stay engaged, and motivation within the company be maintained.

Start with VERSO

Now it’s time to move from planning to action. We support you every step of the way – with the right software solutions and services throughout your entire sustainability journey: from the first report and goal setting to tracking concrete measures. Step by step, you will build the foundation for sustainable business practices in your company.

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So finden Sie die richtigen Projekte zur CO2-Kompensation – ohne Greenwashing
16.10.2024

CO₂-Kompensation – how to make it work without greenwashing

What to do with unavoidable greenhouse gas emissions? In this article, you will learn how to tackle carbon offsetting – with effective projects and without greenwashing.

Your carbon footprint and climate strategy have been drawn up and you are already reducing the first greenhouse gas emissions. But it is slowly becoming clear: Despite all your efforts, you will be left with certain residual emissions! What to do with the unavoidable emissions? If you are also faced with this question, this article is for you. Because of course, CO₂ compensation is the obvious solution. But…

Careful – Carbon offsetting is a double-edged sword

Carbon offsetting has long been a contentious issue. Quite rightly so, as the situation on the carbon market is actually not so rosy: the voluntary carbon market is currently not regulated by either state supervision or a binding legal framework. Instead of legally binding criteria for the validation of carbon offsetting, there are only a number of private standards and registries with different quality criteria. This makes the market structure opaque and leads to major differences in quality within the climate protection projects on which the so-called CO₂ credits are based. One example: Deutsche Umwelthilfe (DUH) has already successfully filed several lawsuits against offsetting through forest projects and reforestation. The reasons: The estimated forest area could not offset the amount of CO₂ emitted at all or the project did not run long enough to keep up with the lifespan of CO₂ in the atmosphere. This leaves you with two problems:

  1. You cannot rely solely on the information provided by standards and registers for quality assurance
  2. At the same time, your company is expected to report truthfully, as greenwashing is penalised.

Actually, you should now take another look at the certified projects yourself. As you can imagine: It will be time-consuming. Together with our partner ClimateGrid, we will show you how to efficiently select reputable carbon offsetting projects.

Guide to the decarbonisation strategy

A holistic decarbonisation strategy or climate strategy is more than helpful when implementing climate targets, transition plans and carbon footprints. With this guide, you can get started right away!

6 factors for the selection of serious projects for CO₂ compensation

1. Impact

The projects should have measurable positive effects on the environment that, where possible, go beyond the mere reduction of CO₂ emissions. This includes the protection of biodiversity, but also the improvement of air and water quality as well as the restoration and preservation of ecosystems (co-benefits). A strong environmental impact means that the selected project makes a holistic contribution to environmental protection.

2. Methodology and verification

The projects should be based on recognised scientific methods and standards. They should also be regularly reviewed by independent third parties to ensure the reliability of the emission reductions claimed.

3. Durability and monitoring

It is important that projects are monitored throughout their entire duration to ensure that emissions are actually reduced in the long term. Regular monitoring and reporting help to recognise risks at an early stage and take countermeasures. This ensures the long-term impact of the project.

4. Additionality

Projects are considered additional if they would not have been realised without the expected income from the proceeds of emission allowances. This requires a more detailed analysis and assessment of the initial scenario (project baseline).

5. Double counting

The project of your choice must guarantee that the emission reductions are not sold more than once or claimed by different parties. This protects the integrity of the carbon market.

6. Embedding in the climate strategy

CO₂ offsetting should really only be an option if you have already exhausted all potential for reducing emissions as part of your climate strategy. A serious project should be part of a comprehensive climate strategy and should never be considered in isolation. This ensures that the measures make a meaningful contribution to your overall climate goals and are not just used for ‘greenwashing’.

Die Green-Claims-Richtlinie auf einen Blick

Beware of greenwashing: The EU now wants to provide a clear framework for sustainability claims to ensure honesty and transparency. Get a clear overview of the new Green Claims Directive and its consequences for your company!

What you should take away from this article

If you want to offset emissions, you should therefore not choose the first offset project that comes along. Use our tips to select a project with a real impact! And remember: climate neutrality can only be achieved with close coordination between your carbon footprint, decarbonisation strategy, greenwashing awareness and reputable climate and environmental protection projects to offset your unavoidable residual emissions.

Looking for support with your CO₂ management?

As you can see, choosing the right projects for your CO₂ offsetting is not that easy. And who knows, maybe you can still reduce greenhouse gas emissions in one place or another? We would be happy to look at this with you. We will guide you through your decarbonization strategy with climate consulting and CO₂ software. And when it comes to selecting the right offsetting projects, we will help you further together with our partner ClimateGrid.

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.
Mann schiebt sein Fahrrad durch Hochwasser. Symbolbild für den Klimawandel, auf den sich ESRS E1 fokussiert
24.09.2024

CSRD and climate: tips on reporting in accordance with ESRS E1

Anyone facing CSRD reporting cannot avoid ESRS E1. Read this article to find out what makes the first environmental standard so important and how you can meet the requirements efficiently!

ESRS E1 – the standard to which (almost) everyone must report

The work on each CSRD report starts with a double materiality analysis. This determines which of the more than 1000 data points of the CSRD your company actually has to report on. The first environmental standard ESRS E1 is an exception. Regardless of the result of the double materiality analysis, every company must basically report on the 230 or so data points required by this standard. Why? Because every company causes emissions and therefore has an impact on climate change. Conversely, every company is likely to be affected by climate change. In short: no company can avoid ESRS E1. At the same time, reporting according to this standard is complex. So let’s go through step by step how to master ESRS E1.

The ESRS standards at a glance

The European Sustainability Reporting Standards (ESRS) are intended to make sustainability reports more meaningful and comparable. All information can be found in the whitepaper.

What is ESRS E1 about?

Data collection and reporting are easier if you know the “why” behind it. ESRS E1 is designed to show you why,

  • … how your company affects climate change (positively and negatively, real and potential).
  • … what risks and opportunities climate change holds for your company and how your company deals with them.
  • … how your company is working to protect the climate – this includes previous and current measures, but also future ones.
  • … the financial consequences of the climate crisis for your company.

