The EU’s Renewable Energy Directive, the so-called RED III Directive, steers the national legislation of the member states in an increasingly environmentally conscious direction. In this blog, we discuss the background of the directive and the new requirements it places on sustainability reporting.
Environmental awareness and the desire for sustainability have reached the whole of society. The finite resources of the Earth are highlighted, among others, by the annual Earth Overshoot Day on August 22. The increased emphasis on environmental thinking is also reflected in the stricter EU-requirements, evidenced by the Renewable Energy Directive.
Renewable Energy Directive requires operators in various sectors to report in more detail on the environmental impact of their operations, and the carbon footprint of the raw materials they use. This is especially true for renewable energy operators, who must reliably collect information throughout the supply chain.
Environmental certificates are also becoming more common in various industries. Collecting information on the environmental impact and the origin of products is beneficial for companies because it promotes competitiveness and continuity of operations in the EU market. At the same time, it reinforces the positive image of sustainable business among customers and stakeholders.
Practical tools are available to meet the obligations of the Renewable Energy Directive, such as the fuel supply chain management system Once by Pinja. You can also read about Gasum’s experience on the introduction of the Once system. Gasum is the leading biogas producer in the Nordic countries.
Carrot and stick for the benefit of the environment
The EU’s Renewable Energy Directive has steered national legislation of the member states in a more environmentally conscious direction to ensure sustainable development and environmental diversity. The first RED I Directive entered into force in 2009 and its updated version RED II in 2018. RED III, the latest directive, entered into force in November 2023, and its practical impact on legislation is now becoming more concrete.
The Renewable Energy Directive RED III increases the reporting obligations of companies in various sectors on their environmental impacts. Its key objective is to increase the current EU-wide overall target of increasing renewable energy to 42.5% by 2030. It also introduces new requirements for different industries, the most relevant for Finland being those related to bioenergy, transport, and renewable energy authorization procedures.
Energy operators must now report on their environmental impact in more detail. Compared to the previous directives, RED III covers even more operators in the sector, as the lower limit for applicable energy plants in terms of thermal input is reduced from 20 MW to 7.5 MW. At the same time, the requirements of the directive are now partially applied to plants that are not part of the emissions trading system.
Manual sustainability reporting is a challenge
Material balance systems are used to monitor the amount of biomass fuels used for electricity, heat, cooling, and biogas production.
What does the Renewable Energy Directive require of energy sustainability reporting? Operators subject to the requirements must report on:
- greenhouse gas emission reductions, and
- the origin of materials
We describe the double challenge of sustainability reporting in more detail in our guide RED III and sustainability reporting in the energy sector.
The Renewable Energy Directive requires the demonstration of greenhouse gas emission reductions throughout the supply chain, including the origin of fuels, cultivation, farming, land use, processing, and transport, among others. The calculations also include emissions from biomass end products and by-products.
In addition, energy plants must report data ron the origin of materials. Plants must demonstrate that they are using sustainable fuels for energy production, which includes verification of fuel origin data.
Reliable data collection requires robust information management practices throughout the value chain. Now it is worthwhile for companies to invest in the traceability of the carbon footprint of fuels and raw materials, even though the directive does not yet directly require them to demonstrate compliance with sustainability criteria.
The days of manual spreadsheets are gone, as manual data collection is time-consuming and prone to errors. In practice, the easiest and most reliable way is to automate supply chain reporting with a dedicated system. This enables the organization to avoid business risks and save human resources for productive work.
Read more about the Once by Pinja system that can help collect the required data the right way and with confidence.
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