Improve flexibility and resilience

The CSRD is effectively a global regulation, with rolling deadlines depending on the size and location of the company. While the CSRD regulations originated in the EU, it is important to understand that any company that intends to generate more than €150 million in annual revenue in the EU must comply with the regulations. Therefore, for certain Chinese enterprises in Europe that meet certain conditions, they are also required to disclose sustainable information in accordance with the requirements of the CSRD: for example, Chinese enterprises with subsidiaries or branches in the EU, EU subsidiaries in China, or Chinese enterprises receiving investment from EU enterprises. In addition, since the disclosure requirements of the CSRD cover the value chain, it is clear that Chinese companies upstream of the EU supply chain also need to disclose sustainable information in accordance with the regulations. These Chinese companies may face the risk of business stagnation if they fail to meet compliance requirements.

At the same time, another important factor for more local Chinese companies is that the supply chain is the highest or second highest source of emissions for most manufacturers. This means that in order to ensure compliance with CSRD requirements, manufacturers will give preference to suppliers that commit to achieving the same level of carbon footprint transparency and emission reduction as they do.

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Clearly, those businesses that actively integrate their sustainability practices now will be better prepared to comply with regulations and better prepared to win contracts. Some of these sustainability measures may involve diversifying suppliers and sourcing materials locally, reducing reliance on a single source. This can increase resilience by reducing risks associated with supply chain disruptions or geopolitical issues. Finally, electrifying and improving power efficiency wherever fossil fuels are used means better agility and flexibility for businesses, as well as more predictable operating expenses.

Time waits for no one

Regarding Chinese companies, Liu Qiang, global senior vice president and President of Greater China at PTC, pointed out: “Currently, the companies that are fulfilling their sustainability commitments are doing so voluntarily. However, with the implementation of CSRD, the sustainability commitment will not only be a legal requirement, but also a necessary threshold for enterprises to expand their own business, so it is crucial for manufacturers to start CSRD early. In other words: Now is the time to increase the digital maturity of enterprises, from product design to manufacturing to services, because only then can rapid emissions reductions be achieved.”

Manufacturers committed to net zero emissions, zero waste and fair practices will drive a new era of efficiency, profitability and environmental stewardship. Manufacturers that cling to outdated, resource-intensive production methods risk becoming uncompetitive suppliers to their carbon-footprint conscious customers, potentially losing up to 20 percent of their economic profits by 2030. Which path will you choose?