The requirements of ESRS E1 can be divided into two subject areas:

  • Mitigation of climate change (“Climate Change Mitigation”): Strategies and measures to limit global warming
  • Adaptation to climate change (“Climate Change Adaptation”): Approaches to strengthen resilience to current and expected consequences of climate change

The data points at a glance

As already mentioned, ESRS E1 is relevant for almost all companies. In total, E1 comprises nine disclosure requirements – but not all of them are immediately relevant or important for every company. Here is a brief overview:

  • E1-1 – Transition plan for climate protection
  • E1-2 – Concepts related to climate change mitigation and adaptation
  • E1-3 – Measures and resources in connection with the climate strategies
  • E1-4 – Goals related to climate change mitigation and adaptation
  • E1-5 – Energy consumption and energy mix
  • E1-6 – Gross GHG emissions in Scope 1, 2 and 3 categories and total emissions
  • E1-7 – Greenhouse gas abatement and greenhouse gas reduction projects financed throughcarbon credits
  • E1-8 – InternalCO2 pricing
  • E1-9 – Expected financial impact of significant physical and transition risks and potential climate-related opportunities

There are also three requirements from the overarching ESRS 2 standard:

  • ESRS 2 GOV-3 – Inclusion of sustainability-related performance in incentive systems
  • ESRS 2 IRO-1 – Description of procedures for the identification and assessment of significant climate-related impacts, risks and opportunities
  • ESRS 2 SBM-3 – Significant impacts, risks and opportunities and their interaction with strategy and business model

Good to know: There are some exceptions to ESRS E1 reporting. In principle, any company can use internalcarbon pricing(ESRS E1-8), but in practice it only makes sense for large companies. ESRS E1-8 is therefore not a mandatory part of every CSRD report. You only have to report on E1-9 from the second reporting year onwards. And Scope 3 data is only mandatory in the first reporting year for companies with more than 750 employees. Nevertheless, a lot of information is requested here. To make matters worse, most of the required data points are not simply available, but must first be determined. This raises the question: What is the best way to approach ESRS E1? Here is your guide to ESRS E1.

Guide for your climate strategy

A holistic climate strategy is more than helpful for climate targets, transition plans and CO2 balances. You can find tips on this in this guide.

Step by step through ESRS E1

The ESRS E1 disclosure requirements make sense in the order just mentioned when reading and reporting/writing. However, if you stick to this order when collecting data, you will be missing important data at the beginning. We therefore recommend the following procedure for data collection instead. During the actual reporting, you then present your results in the actual order: E1-1, E1-2, …

Step 1: ESRS E1-6 and ESRS E1-5

ESRS 1 stands and falls with the GHG balance for Scopes 1 to 3, which serves as a baseline for all further disclosure requirements. Determine your energy balance directly here so that you have all the data to hand in the next steps.

Step 2: ESRS E1-4

Based on your balance sheet baseline, develop or name your short and medium-term climate targets as well as your long-term net zero target. Make sure that your targets are science-based and in line with the goals of the Paris Climate Agreement. Don’t have any targets yet? Then you can also indicate when you will set your targets.

Step 3: ESRS E1-3

Now identify your decarbonization levers. Describe which measures you want to use to achieve the stated targets and which measures have already been implemented. Alternatively, you can specify here by when you want to have developed your measures – similar to the targets.

Step 4: ESRS E1-7

Does your company offset unavoidable residual emissions viaCO2 credits or compensation projects? Then of course you must also report on this. Caution: Be careful here to avoid falling into the greenwashing trap.

Step 5: ESRS E1-1

Now comes your transition plan. Here you describe in detail how your company is working to protect the climate, how you are preparing your company for the climate crisis and its consequences and how your company is making a concrete contribution to limiting global warming. There is a transition period for ESRS E1-1 in the first reporting years.

Step 6: ESRS E1-2

You then name concepts in connection with climate protection and adaptation to climate change – and how you implement these strategies. This includes, for example, internal control elements such as the internalCO2 price according to ESRS E1-8, but also IT and software strategies. Here, too, you can alternatively specify by when you will develop your concept.

Step 7: Reporting

Once the data has been collected, targets set and measures defined to achieve these targets, the next step is reporting.

Practical guide CSRD

Special features, practical examples and stumbling blocks: Our guide makes it easier for you to get started and prepare for the CSRD and the ESRS standard. Including checklist!

Practical tips for implementation

Not all companies manage to report on all disclosure requirements in their first report. Nevertheless, we would like to conclude by giving you a few basic tips on what you should pay particular attention to when reporting on ESRS E1.

Never underestimate the carbon footprint

The carbon footprint must be based on a stable foundation of data. You should therefore carefully consider all of your company’s sources of emissions. From employees’ commute to work to logistics. Even if this means a lot of work, don’t take any shortcuts in the wrong places. The results run like a red thread through the entire standard. All further measures are derived from the carbon footprint. At the same time, you can only achieve your climate targets if they are reflected in the carbon footprint. Thirdly, inaccuracies and errors lead to false claims in climate statements – something that is now sanctioned under the Green Claims Directive. So approach ESRS E1-6 with a keen eye and the necessary level of detail to ensure that the next steps are also successful.

Customize your processes

The enormous amounts of data that need to be collected from a wide variety of sources for ESRS E1 require a high level of transparency about what is going on in your company and your supply chains. Depending on how your company is already set up, new processes and structures may be needed to effectively map the requirements.

Allow sufficient time

CSRD reporting is already very extensive. ESRS E1 in particular takes a lot of time. The carbon footprint alone can take six months – and the climate strategy based on it is also time-consuming. So plan enough time and a buffer!

From carbon footprint to reporting: VERSO supports you!

Probably the most important tip: don’t waste any time. And don’t hesitate to seek support. VERSO helps you with software and advice to meet the requirements of ESRS E1 – from thecarbon footprint and transparent, truthful climate communication to the finished sustainability report.

Stress-free CSRD compliance

Our practical software package supports you every step of the way – right through to the finished CSRD report.

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

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  • Individual advice from the VERSO experts
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Earth Overshoot Day
18.07.2024

Earth Overshoot Day:
3 tips for sustainable resource management

Earth Overshoot Day marks the day on which we humans have used up all the natural resources we are entitled to for the year. Earth Overshoot Day shows us that we must take action! In this blog post, you will find lots of information about Earth Overshoot Day as well as three tips for more sustainable resource management in your company.

Let’s imagine that: At the beginning of August, we have already spent our entire annual salary.
We should now be planning our big summer vacation – but no, there’s not a single cent left.
From now on, we’ll have to live on credit and somehow get by until the end of the year.
Not a nice idea, is it?
The scary thing is: This is exactly how we are treating our planetary resources – and this is what Earth Overshoot Day stands for.
In 2024, Earth Overshoot Day falls on August 1.
All the natural resources that we humans are actually entitled to this year have been used up.
From this day onwards, we will be living at the expense of the future – for another 5 months.
A bitter day?
Absolutely, there’s no denying it.
But it doesn’t help to bury our heads in the sand.
Let’s use the day as a reminder: let’s act now and push Earth Overshoot Day as far back as possible!
Following the information about Earth Overshoot Day, this blog post therefore contains three tips on how you can make your company’s resource management more sustainable.
These simple measures, which every company can implement, actively contribute to environmental and climate protection.  

