The Green Digital Twin as an Enabler for Sustainability Assessment for the CSRD
A short impulse on how digital twins can support in meeting the requirements of Corporate Sustainability Reporting Directive 2024
The CSRD implementation deadline is fast approaching. However, some people may still be wondering what this directive entails since it was approved in the European parliament and came into effect on 5th January 2023. With only eight months remaining for implementation, it is crucial to delve deeper into the topic to understand the various aspects associated with the directive.
The European Green Deal of 2019 is a plan by the Union to make the EU area the world’s first CO2-neutral continent by 2050. The decisive factor here is the classification system for environmental, social and governance (ESG) activities known from the EU taxonomy. The ESG criteria contained therein define standards in the three areas of environment, social affairs and governance, with each of the areas containing individual specifications and guidelines. The Corporate Sustainability Reporting Directive (CSRD) describes the requirements for the environmental part and the European Sustainability Reporting Standards (ESRS) define how these requirements must be reported. And if you don’t already know, the CSRD applies across all sectors.
The ESRS distinguishes between two types of so-called “cross-sectoral cross-cutting standards”:
1. General Requirements (ESRS 1): Specify the general requirements for the content of sustainability reporting
2. General Disclosures (ESRS 2): Define the specific reporting requirements and disclosure requirements for the respective companies, regardless of their sector affiliation and for all sustainability topics
The Cross-Sectoral Standards are also divided into Environment (ESRS-E), Social Affairs (ESRS-S) and Corporate Governance (ESRS-G), whereby the areas have been further divided into up to five sub-areas.
From the ESRS, it can therefore be concluded how, and which data must be collected for later reporting. Now let us take a look at the ESRS E2. In Chapter E2–4 Pollution of air, water and soil, section 25 states:
The undertaking shall disclose the pollutants that are generated or used during production processes or that are procured, and that leave its facilities as emissions, as products, or as part of products or services
And that is exactly where a possible challenge lies!
According to the EU, the reporting obligations would not apply to smaller companies until 2026. However, they are still indirectly affected by the contents of the ESRS, e.g. if they are suppliers for larger companies and thus also part of their supply chain in 2024. These affected companies will therefore have to ask themselves whether they have the appropriate KPIs to meet the CSRD and ESRS requirements in the upcoming months.
Conversely, this means that in the case of manufacturing companies, full data acquisition is only possible if production data is also requested from suppliers, i.e. smaller companies with fewer than 250 employees and 40 million net sales revenues. [1][2]
Challenge: Data collection in the supply chain
Again referring to E2–4 section 25, the question now arises: where should the data for the pollution of air, water and soil caused during production actually come from? The fact is that all manufacturing companies must start collecting this data in order to be able to transfer these KPIs in a digital product passport to later participants in the value chain in the future.
For example, models from the Life Cycle Assessment (LCA)[3] can help to calculate the respective KPIs. But again, the problem is that the LCA models need basic quantitative data on e.g. energy and water consumption to work.
It is also advisable to use generally valid emission factors from environmental databases for the calculation. In Germany, for example, the database for process-oriented basic data for environmental management systems (ProBas) was created by the Federal Environmental Agency (UBA), which companies can access free of charge for their sustainability reporting.
The data collection of emission levels should also comply with certain standards accepted by the EU. For the carbon footprint, for example, this would be the German ISO 14067. [4]
If we take this Product Carbon Footprint as an example, the following data, among others, is required for its calculation according to ISO 14067:
- Quantity of all raw materials used in the product (e.g. aluminium and plastic)
- Quantity of all materials used for the production of the product in machines and systems (e.g. lubricating oil and greases)
- All energy sources used for production from the energy mix (e.g. electricity and gas)
- All aggregated transport costs from suppliers internally and externally (e.g. truck and cargo ship transports)
- All emission factors for these quantified data (e.g. 1 t aluminium matches in fossil CO2 9274 kg/t [5])
The latter data can be obtained from the environmental database. But where is the quantifiable data for the product collected and stored during the product development process?
