Energy EfficiencyConnecting the dots of Energy Efficiency Directive with sustainable finance reporting. The full potential unlocked.
Summary
Recommendation 2024/2002 issued by the European Commission provides guidance on implementing the Energy Efficiency Directive (EED) in harmony with the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD). The recommendation emphasizes the integration of energy audits and energy management systems, the financing of energy efficiency, and reporting activities related to sustainability, which are now mandatory for many enterprises. Energy Efficiency Networks are encouraged, particularly for SMEs, to share experiences and expertise for enhanced efficiency and greenhouse gas emissions reduction.
The recommendation highlights the monetization of non-energy benefits from energy efficiency measures, such as improved business performance and air quality, as well as the adoption of renewable energy sources. Energy performance contracts are also detailed, where payment is linked to actual energy savings, which can offer regulatory exemptions when aligned with the EED.
ESRS reporting standards call for transparency in financial and sustainability performance, including energy. Reporting under EED must align with the ESRS, obliging companies to document energy consumption and efficiency measures' implementation rates in their annual reports.
While Recommendation 2024/2002 does not explicitly connect with other directives, it prompts member states to consider the integration of EED requirements with obligations of CSRD and CSDDD during their transposition process. These complementary directives aim to enhance corporate sustainability reporting and due diligence across companies' activities and supply chains for sustainability purposes. The approach is iterative, encouraging continuity in compliance reporting and promoting the widespread adoption of energy efficiency and climate mitigation measures.
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Connecting the dots of Energy Efficiency Directive with sustainable finance reporting. The full potential unlocked.
During this summer, the European Commission published in the OJ (Official Journal) a series of Recommendations and guidelines, addressed to member states, for the transposition of the Energy Efficiency Directive (EU) 2023/1791 which must be adopted by October 11, 2025:
- 2024/2143 setting out guidelines for the interpretation of Article 3 as regards the energy efficiency first principle;
- 2024/1722 setting out guidelines for the interpretation of Article 4 as regards energy efficiency targets and national contributions;
- 2024/1716 setting out guidelines for the interpretation of Articles 5, 6 and 7 as regards energy consumption in the public sector, renovation of public buildings and public procurement
- 2024/1590 on transposing Articles 8, 9 and 10 on the energy saving obligation’s provisions;
- 2024/2002 setting out guidelines for the interpretation of Article 11 as regards energy management systems and energy audits;
- 2024/2481 setting out guidelines for the interpretation of Articles 21, 22 and 24 as regards the consumer related provisions;
- 2024/2395 setting out guidelines for the interpretation of Article 26 as regards the heating and cooling supply;
- 2024/2476 setting out guidelines for the interpretation of Article 29 of Directive as regards energy services;
- C/2023/8558) on transposing Article 30 on national energy efficiency funds, financing and technical support.
In addition, the Commission is suggesting the examples of good practices illustrating how the new and revised provisions could be implemented are compiled in the contractors’ report on good practices related to the EED-Recast (https://circabc.europa.eu/ui/group/8f5f9424-a7ef-4dbf-b914-1af1d12ff5d2/library/12d21f3f-42bf-4d63-979a-9cd1006a2ff1/details?download=true)
Among all the Recommendations I’d like to focus on the relevance of 2024/2002. It strives to interconnect regulatory, social and financial requirements of the EED and to make them working synergistically, all at once, to meet the disclosures obligations of the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD). This is a comprehensive new approach to risks and benefits management throughout the supply and value chain toward Net Zero.
In particular, Recommendation 2024/2002 connects in a holistic framework the activities of:
- energy audits and energy management systems (EnMS). The Action Plans and the recommendation implementation rate will be published in the enterprise’s annual report, and are made publicly available;
- financing of energy efficiency improvement activities and exploitation of renewable sources;
- monitoring and reporting activities on sustainability according to the ESRS (European Sustainability Reporting Standards) of the European Financial Reporting Advisory Group (EFRAG) of the Commission. ESRS establish sustainability disclosure obligations for enterprises and organizations, as defined in the EU CSRD 2022/2464 or voluntary disclosures for not listed SMEs.
All of these requirements are integrated and embedded into the context of the obligations of the CSDDD 2024/1760 related to the duty of diligence of enterprises for sustainability purposes.