Definition: What is Earth Overshoot Day?

Earth Overshoot Day has been calculated since 1971.
In German, it is also known as Earth Overshoot Day or World Exhaustion Day.
It marks the date on which humanity’s demand for ecological resources and services in one year exceeds what the earth can regenerate in that year.
This is how the WWF describes it, for example.
The overshoot days are calculated globally and nationally – the total global consumption of resources is used or the consumption of a specific country is extrapolated to the global availability of resources.
The calculations for the overshoot days are based on the concept of the ecological footprint.
It describes the biologically productive area on earth that is necessary to enable a person’s lifestyle and standard of living.
In short, it documents how much nature we have and how much we need.
Earth Overshoot Day is calculated by the Footprint Data Foundation, York University and the Global Footprint Network.

Why is sustainability important for your company?

Sustainability is becoming increasingly important – not only for private individuals, but also for companies.
We use facts and figures from the year 2024 to show why you should not view sustainability as a mere compulsory exercise.

Earth Overshoot Day earlier and earlier

It’s no big surprise: Earth Overshoot Day is always earlier, and it has steadily moved forward over the past 50 years.
Since the 2010s, however, it has settled around the beginning of August.

Der Earth Overshoot Day, auf deutsch auch Erdüberlastungstag oder Welterschöpfungstag genannt, fällt 2024 auf den 1. August. Der Tag zeigt, wann wir Menschen alle natürlichen Ressourcen, die uns für dieses Jahr zur Verfügung stehen, aufgebraucht haben. Er ist seit 1971 kontinuierlich früher. © Global Footprint Network www.footprintnetwork.org

It all started in 1971: the first Earth Overshoot Day came as a worrying Christmas present under the Christmas tree, so to speak.
It fell on December 25, but at least we were still almost on target.
However, the consumption of resources continued to increase and so did Earth Overshoot Day.
As early as 1974, it moved to November, from 1987 to October and in 1999 it was in September for the first time.
Since 2005, Earth Overshoot Day has been in August and is steadily approaching July.
In 2018 and 2022, Earth Overshoot Day was already on August 1, the earliest date to date.
Each time it was a little later the following year.
In 2024, it will fall on August 1 for the third time.
The coronavirus pandemic and specifically the year 2020 represent a notable break in the statistics.
Global lockdowns and restrictions, the decline in production and transportation had a drastic impact on people and the economy.
But energy and resource consumption and CO2 emissions also fell significantly and the Earth Overshoot Day slipped back to August 16.
However, the effect did not last long and was no longer strongly felt the following year.
If you follow the development of Earth Overshoot Day closely, you will have noticed the fluctuations.
From time to time the day is later than in the previous year or it is adjusted retrospectively.
This can also be related to optimizations in resource consumption.
However, the reasons are usually more precise calculation methods and improved data sets.

CSRD: New requirements for sustainability reports

As part of the Green Deal, the EU is driving forward numerous measures for sustainable transformation – including the CSRD, the Corporate Sustainability Reporting Directive.
You can find all the details in our factsheet.

Overshoot Day for Germany

Calculated for Germany alone, Overshoot Day is even earlier.
In 2024, it already fell on May 2.
This means that if every country consumed resources like we do in Germany, everything the planet can offer and regenerate would already be used up by that day.
In other words, if everyone lived like we do, we would need three Earths.
Compared to previous years, not much has changed with regard to Germany’s Overshoot Day.
It is consistently at the beginning of May – except for the outlier in 2020 due to coronavirus.
So we haven’t got worse in Germany, but we haven’t really improved either.

Der Country Overshoot Day für Deutschland ist 2024 auf den 2. Mai gefallen. Würden alle Menschen auf der so leben wie wir in Deutschland, wären an diesem Tag alle natürlichen Ressourcen, die uns eigentlich zur Verfügung stehen, aufgebraucht. Das bedeutet: Wir bräuchten drei Erden. © Global Footprint Network www.footprintnetwork.org

However, it is also worth taking a look at other countries for comparison.
The three earliest Country Overshoot Days in 2024 were in:

  • Qatar: February 11
  • Luxembourg; February 20
  • United Arab Emirates: March 4

The three countries for which the respective Country Overshoot Day was calculated for the latest date are:

  • Guinea: December 27
  • Moldova: December 28
  • Kyrgyzstan: December 30

And to conclude the comparison, let’s take a look at three G12 countries:

  • USA: March 14
  • France: May 7
  • China: June 1

 

What Earth Overshoot Day means for your company

Earth Overshoot Day is first and foremost a wake-up call to humanity.
The initiators want to show that our actions can lead to unpleasant consequences.
And these consequences will also be felt by companies, or are already being felt.
One example is extreme weather events such as droughts or floods, which are occurring more frequently and more intensively as a result of climate change.
They show how vulnerable global supply chains are.
The consequences are often crop failures, shortages of raw materials or blocked transport routes.
All of this is already leading to bottlenecks in supply and production – and the trend is currently increasing rather than decreasing.

Practical guide to CSRD

Our practical guide, including a checklist, will help you prepare for CSRD reporting.
Find out what challenges there are and how you can overcome them.

3 tips for sustainable resource management in your company

Resource consumption affects us all.
Even as private individuals, we can make a difference.
The WWF lists various ways for end consumers to live more sustainably and thus push back the date of World Exhaustion Day.
“Buy green, consume less and eat less meat” is the succinct but effective recommendation for private individuals.
However, one of the biggest levers for saving resources worldwide is the economy.
Anyone who now thinks that sustainability is just something for a clear conscience or regulatory reporting obligations is mistaken: sustainable management brings business value, creates competitive advantages and strengthens the future viability and resilience of companies.
Many measures can save you money.
These three tips will help you get closer to sustainable resource management:  

The three big Rs – Reduce, Reuse, Recycle

One of the most effective methods for establishing sustainable resource management in a company is the circular economy.
It starts with the big three Rs: Reduce, Reuse, Recycle.
It is about reducing the use of resources and materials, reusing products and reusing the materials from one product in another product.
One approach is an internal recycling process in which production waste is collected, processed and reused.
This can significantly reduce waste and thus the amount of raw materials required.
In addition, recycled or bio-based materials can be ordered from suppliers.
Resources can also be saved during shipping.
For example, packaging that can be reused.
But also in transport itself.
There are special pooling systems for pallet cages and Euro pallets – a reusable system for load carriers, so to speak.
Empty runs by truck should also be avoided.
But savings can also be made quite simply in the office.
For example, in water or energy consumption.
Refillable printer cartridges produce less waste.
Or you can switch completely to a paperless office.
Incidentally, the three big Rs are just the beginning: the circular economy goes a big step further and focuses on the 10 Rs. The concept and many other interesting facts about the circular economy can be found in this blog post “How the circular economy works and what it can achieve in Germany“.  