The digital twin as a digital product passport for CSRD reporting
In my opinion, one possible solution for this is a digital product twin. The digital twin is a key concept in the context of Industry 4.0 and the Industrial Internet of Things (IIoT). There are various types of twin concepts in connection with IIoT, for example, the “process twin”, the “simulation twin”, the “plant twin” or the “product twin”. The official definition of the Industrial Internet Consortium (IIC) is correspondingly vague: “The digital twin is a digital image […] that is sufficient to meet the requirements of a number of use cases.” [6]
Fraunhofer IOSB clarifies this term: It understands the digital twin as a concept with which products as well as machines and their components are modelled with the help of digital tools. This includes all geometry, kinematics, logic and process data. The digital twin acts as a reflection of the physical “asset” in a real environment. [7]
In summary, the digital twin represents the digital representation of a physical product and is therefore ideally suited for the use case of CSRD reporting, as all relevant information can flow together throughout the entire product life cycle. Figure 1 shows an overview of the aspects that affect the digital twin. It also shows that telemetry, process and operating data from various device sources and connections can flow directly into the digital twin. In my opinion, all these functionalities are fundamental prerequisites for making the calculations of the ESRS KPIs and thus the environmental reporting possible in the first place.
Example of an implementation in CONTACT Elements
Now let’s take a look at what a possible implementation of such a digital twin could look like.
As an illustrative example, let’s assume that we want to calculate the carbon footprint of a bicycle. The bicycle has a simple Bill of Materials (BOM) that includes a handlebar, fork, frame, saddle, pedals, and two wheels with tires. Each of the individual parts is manufactured from varied materials and processes internally or externally via suppliers. Therefore, the environmental KPIs CO2 emissions and water consumption must be calculated individually for each installed part.
In order to collect the required data, the information from the ProBas environmental database was merged with material information from the ERP and Material Data Management. Based on this data, calculations can now be conducted according to an LCA method for each component.
Once all the values for each part have been determined by means of the respective calculations, the data for the digital product passport of the entire bicycle can be easily obtained. As a rule, the sum of the values of all installed components within the parts list is formed for this purpose. In the following Figure 3, the KPIs for CO2 emissions and water consumption of the bicycle are shown summed up over the entire production process based on the materials used.
Furthermore, through the complete digitization of the product passport, it is possible to pass on the calculated data, including the associated models, BOMs and documents, to processing companies in the value chain. Ideally, the data is provided by our suppliers in the same way to enable easy import.
Green Digital Twin for the Aerospace Industry
In the context of the manufacturing industries, the aerospace sector is particularly affected by the CSRD. In this industry, there has always been a detailed obligation to provide evidence of the materials and processes used in the form of the Life Data Sheet (LDS). Mind you, the LDS is still used in paper form in manufacturing! This might be a problem too. What is new, however, is the design of sustainable production in order to be able to meet external factors (Product Declaration), such as the fulfilment of customer requirements for sustainable products. As a part of the PredictECO research project, CONTACT Software is collaborating with partners from academia and industry to create a green digital product twin that meets the requirements of the CSRD. The goal is to create a digital twin that is based on the LDS and meets the latest standards. The Green Digital Twin should include all the necessary manufacturing information for every component in the future, which will be documented for the manufacturer and downstream processes and the data can be then used for the Corporate Sustainability Reporting.
In an upcoming story, I will provide a detailed demonstration of the subject matter. In the meantime, please don't hesitate to contact me if you have any questions or concerns or if you want to discuss the topic further. I'm always open to well-founded discussions. And stay tuned for more blog posts on current topics related to production, services, digital lifecycle management and sustainability.
References:
[1] EUR-Lex — CSRD, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32022L2464
[2] EFRAG — ESRS, https://www.efrag.org/lab6
[3] Fraunhofer IPB — Life Cycle Assessment,
https://www.ibp.fraunhofer.de/en/expertise/life-cycle-engineering/applied-
methods/life-cycle-assessment.html
[4] DIN — Greenhouse gases — Carbon footprint of products — Requirements and guidelines for quantification (ISO 14067:2018), https://www.din.de/en/getting-involved/standards-committees/nagus/publications/wdc-beuth:din21:289443505?destinationLanguage=&sourceLanguage=
[5] Umweltbundesamt — Prozessdetails: Aluminium, https://www.probas.umweltbundesamt.de/php/prozessdetails.php?id={D67F9971-D39A-4EAB-B872-A593687A3DB1}
[6] IIC — Journal of Innovation, https://www.iiconsortium.org/news/joi-nov-19/
[7] Fraunhofer IOSB — Digital Twin — the key concept for Industrie 4.0, https://www.iosb.fraunhofer.de/en/business-units/automation-digitalization/fields-of-application/digital-twin.html
About CONTACT Research. CONTACT Research is a dynamic research group dedicated to collaborating with innovative minds from the fields of science and industry. Our primary mission is to develop cutting-edge solutions for the engineering and manufacturing challenges of the future. We undertake projects that encompass applied research, as well as technology and method innovation. An independent corporate unit within the CONTACT Software Group, we foster an environment where innovation thrives.