The relevant topics of Recommendation 2024/2002 are:
Energy Audit and Energy Management Systems
Energy Audit (according to EN 16247) or Energy Management Systems (according to EN ISO 50001), will be mandatory for many industrial and commercial enterprises. These systematic reviews analyze the energy consumption profile of a company or building identifying opportunities for improving energy efficiency and determining the cause-effect performance indicators that will impact on the financial performance of the project. The desired outcome is encouraging and supporting the implementation of sustainable practices towards decarbonization and Net Zero, monitoring progress towards targeted changes.
Energy efficiency network
Energy efficiency networks, support companies, in particular SMEs, to undertake a common path towards greater efficiency and reduced GHG emissions. These networks facilitate the exchange of experiences and information, and provide companies with access to independent experts to evaluate their performance and implement sustainable strategies. These initiatives prove effective in promoting energy audit and encouraging the adoption of energy management systems, especially for companies (SMEs) below the mandatory consumption threshold defined in the EED.
Multiple benefits of energy efficiency
The adoption of energy efficiency measures offers the possibility to monetize non energy benefits, which go beyond simple energy savings. These include improvements in business performance, air quality, and reduced operating costs. Furthermore, the integration of renewable energy sources contributes to climate objectives. Non-energy benefits represent a strategic lever for enterprise value, while improving environmental sustainability. This topic is the objective of an European standard under development at CEN CENELEC.
Energy performance contracts
Energy performance contract refers to an agreement between a company and an energy service provider, aimed at improving the energy efficiency of business facilities or processes. This type of contract clearly defines the energy saving objectives, which must be guaranteed by the service provider. Energy performance contracts provide that payment for services is based on energy savings actually obtained and measured for the entire duration of the contract. The EN 17669 standard defines the minimum requirements for these types of contracts.
Furthermore, companies adopting an energy performance contract can obtain exemptions from some EED regulatory obligations, provided that the contract includes the necessary elements for the energy management system and complies with the requirements established by the EED.
ESRS reporting standards
The ESRS (European Sustainability Reporting Standards) require certain types of enterprises to have greater transparency in reporting financial, environmental and sustainability performances, including energy. The reporting requirement under EED aligns with the ESRS, requiring companies to report energy consumption and implementation rates of efficiency measures in their annual financial report. The ESRS principles developed by EFRAG and adopted by the Commission support the integration of energy information into company balance sheets, encouraging compliance with international standards and the requirements of the Taxonomy referred to in Regulation 2020/852 relating to the establishment of a framework that favors sustainable investments. It is important to mention the relevant risk or benefit indicators that determine the cause-and-effect relationship that generate a positive or negative impact of a non-financial decision on the enterprises’ results. These ‘mediating factors’ are the KPI and Energy Performance Indicator typically defined in the Energy Audit or EnMS.
Recommendation 2024/2002 does not indicate connections with other Directives. Nevertheless, member states should consider in their own transposition process the integration and the interoperability of the EED requirements with the obligations of the CSRD and CSDDD
Directive (EU) 2022/2464 Corporate Sustainability Reporting (CSRD)
The directive establishes new requirements for corporate sustainability reporting. It arises from the EU's commitment to the Green Deal and aims to improve the transparency and comparability of non-financial information. The disclosure obligations are extended to all large companies, including unlisted ones, and to small and medium-sized listed companies (excluding micro-enterprises), to ensure the disclosure of social and environmental impacts. Third country companies with significant activity in the EU must also comply. The directive introduces the concept of "double relevance", requiring companies to consider both the impact of their activities on the environment and society, and the risks and opportunities for the company itself. The Directive was implemented in our country with Legislative Decree 2024/125 on 6 September 2024.
Directive (EU) 2024/1760 Business due diligence for sustainability purposes (CSDDD)
The Directive defines "good diligence" obligations for businesses to promote sustainability and the protection of human rights and the environment along global value chains.
Companies must take preventive measures to identify, avoid and mitigate negative impacts on human rights and the environment, both in their own operations and in those of the supply chain.
The path to possible take us around in a clockwise direction. The path begins with the energy audit and Energy Management Systems, proceeds with the Multiple Benefits and Energy Performance Contract and ends with the compliance reporting to Taxonomy. The process is iterative and enables continuity with CSRD and CSDDD obligation reporting.
Attaining the regulatory, social and financial conditions that would allow the large-scale adoption of energy efficiency improvement measures (climate mitigation and adaptation measures) is a critical impact factor of the EED.
The path to possible is to engage all the relevant involved stakeholders (Financial Institutions, Accounting reporting organizations and Standards setter) and the policy maker (EU Commission), all at once, to work synergistically to unlock the full potential.