Save energy and use it more efficiently

Energy is an important resource for every company – which is why it makes sense to start here.
The range of measures to save energy and use it efficiently is very broad.
It starts with obvious and simple steps:

  • Use LED instead of halogen lamps
  • Install motion detectors for the lighting
  • Adjusting the brightness of screens downwards
  • Use laptops instead of desktop computers

You should also take a systematic approach here – an energy management system in accordance with ISO 50001, for example, is helpful.
Although individual measures can lead to savings, they can also cause problems in other areas.
Therefore, look at the big picture and start looking for energy guzzlers.
Air conditioning, heating and ventilation often offer opportunities for optimization.
Important: Also check whether there is a state subsidy for the replacement.
Or have you ever thought about hosting your website?
With tools such as the Website Carbon Calculator, you can calculate the CO2 footprint of your company website in no time at all.
In the blog post “How to communicate your sustainability on your website“, we provide simple tips under point 6 on how to make your website more sustainable without any design or coding knowledge.
Another way to save energy: your company can become an electricity producer itself.
Photovoltaic systems are not only suitable for building roofs, but also for parking lots.
Not only do you generate green electricity and cover part of your energy requirements, you also create a source of shade.
You can also participate in local wind farms.  

Sensitize and train employees

Employees are the key to a company’s success.
This applies not only to purely financial success, but also to the implementation of ESG initiatives.
It is therefore important to sensitize the entire team to sustainable action and train them accordingly.
This firmly anchors sustainability in the corporate culture.
During workshops, you should emphasize waste separation and avoidance and give tips on saving water and energy.
If everyone, or at least many people, adapt their behavior a little, a lot can be achieved.
One question that everyone should ask themselves, for example: Do I really need to print out this document or will it suffice in digital form?
One major lever is the transport sector.
Switch to public transport for business trips within Germany.
At the same time, your company can reward environmentally friendly behavior – for example with rental bikes or a subsidy for public transport.  

Is your company doing enough in terms of sustainability?
Here’s how to find out

A sustainability report is a good measurement tool for companies in terms of ESG and implementation.
It allows you to determine the status quo and see your development over the years.
On this basis, you can develop or adapt measures and targets.
The CSRD reporting obligation may even mean that your company is obliged to prepare a sustainability report.
VERSO provides you with comprehensive support for this task.
With the VERSO ESG Hub, you can collect all relevant data and create a meaningful sustainability report.
The Climate Hub also calculates the corporate carbon footprint. And the VERSO Sustainability Experts will support you throughout the entire process. Would you like to acquire even more knowledge about ESG and sustainability yourself? Then it’s worth visiting our VERSO Academy. In the online courses, you and your colleagues can learn all about sustainability in the company – now with a brand new course for specialists and managers.  

 

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

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Nuvia Maslo im neuen Kurs der VERSO Academy, Fit for Sustainability
09.07.2024

What specialists and managers should know about sustainability

ESG regulations, sanctions and real environmental threats are putting companies under increasing pressure. This means that sustainability must now be implemented in companies.

And in such a way that it does not become a bureaucratic monster. Because sustainability is not a spoilsport, but can create real business value. Read here to find out how this works and what you need to know as a specialist or manager.

Sustainability starts with specialists and managers

Sustainability ambitions must come from the management level.
Then it can create real business value with competitive advantages, cost savings and resilience.
At management level, the importance of the topic must be understood, priorities set and strategic decisions made for sustainability.
For specialists and managers, this means getting to grips with the topic of sustainability, acquiring knowledge and at least understanding the basics.
We give you 4 tips to help you successfully drive forward the sustainable transformation in your company.

Training tip: The new ESG course “Fit for Sustainability”

Learn everything that specialists and managers need to know about sustainability in our “Fit for Sustainability” online course.
The early bird phase is currently still running – register here for a 25% voucher!

4 tips for starting the sustainable transformation

1. find out about the role of companies in sustainability

Climate change is real.
The first effects are already being felt.
Extreme weather events are more extreme and occur more frequently.
There is a lot to be done to ensure that this planet remains liveable for future generations.
But what role do companies play in this?
Where are the most serious problems and how can we solve them?
You should be clear about this before you put sustainability on the agenda.
Because only then will you be able to win over your employees to the issue and only then will you have the know-how to implement measures with real impact.

2. familiarize yourself with the most important ESG regulations

With the Green Deal, the EU is bringing many laws and directives to the table that oblige companies to be more sustainable.
These include the CSRD reporting obligation, the CSDDD supply chain law and special regulations such as the EU Taxonomy, the SFDR regulation for the financial sector, the CBAM carbon border adjustment mechanism and the EUDR deforestation regulation.
In addition, there are also laws in Germany that require companies to deal with sustainability at all ESG levels, such as the German Supply Chain Act LkSG.
Of course, you don’t need to know all the directives and laws in detail.
However, an overview of the implementation deadlines, what needs to be done and which roles are required in the company is essential.

3. communicate sustainability transparently and without greenwashing

Regardless of whether you have to publish a sustainability report due to the CSRD obligation or would like to report on your sustainability activities voluntarily: Communicating sustainability is a fine line between correct and misleading.
What is communicated can quickly verge on greenwashing, and the CSRD also requires very comprehensive statements that have to be watertight.
Successful and legally compliant communication requires a good understanding of sustainability, of the company’s own activities, of sustainability communication and of the regulatory framework.

4. develop a sustainability strategy and use it to leverage potential for your company

The topic of sustainability and the associated laws and guidelines are often referred to as a “bureaucracy monster”.
But that doesn’t have to be the case: take a strategic approach to the topic and integrate sustainability firmly into your corporate strategy.
This will open up real opportunities for your company.
Because sustainable management makes your company resilient and fit for the future and opens up new business models and competitive advantages.

How do you get started? With knowledge building!

Now it’s time to get started!
At the VERSO Academy, we have the ideal course for you to gain knowledge on all these topics: You will efficiently learn everything important that specialists and managers should know about sustainability in the shortest possible time – tailored to your needs and potential.
After the training course, you can get started with the sustainable transformation straight away. Sounds good?
Get the
25 % Early bird discount – redeemable as soon as the course is bookable:

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

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Sign up and receive regular news about:

  • Pragmatic all-in-one solution for ESG reporting, climate and supply chain management
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Foto eines Pflanzensprosses, der sich spiralenförmig entrollt
10.06.2024

How the circular economy works and what it can achieve in Germany

Circular economy and circular economy are terms that you come across more and more often in the context of sustainability. What is behind them, why is the circular economy presented as an important system change and what would it look like in everyday life?

