The European Union's Omnibus initiative is a package of legislative proposals aimed at simplifying and streamlining various EU regulations, including the Corporate Sustainability Reporting Directive (CSRD). While intended to reduce the administrative burden on SMEs, the proposed changes to the CSRD have raised concerns within the sustainability community.
Specifically, the Omnibus initiative is considering removing many SMEs from the scope of mandatory CSRD reporting. This means that a substantial number of food and beverage suppliers – often SMEs – may no longer be obligated to track and report their carbon emissions in a standardized, verifiable way.

The Impact on Retailers
While large suppliers might still be subject to CSRD, the lack of consistent, mandatory reporting from a large segment of the supply chain makes it considerably harder for retailers to:

• Accurately Calculate Scope 3 Emissions: Retailers rely on supplier data to calculate their overall carbon footprint. Inconsistent or missing data from SMEs creates significant gaps and undermines the accuracy of these calculations.
• Track Progress Towards Net-Zero: Without comprehensive data, retailers cannot effectively monitor progress towards their emission reduction targets. This lack of transparency can damage credibility with consumers and investors.
• Engage Suppliers Effectively: The absence of a mandatory reporting framework may reduce the incentive for SMEs to prioritize carbon reduction efforts, making it more difficult for retailers to drive change throughout their supply chain.
• Risk of Greenwashing Accusations: Without clear reporting the retailers might be accused of misleading communication.

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The Limitations of SBTi Reliance
Many retailers are encouraging their suppliers to set Science Based Targets (SBTi) as a means of demonstrating commitment to climate action. While SBTi provides a valuable framework for setting ambitious, science-aligned targets, it's not a perfect solution for retailers needing granular, product-level data.

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Here's why solely relying on supplier SBTi commitments can be insufficient:

• Lack of Product-Level Granularity: SBTi targets are typically set at the company level, not for individual products. This makes it impossible for retailers to identify which products are driving the most significant emissions and to prioritize those for reduction efforts.
• Inconsistent Reporting Methodologies: While SBTi provides guidelines, there can still be variations in how companies calculate and report their emissions, making it difficult for retailers to compare data across suppliers.
• Time Lag and Verification: SBTi progress is often reported annually, creating a significant time lag between action and reporting. Furthermore, verifying the accuracy of supplier-reported data can be challenging.
• Focus on Targets, Not Necessarily Action: Setting a target is a crucial first step, but it doesn't guarantee that the supplier is actively taking steps to reduce emissions across their entire product range.

The EU Omnibus initiative, coupled with the limitations of relying solely on SBTi, presents a significant hurdle for grocery retailers striving to achieve their net-zero goals. Accurate, granular, and consistent data on product-level emissions is essential for effective decarbonization efforts. In our next article, we will explore a solution that empowers retailers to overcome these challenges and drive meaningful change throughout their supply chain.

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