Questions & Answers
When a topical standard does not include Disclosure Requirements that are applicable jointly with ESRS 2 (ref. to Appendix C of ESRS 2), are ESRS 2 requirements applicable in relation to that topic?
- ESRS 2 related disclosures in topical standards
Background
The original question received was reworded to the above question; the original question was: ‘If there is no additional guidance, then do the other disclosure requirements do not apply to the topical standard (meaning GOV 1 and GOV 2 do not apply)? Or do they all still apply, but there is just more guidance to follow (such that there is more specific guidance for GOV 3 specifically when reporting on E1)?’
In the architecture of the ESRS, the two cross-cutting standards ESRS 1 General Requirements and ESRS 2 General Disclosures are complemented by ten topical standards (E, S and G). ESRS 1 paragraph 9 states: ‘Topical ESRS can include specific requirements that complement the general level Disclosure Requirements of ESRS 2. ESRS 2 Appendix C Disclosure/Application Requirements in topical ESRS that are applicable jointly with ESRS 2 General Disclosures provides a list of the additional requirements in topical ESRS that the undertaking shall apply in conjunction with the general level disclosure requirements of ESRS 2.’
ESRS 2 disclosure requirements are ‘cross-cutting in nature’, so they do not refer to a specific topic, but some of them also have topical specifications in the topical standards as explained in ESRS 2 Appendix C. An example is ESRS 2 GOV-3 ‘Integration of sustainability-related performance in incentive schemes’: this disclosure requirement (paragraphs 27-29) has a specification in the climate topical standard ESRS E1 paragraph 13.
ESRS E1 paragraph 13: ‘The undertaking shall disclose whether and how climate-related considerations are factored into the remuneration of members of the administrative, management and supervisory bodies , including if their performance has been assessed against the GHG emission reduction targets reported under Disclosure Requirement E1-4 and the percentage of the remuneration recognised in the current period that is linked to climate related considerations, with an explanation of what the climate considerations are.’
A basic principle is that the requirements in the topical standards should be read and applied in conjunction with the cross-cutting standards.
Furthermore, all topical standards are subject to materiality assessment.
Answer
Disclosure Requirements (DRs), including their datapoints, in the cross-cutting standard ESRS 2 General Disclosures are to be reported irrespective of the outcome of the materiality assessment (for example, GOV-1, GOV-2, GOV-3, GOV-4, and GOV-5), see ESRS 1 paragraph 29. The content of ESRS 2 (with the exception of MDR – P, A, T) is not intended to provide a content to be followed in each and every topic, but it provides content that is to be provided at corporate/general level (across all the topics).
All topical standards should be read in conjunction with the cross-cutting standards ESRS 1 and ESRS 2, as these apply to the sustainability statement as a whole.
There are datapoints related to the ESRS 2 DRs in some of the topical standards. These are outlined in the table in ESRS 2 Appendix C, Disclosure and Application Requirements in topical ESRS that are applicable in conjunction with ESRS 2 General disclosures. They include GOV-1 in ESRS G1 ‘Business conduct’, paragraph 5, and GOV-3 in ESRS E1 ‘Climate change’, paragraph 13.
The topical specifications of ESRS 2 DRs listed in Appendix C of ESRS 2 provide additional datapoints that shall be included and/or additional considerations that the undertaking has to take into account when preparing the respective ESRS 2 Disclosure Requirements.
In terms of the scope of the materiality assessment:
(e) ESRS 1 paragraph 29 specifies the Disclosure Requirements always to be included irrespective of the outcome of materiality. These include the ESRS 2 IRO-1 requirements (listed in Appendix C of ESRS 2) that are located in the topical standards, which are to be applied also if the respective topic is not material.
(f) Other ESRS 2 specifications (listed in Appendix C of ESRS 2) and the other disclosure requirements located in topical standards are subject to materiality assessment. This implies that the undertaking only has to report on them when the respective topic is considered material. This avoids having to report, for example, on GOV-1 ‘Business conduct’ (topical standard) if the topic ‘Business conduct’ has been determined not to be material to the undertaking.
(g) All narrative disclosures including those in ESRS 2 should be applied with consideration to paragraph 31 of ESRS 1, which sets the criteria for assessing the materiality of information to be provided and ultimately affect the granularity of the reported information.
When a Disclosure Requirement in ESRS 2 does not have topical specifications, ESRS 2 has to be applied as specified in ESRS 2 Disclosure Requirement. No additional datapoints to those in ESRS 2 or considerations at topical level apply in these cases. If ESRS 2 does not set topical specifications for a given topic, ESRS SBM-3 requires nevertheless to disclose material impacts, risks and opportunities for that material topic.