Circular Economy and circular economy are terms that you come across more and more frequently in the context of sustainability.
What is behind them, why are
Circular Economy as an important system change and what would that look like in everyday life?
We have for you
a brief insight with the most important topics compiled.
One
really small. Dbecause the whole is so ramified and comprehensive that we could probably write a whole book about it.n couldnten

Circular economy and circular economy – what are they?

Circular economy and circular economy – what are they?

Let’s start with a classic definition.
Because – spoiler – the terms
Circular economy” and Circular Economy” are often used synonymously, but are strictly speaking different.

Circular Economy

Circular economy describes an economic model in which resources and products are used for as long as possible within a closed cycle.
Once they have reached the end of their useful life, they are not simply disposed of, but returned to the cycle – i.e. made usable again.

The reference point is ISO 59004:2024.
It describes the basic principles and concepts of the circular economy, but also provides assistance for implementation in the company.
Circular economy is defined here as:

“Economic system that takes a systemic approach to maintaining the cycle of resources by recovering, preserving or enhancing their value while contributing to sustainable development.”

The WWF‘s definition is somewhat clearer and more direct:

Circular Economy [ist] a regenerative system, powered by renewable energy, which replaces the current linear industrial model Take – produce – dispose replaced.
Materials are instead retained in the economy, products are shared, while waste and negative impacts are avoided.
CE creates positive effects and benefits for the environment and society and works within planetary boundaries.
It is made possible by rethinking the current understanding of growth and consumption.”

A helpful overview of all relevant standards relating to the circular economy can be found at the German Institute for Standardization (DIN).

For companies subject to CSRD, ESRS E5 (Resource use and circular economy) is also important in this context.

The ESRS at a glance

How are the ESRS structured, what information is required and how does double materiality work?
Our white paper explains it clearly!

Circular economy

Circular economy means exactly the same thing in theory.
In Germany, however, the circular economy actually only means avoiding waste:
The circular economy within the meaning of [the Circular Economy Act] is the prevention and recycling of waste.

If we talk about the circular economy here in Germany, the correct term would be “circular economy”.
After all, we like to make life difficult for ourselves with unwieldy terms.

However, when the term “circular economy” is used at EU level (e.g. on the website of the EU Commission or EU Parliament), it always refers to the circular economy in the true sense of the word.

Why do we need a circular economy?

Global consumption of raw materials has tripled since 1970.
We live and do business as if we had unlimited resources at our disposal.
Earth Overshoot Day – the day on which all resources are used up globally for the year – is taking place earlier and earlier.

What is no longer needed is disposed of and replaced by something new.
And then it disappears from the scene for us.
But it ends up somewhere else.
Europe exports around 3,000,000 kilograms of plastic waste to countries in the Global South every day.
This is sometimes referred to as
“Garbage colonialism” labeled.
And it doesn’t stop with plastic.
Growing mountains of old clothes, scrap metal, batteries, tires – our waste is piling up in other parts of the world.

On top of this comes the extraction of ever more resources for products that are produced in abundance worldwide.
Far too often, extraction and production go hand in hand with environmental damage and the violation of human rights.

The CSRD and supply chain directives such as the LkSG, CSDDD, CBAM and EUDR are intended to gradually prevent the latter.
However, what we actually need is a new economic system that tackles the underlying problems at the root.

Curtain up for circular economy.

Linear Economy vs. Recycling Economy vs. Circular Economy – from the 3 Rs to the 10 Rs

Our current economic system is a one-way street.
It is therefore also known as
“linear economy”.
There are already initial attempts to counteract the high consumption of raw materials and the throwaway mentality.
The focus here is on
currently mainly on the so-called 3 Rs:

  • Reduce – Reduce use of resources and materials through greater efficiency in product manufacture/use
  • Reuse – Reuse of products that are still in good condition
  • Recycle – Reuse materials in products of the same or lower quality

This gives rise to the recycling economy.
However, recycling only puts a slight damper on things.
In the end, there is still far too much waste piling up in mountains of garbage.
Only 7.2 percent of our materials are reused after use.

Illustration, die Linear Economy, Recycling Economy und Circular Economy gegenüberstellt. Linear Economy führt direkt zur Mülltonne, bei Recycling Economy ist noch ein kleiner Umweg drin und bei Circular Economy dreht sich der Produktlebenszyklus im Kreis; es landet nichts im Müll

Circular Economy goes a big step further and relies on 10 R:

  • Reduce – Reduce use of resources and materials through greater efficiency in product manufacture/use
  • Reuse – Reuse of products that are still in good condition
  • Recycle – Reuse materials in products of the same or lower quality
  • Refuse Avoid overconsumption by optimizing or innovating products and eliminating products
  • Rethink – Rethinking product use and manufacturing processes
  • Repair – Repair and maintenance of defective/damaged products
  • Refurbish – Refurbishing discarded products so that they can still be used
  • Remanufacture – Reuse of product parts in new products with the same function
  • Repurpose – Reuse of product parts in new products with a different function
  • Recover – Burning materials with energy recovery
Tabelle mit den 10 R der Circular Economy

The European Commission also lists 7 very similar pillars of the circular economy:

  1. Sustainable supply chains
  2. Ecodesign of products and services
  3. Industrial and territorial ecology, i.e. cooperation and exchange between companies
  4. Functional economic organization; i.e. sharing the benefits of products with others instead of owning your own products
  5. Responsible consumption
  6. Extend product service life
  7. Recycle

So much for the theory.
Now you’re probably asking yourself: what will it all look like in practice?
After all, a lot has to change for the circular economy to become a reality.
We need new processes and more durable, fully recyclable materials.
Not to mention a change in mindset.

Circular economy in practice

Action plan for the circular economy and national circular economy strategy

As part of the Green Deal, the EU 2020 has “Action Plan for the Circular Economy”, which aims to achieve a “carbon-neutral, ecologically sustainable and pollutant-free circular economy” by 2050.
Initial measures such as the extension of ecodesign regulations, the right to repair and the Green Claims Directive are already in force.

Your overview of the new Green Claims Directive

With the Green Claims Directive, the EU now provides a clear framework for sustainability claims.
Get a clear overview of the new Green Claims Directive and its consequences for your company in this factsheet!

The “National Circular Economy Strategy (NKWS)” is based on the EU action plan.
This is intended to create a future framework strategy for measures and targets to implement a circular economy in Germany.
The German government is working closely with industry and society on this.

