Watershed moment

The European Union’s Corporate Sustainability Reporting Directive (CSRD) may sound dull but it could prove the most important development in travel management in 2023. Arguably it marks the moment when sustainability becomes a mandatory, perhaps even the dominant, element of managed travel programmes.

CSRD vastly increases the burden on companies to report on the environmental, social and governance impact of their activities (and how, in turn, climate change affects their business – so-called double materiality). Reporting must also be audited externally and include information on ESG activities of the enterprise’s supply chain.

Among the 1,144 data points companies must disclose publicly using defined European Sustainability Reporting Standards is a section on climate change that includes a breakdown of “significant” Scope 3 indirect emissions. One of those specified significant line items is business travel. For the first mandatory disclosures, covering the year 2024 and which must be submitted in 2025, companies will have to state their business travel emissions, plus a statement of their targets for business travel for 2025, 2030 and 2050 (although companies with fewer than 750 employees can omit Scope 3 reporting for Year 1).

“There is just one line in the reporting for business travel emissions,” says Spotnana vice-president for strategy and partnerships Johnny Thorsen. “Just one number allows for instant benchmarking of carbon emissions, so it will be hard to hide.”

“This is European regulation but you could still be asked for information if you’re part of someone else’s value chain”

Will that put pressure on companies to reduce travel emissions more vigorously? “Definitely,” replies Thorsen. “You will be judged on your carbon intensity. Companies will feel they have to be average or below average. They won’t want to be seen as laggards and will aim to be more carbon efficient with their business travel.”

Bruce Bolger, founder of Enterprise Engagement Alliance, a thinktank advising companies on stakeholder engagement, agrees that CSRD is a watershed. Investors and other stakeholders, he says, “will be able to do big, detailed comparisons. This is Glassdoor on steroids. Companies can no longer greenwash. They have to supply audited metrics and explain. It’s going to have massive impact in the coming years.”

If travel managers in the UK, US or other non-EU countries believe themselves immune, they should think again. CSRD applies to EU companies meeting two out of three criteria of more than 250 employees, €40 million turnover or €20 million on their balance sheet. It also applies to smaller EU companies that are publicly listed, but significantly, also to non-EU businesses with net turnover in the EU of more than €150 million.

But the ensnaring of non-EU companies goes beyond that. “Yes, this is European regulation but you could be asked for information if you’re part of someone else’s value chain,” says Lisa O’Donnell, a director and CSRD lead for PwC’s UK business. Moreover, she adds, CSRD effectively sets a standard for non-financial disclosure with which other national and supra-national regulatory regimes are likely to align. There’s no avoiding CSRD, even for companies not among the 50,000 enterprises that the European Commission estimates will be affected directly.

EMBRACING CSRD

Bolger says there are major implications for travel managers, who “will have to be more accountable for steps taken to carry out the organisation’s purpose, goals, and objectives as they relate to travel policies.” But, Bolger points out, CSRD will help too, giving travel managers “much more easily accessible information about major companies to reduce risks of supporting suppliers with bad people or environmental records.”

CSRD could also elevate the status of travel managers. “Travel managers will be asked for numbers but they will also be asked ‘how do we improve our performance?’” says O’Donnell. “Many organisations are very tied up in the data points but in every conversation we’ve had we’re saying ‘Don’t forget you’re telling the market and your stakeholders something they’ve not heard before. Your performance likely isn’t going to look great to begin with.’ You need to be accelerating your programmes. I suspect that’s where travel managers will be brought in.”

"Travel managers will have the opportunity to educate the rest of the business and emphasise how their travel programme is really helping with decarbonisation"

American Express Global Business Travel head of sustainability consulting Susan Austin identifies CSRD as an inflection point for similar reasons. “The travel manager will have the opportunity to educate the rest of the business and emphasise how their travel programme is really helping with greening and decarbonisation, which is so important to employees,” she says.

Yet precisely how travel managers should fulfil the core requirement of providing reliable travel emissions data is far from clear. On the positive side, Institute of Travel Management head of programme Kerry Douglas says travel managers who already have processes in place to share emissions data internally will be fine, “particularly those organisations already reporting on Scope 3 business travel emissions due to the Non-Financial Reporting Directive [a less ambitious forerunner of CSRD which applies to around 11,700 companies].”

However, Douglas also counsels caution. Firstly, she warns EU member states could implement the directive, and therefore their reporting requirements, differently. Secondly, smaller companies might struggle to create methodology and process for reporting. ITM’s sustainability taskforce is preparing practical guidance to help those struggling.

But whether large or small, travel managers at all companies have reason to fear inconsistency. If Thorsen is correct that companies’ data disclosures are likely to be compared rigorously, such comparisons will only be fair if methodologies are identical.

REPORTING INCONSISTENCIES

O’Donnell says CSRD reporting must be “repeatable, robust and assurable”. Yet everyone in managed travel knows it is possible, simply by using different booking tools, for example, to meet those three criteria yet arrive at totally different numbers.

As an example of the doubts over consistency, the current draft of standards for CSRD specifies reporting should use the Greenhouse Gas Protocol for Scope 3 emissions. However, as a couple of the 604 comments about the standards submitted to the European Commission last month noted, the GHG Protocol does not take into account the harm caused by non-CO2 emissions at altitude. Some companies voluntarily add a multiplier to their travel emissions reporting to reflect this additional damage; others do not.

BT4Europe, a lobbying organisation representing many European travel management associations, is pinning hopes for transport reporting standardisation on a separate European Commission initiative called CountEmissions EU. But, says BT4E chair Patrick Diemer, “CountEmissions EU will not make its standard a requirement. DG Move [the European Commission's Directorate-General for Mobility and Transport] will just define the standard. It does, however, expect that other legislative initiatives from the EU will refer to the standard once approved to be used for reporting, such as CSRD. That, in my mind, is something which will take some time until it becomes ubiquitous.”

Thorsen and O’Donnell agree that clarity will come slowly but eventually. Right now, says the latter, how to report for CSRD is “very open to interpretation. My expectation is that over time the standards will become more prescriptive and take away the ambiguity.”

However, O’Donnell adds, current concerns over lack of clarity should not detract from appreciating the impact of CSRD on businesses nor its potential to kick the corporate world into taking meaningful climate change action, including how it addresses travel consumption. “The reason the EU is doing it is that businesses have not moved fast enough,” she says. “Europe is saying it has to regulate because it’s the only way to make change. This is driving transparency and there’s no way to hide from that.

“These are massive transformation projects but it will start people on that journey. Even if the reporting’s not perfect, it’s driving change.”

CSRD REQUIRES SOCIAL REPORTING TOO

A sometimes overlooked aspect of the Corporate Sustainability Reporting Directive is that it requires companies to submit full Environmental, Social and Governance reporting covering the “S” and “G” in addition to the “E”.

According to the Enterprise Engagement Alliance, the Social aspect of the directive “requires a level of stakeholder management disclosures never before seen in business.” Companies will need to report on numerous issues including gender diversity, executive/worker pay ratios, worker representation, injury rates, child labour, forced labour and much more. They also need to disclose how their supply chain performs on all these issues.

“The major impact for travel managers is going to be more data on the companies they do business with,” says EEA founder Bruce Bolger. “Hotels are a great example. They are going to have to disclose tremendous detail on what they pay employees, how they train them, how much worker voice they give them, plus health, safety and discrimination. Travel planners are certainly going to avoid hotels that have very bad reports and gravitate towards ones that are safe. They won’t send their people to a place where there is slave labour.”