The overarching objectives of the NKWS are:

  • Climate protection
  • Protection of biodiversity
  • Reducing species extinction and environmental pollution
  • Securing the supply of raw materials
  • Reduce GHG emissions

Model Germany Circular Economy

As the NKWS is still a work in progress, WWF Germany, together with the Öko-Institut, Fraunhofer ISI and the FU Berlin, has developed a roadmap for the circular economy in Germany – the “Model Germany Circular Economy (MDCE)“.
This comprehensive paper shows which measures, political strategies, targets and instruments could be used to achieve a circular economy by 2045.

Here is an overview of the most important findings.

The advantages of a circular economy compared to business as usual

  • The supply situation is easing for 29 out of 36 critical raw materials, and for 9 raw materials more than 50 percent of Germany’s demand could be reduced or covered
  • A CO₂-equivalent savings of up to 26 percent (186 million tons) are possible
  • We need 27 percent less raw materials (179 million tons), total material consumption is down by 26 percent (329 million tons)
  • We need 30 percent less land (8.5 million hectares)
  • The MDCE scenario could also be used to reduce emissions that are difficult to avoid
  • The modeled circular economy would avoid 26 percent (147 billion euros) of the climate damage costs caused by direct emissions – with indirect emissions 10.7 billion euros

What is currently hindering the circular economy

  • Passing on environmental costs (externalization)
  • Lack of infrastructure for circular products and processes
  • Lack of investment (e.g. in research and development) for a circular economy
  • Lack of transparency with regard to the transfer of information and data in the value chains
  • Long-term path dependencies due to investments in linear technologies
  • Lack of common standards for circular products

5 key strategies for implementing a circular economy

  1. Reduce resource flows
  2. Substitute materials
  3. Slowing down resource flows
  4. Intensify product use
  5. Closing resource cycles with high quality

Consumers, companies and politicians share responsibility

The circular economy must be considered from two perspectives:

  1. Behavior-based solutions – sustainable design of consumption
  2. Technology-based solutions – on the technical and production side

The paper emphasizes that the necessary changes in behaviour do not lie solely with consumers.
Both approaches require
political and entrepreneurial need for action that goes far beyond information instruments and should be controlled by regulatory and market-based instruments.

10 guiding political principles for the success of the circular economy

  1. Prioritize absolute reduction of resource consumption
  2. Set binding resource targets along the lines of climate targets
  3. Shaping the structural change triggered by the circular economy with specific policy instruments
  4. Creating conviction for comprehensive CE in social alliances
  5. Understanding education and knowledge transfer as the key to transformation
  6. Setting incentives for a change in values in companies
  7. Expanding the state’s role model function in procurement
  8. Strengthening regional value chains in Germany
  9. Provide financing and research & development for the transformation to a circular economy
  10. Germany must assume greater international responsibility

Conclusion: We still have a long way to go!

Looking at our current economic model and the MDCE draft, it is clear that we still have a lot of work to do to achieve a truly sustainable transformation.
It can only succeed if we all – consumers, companies and politicians – work hand in hand.
Let’s get started!

Read more:

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Schmelzender Eisberg im Wasser als Symbol für die Klimastrategie
17.04.2024

Step by step to Net Zero: how to develop a climate strategy for your company

The climate strategy for your company is imminent. But how to start – and where? Read this article to find out how to develop a suitable strategy for targeted decarbonization step by step!

Sustainability has become more of a focus for society, politics and business in recent years.
With the Paris Climate Agreement, the European Green Deal and its various implementation strategies such as CBAM, the EU Climate Change Act, CSRD or CSDDD, there is a whole range of targets, goals and guidelines, including for climate protection.
Nevertheless, there are warnings that the current course is not enough and that we will crack the 1.5° mark sooner than feared.
So is it better to bury our heads in the sand because it won’t help anyway?
No – it is now all the more important that everyone gets involved.
Companies in particular have a responsibility here.
But how and where to start?
Here is a step-by-step guide to developing a decarbonization strategy for your company!

1. recognize the challenge: Tackling the climate strategy with the right motivation

55% of the German managers surveyed in a Capgemini study stated that In the next ten years, climate change will pose the greatest challenges for the business model.
Climate change is no longer just around the corner – it already has both feet in the hallway.
For the first companies, it has even arrived in the living room and is smashing the fine china in the display case.
This is because climate change has long since had an impact on the first supply chains and business models.
So the challenge is clear: develop strategies and plans to reduce your own company’s emissions. At VERSO, we think it’s important not only to recognize the challenge – but also to find the right motivation to get started in a focused way and to persevere.
So here’s a question for you: What is your motivation behind developing a climate strategy? Perhaps for you it’s the traditional regulatory pressure.
For example, because you are obliged by the CSRD to disclose your climate strategy.
But perhaps the matter is also close to your heart regardless of the law – because you can see the advantages of a climate strategy or because you want to future-proof your company.
You may also want to arm yourself against rising costs due to CBAM and EU emissions trading, meet the growing demand for sustainable products or strengthen your employer branding.
Whatever it is, a clear motivation brings commitment throughout the company and ensures that your decarbonization plan is not just based on dry numbers.

2. create a CO₂ balance sheet or GHG balance sheet: The basis of your climate strategy

But it doesn’t work entirely without dry figures.
Once the commitment has been clarified, the second step is to lay the foundations for your decarbonization strategy.
This first requires an inventory in the form of a carbon footprint.
The Greenhouse Gas Protocol(GHG Protocol) provides you with guidance.
This is the most widely used standard for balancing greenhouse gas emissions.
Important when determining your emissions: Go really in-depth and get as much data as possible – from as many sources as possible!
How is your company structured?
What sources of emissions are there in your company?
Which of these sources are real emissions hotspots?
How many emissions are generated each year?
Work your way through your processes, products and activities step by step – right through to Scope 3.
Because even if it is easier to collect data for Scope 1 and Scope 2, Scope 3 emissions from the upstream and downstream value chain account for up to 80% of a company’s total emissions!
Tools such as our Climate Hub and Supply Chain Hub make it easier for you to record all climate data accurately and clearly.

Überblick zu den einzelnen Scopes: Scope 1 umfasst direkte Emissionen eines Unternehmens, Scope 2 umfasst indirekte Emissionen eines Unternehmens und Scope 3 umfasst alle Emissionen, die in der Wertschöpfungskette eines Unternehmens entstehen.

By the way: If you want to know even more precisely, you can balance all of your company’s greenhouse gas emissions.
In addition to CO₂, a complete GHG balance sheet includes six other gases with greenhouse gas potential – including methane and nitrous oxide, for example.

3. set targets for the decarbonization strategy

The status quo is ticked off.
Now the journey can begin.
But – where are we actually going?
The next step is to set clear climate targets for your company.
Preferably in SMARTform, of course:

  • Specific
  • Measurable
  • Ambitious
  • Realistic
  • Scheduled

Be sure to involve your company’s stakeholders here – because setting targets over the heads of employees, which they ultimately have to implement, can quickly backfire.
Here is a short checklist for the goals of your climate strategy:

  • Our climate targets are science-based (support is provided, for example, by the SBTi sector guidelines)
  • Our climate targets support the 1.5° target of the Paris Climate Agreement
  • We have set a baseline year to benchmark our progress
  • We have agreed a clear timeframe for our climate targets

When planning your reduction targets, also differentiate between:

  • Long-term climate targets that go hand in hand with far-reaching structural changes in your company
  • Short-term climate targets with which your company can achieve initial success quickly
  • Absolute climate targets; i.e. quantitative targets to be achieved by time X
  • Relative climate targets; i.e. the CO₂ reduction depends on key figures such as the number of employees or production figures

4. plan measures to implement the climate strategy

You are aware of your company’s emissions and climate hotspots and have set yourself clear decarbonization targets. Unfortunately, targets alone do not slow down climate change.
So in step 4, it’s time to plan your strategy so that you can take action.
Here are four tips from our side:

  1. Involve important stakeholders here again in order to find as many approaches and levers as possible.
  2. External consultants are also worth considering – they can help you uncover hidden potential for reducing emissions.
  3. Make sure that the measures are feasible.
    No one is helped if you develop ambitious goals and radical measures that are unfortunately not compatible with reality.
  4. Get a picture of the maturity levels of your stakeholders.
    An example: In order to achieve the climate targets in the supply chain, suppliers should produce 100% with renewable energies.
    Supplier A has had sustainability on its agenda for a long time and fulfills this requirement with ease.
    Supplier B has not had much to do with sustainability so far, but wants to make the switch – your company can help here with training or support.

Is your procurement ready for ESG requirements?

Prepare yourself optimally for all new requirements with this checklist!

5. reduce emissions

If planned correctly, your climate strategy should work like a cycle: After the initial assessment with objectives and action planning, there is a “working phase” in which you let your measures take effect and pursue your goals.
After a year, you take stock and adjust your strategy to make it even more efficient.
The rule here is: good things take time.
If the decarbonization strategy is to have a real impact, it can run for ten years or longer in large companies with extensive processes and supply chains!

6. offset unavoidable emissions

Let’s be honest – CO₂ compensation is a controversial topic.
Some are in favor of it, others see it as greenwashing.
In principle, offsetting should really only be an option if you have fully exhausted all potential for reducing emissions.
If you decide to offset unavoidable emissions as part of your climate strategy, we would like to give you an important tip: Make use of reputable offsetting projects that

  1. are tailored to your company and
  2. whose effect is measurable.

The voluntary carbon market is not yet regulated by the state and is rather opaque.
Instead of legally binding criteria for validating carbon offsetting, there are only a number of private standards and registers with different quality criteria.
The result: major differences in quality within the climate protection projects on which the so-called CO₂ credits are based.
So take a close look.
In particular, Deutsche Umwelthilfe (DUH) has already successfully (and publicly!) sued several times against compensation through forest projects and reforestation, for example because the estimated forest area could not compensate for the amount of CO₂ emitted or the project did not run long enough to keep up with the lifetime of CO₂ in the atmosphere.

7. optimize climate strategy – and communicate with pleasure!

We briefly touched on this a moment ago: The decarbonization strategy is not a one-off project.
Once it gets rolling, it will run for many, many years.
After all, we still have a long way to go with climate change.
And a lot can happen in those years.
Check progress regularly.
What is going according to plan, where is there a hitch, where is nothing happening at all?
Check whether you will achieve your goals within the agreed time frame.
Talk to your stakeholders about where there is still potential. And please evaluate honestly whether your current strategy is actually of any use to the stakeholder on whom everything ultimately depends: nature! Last but not least: mistakes are part of the process – just like celebrating successes.
Communicate your progress, but also openly admit where you may have misjudged.
Show what your company wants to achieve and where you want to make improvements. Transparency, honesty and commitment are the drivers of sustainable transformation!

Let’s find your way towards Net Zero

Alongside sustainability reporting, planning and implementing the climate strategy is one of the most time-consuming tasks.
Thousands of data points and emission factors from the entire value chain are included in the calculation of the carbon footprint.
Many of these are not directly available to you and must first be obtained.
If you want to carry out the calculation correctly (i.e. in line with international standards such as the GHG Protocol), you need insight and perseverance.
And then there are doubts like: Do our climate targets even make sense?
Are our measures having any effect?
Can I communicate this and that milestone for our product now, or will I be accused of greenwashing?

Your overview of the new Green Claims Directive

New obligations for all those who advertise with terms such as “climate neutral”: The Anti-Greenwashing Directive sets barriers.
What you should know now.

The first climate strategy in particular is a real challenge.
VERSO helps you to get started – and to implement your decarbonization plan safely in the long term.
Interested?
Then take a look at how we can support you with your climate strategy:

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

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CO2-Bilanz, Klimaziele, Net-Zero: Hinter all diesen Begriffen steckt die Dekarbonisierungsstrategie bzw. die Klimastrategie von Unternehmen. Die ganzheitliche Erarbeitung einer solchen Strategie hat viele Vorteile. Welche Chancen dahinter stecken, lesen Sie hier.
08.04.2024

5 advantages of a decarbonization strategy: Why it is important for companies

Carbon footprint, climate targets, net zero: behind all these terms lies the decarbonization strategy or the climate strategy of companies. The holistic development of such a strategy has many advantages. You can read about the opportunities behind it here.

Despite the Paris Climate Agreement, the Green Deal and national laws: The amount of greenhouse gases (GHG) in the atmosphere continues to rise.
And industry is the second largest contributor to these emissions after the energy sector.
As a result, the pressure on companies to focus on their environmental performance, invest in climate protection and reduce their GHG emissions continues to grow.
You may already be facing requirements such as carbon footprinting, meeting climate targets or, more recently, a climate transition plan required by the CSRD.
All of these topics are part of the holistic climate strategy that we are talking about here.

Laut Umweltbundesamt wurden im Jahr 2023 in Deutschland die meisten Treibhausgasemissionen (CO2e) in den Sektoren Energiewirtschaft und Industrie ausgestoßen.

What is a decarbonization strategy?

A decarbonization strategy can be thought of as a cycle: It comprises six steps that you go through in sequence.
After the sixth step, you start again at number one.
With each step, you look at your challenges in more detail and continue to optimize your processes.
You can manage your goals, adapt measures, reduce emissions further and further – and get closer and closer to your Net Zero goal.
These are the 6 steps of the decarbonization strategy:

  1. Development and recognition of challenges
  2. Preparation of a greenhouse gas balance sheet to determine the status quo
  3. Definition of measurable climate targets and measures
  4. Reducing GHG emissions as far as possible
  5. Offsetting residual emissions through certified projects from e.g. Climate Grid
  6. Transparent communication of successes and potential for improvement

Before you go through the process for the first time, we recommend that you introduce a data and process management tool such as VERSO’s Climate Hub into your company.
Important for the decarbonization plan: The software should not only cover the calculation of the carbon footprint, but also enable proper climate management including KPI tracking, target tracking, creation of measures as well as internal and external collaboration options.

The 5 advantages of a decarbonization strategy

In 2023, the opinion research institute Forsa asked German SMEs that will fall under the new CSRD about their status quo with regard to sustainability and climate reporting: 52% are currently working on a climate strategy, 40% have already formulated a concrete strategy and 9% do not yet see a need for one.
We have here Five advantages that a climate strategy entails for your company:  

1. be prepared for regulatory pressure

In Germany and the EU, the laws resulting from the European Green Deal in particular are calling on companies to decarbonize and operate in a more environmentally conscious manner.
Examples of legal requirements:

  • The CSRD’s ESRS E1 reporting standard alone requires an entire climate transition plan – in addition to the carbon footprint and disclosure of specific climate targets.
  • The CSRD is also linked to the EU taxonomy, which requires companies to disclose how sustainable their business activities are according to strict criteria.
  • The CBAM will be of interest to companies that import goods from non-EU countries, as the CO2 border adjustment mechanism will in future oblige companies that import emission-intensive goods to purchase certificates to offset the emissions emitted.

At the latest when your company is affected by these regulations, you should have a decarbonization plan up your sleeve – otherwise legal consequences are possible.
However, there are also advantages to starting the project before the law takes effect.
You can then pay attention to limit values and risks as early as the target setting stage, collect the data required for legal compliance during data collection and have the relevant disclosure requirements ready in the right form.
This will save you stress and you will not be surprised by requirements that you cannot fulfill.  

2. avoid the risk of greenwashing accusations

Simply calling yourself “green” is a thing of the past.
With the Green Claims Directive the EU is specifying what is greenwashing and what is not.
Soon, companies will have to prove the accuracy of their environmental claims in a scientifically verified manner.
If they fail to do so, they will not only face damage to their image, but also real legal and financial consequences.
They are certainly not deliberately greenwashing – but it can easily happen unknowingly, as many greenwashing accusations originate from marketing activities that portray the company in too good a light.
This happens above all when the company’s sustainability data is not transparent.
However, transparent sustainability communication can succeed with a climate strategy: The number-based strategy, KPI tracking and carbon footprint allow you to communicate comprehensible facts, figures and targets.

Your overview of the new Green Claims Directive

With the Green Claims Directive, the EU now provides a clear framework for sustainability claims.
Get a clear overview of the new Green Claims Directive and its consequences for your company in this factsheet!

3. identify the risks and potential of climate issues

A decarbonization strategy can make a significant contribution to the future viability of your company.
It reveals risks and potential. Risks By collecting detailed data, you can identify risks that often go unnoticed in day-to-day business.
How much electricity do we actually consume?
Which bottlenecks in our production lead to increased CO2 consumption?
You receive figures and comparative values for areas where there was often little clarity before.
Identifying climate risks makes your overall risk management more meaningful.
It helps you to plan more reliably and calculate costs correctly. Potentials In addition, your potentials become visible, such as the environmental commitment of your suppliers, energy savings or the use of renewable energies.
You can measure progress and see which measures may have less impact than expected and where you can actually make a difference.
Ultimately, you can also save costs and increase your efficiency.  

4. advantages with stakeholders for loans, investments and tenders

If you have a decarbonization plan ready, you will make yourself popular with your stakeholders.
After all, they are increasingly asking about a company’s commitment to climate protection.
Which stakeholders are you talking about in particular?

  • Business partners in tenders: Other companies – especially OEMs – are also affected by statutory ESG requirements.
    As a result, they naturally do not want to take on any additional risk and also pay attention to ESG criteria in tenders.
    If you already have a solid decarbonization plan in place, this puts you in a better position in the tendering process.
  • Banks for loans: Banks also face ESG requirements.
    In practice, this means that your borrowing costs also depend on your ESG rating: Better rating, cheaper loan.
    And your strategy naturally has an impact on your rating.
  • Investors: The same applies here – investors also include ESG criteria in their investment ratings.
    With a decarbonization strategy, a lot of things can be ticked off the list.
    And not to forget: The strategy gives investors insights into your company’s potential and options for action.
    You can authentically demonstrate how you want to ensure the future viability of your company in harmony with the environment.
  • Customers: 79% of consumers change their purchasing behavior based on sustainability considerations(study by Capgemini).
    This means that you have a competitive advantage if you can make transparent how your company is committed to climate protection and decarbonization.
    Consumers now look closely at sustainability communication and are quickly suspicious of general sustainability claims.
    You score points with your climate strategy because you can also back up your communication with figures and transparently show your improvement potential and strategy.

5. strengthen supply and business relationships

Companies with which you have a business or supply relationship may also be affected by the CSRD or the German Supply Chain Act, the LkSG.
You now need ESG transparency throughout your supply chain – including climate and CO2 data.
With your climate strategy, you are already prepared for the questionnaires from your business partners.
If you have nothing to show, business relationships may be on the brink of collapse.

How VERSO supports you with your decarbonization strategy

If you want to take a strategic approach to decarbonization, we will be happy to support you: The VERSO Climate Hub, combined with the VERSO ESG Hub, enables you to achieve holistic climate management.
We are also happy to support you with our consulting team: many questions arise, especially in the first year of balancing or strategy development, and it takes some time to familiarize yourself with the topic.
We support you in integrating the processes in your company, in correctly preparing the first carbon footprint and in developing sensible targets, measures and strategies to reduce your emissions.
With this support, we enable you to subsequently implement your climate strategy on your own responsibility.
Does that sound like what you’re looking for?
Please feel free to contact us.

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.

Subscribe to our newsletter!

Sign up and receive regular news about:

  • Pragmatic all-in-one solution for ESG reporting, climate and supply chain management
  • Individual advice from the VERSO experts
  • Developed with expertise from 12+ years of sustainability management
  • Trusted by 250+ customers

Get to know the software!