Questions & Answers
Do entity-specific metrics need to be developed for a topic that is covered in the standards but is only for a specific part of the value chain?
- Entity-specific disclosure on matters not covered by ESRS Disclosure Requirements
Background
The submitter provided the following background for the question: ‘... for example, a company has identified a matter as material for which the topic of water is relevant in the value chain. In the ESRS E3 standard, the topic of water in the value chain is covered by datapoints in the areas of Policies, Targets and Actions. However, the associated metric relates exclusively to the company’s own business activities (ESRS E3 paragraph 28-29). Can it now be deduced from paragraph 30 (b) in ESRS 1 that the company must develop an entity-specific metric for this matter because there is insufficient “granularity” here, or has the EU deliberately limited the metric to its own business activities so that no metric for water use in the value chain has to be explicitly developed?’
ESRS 1 paragraph 11 states: ‘In addition to the disclosure requirements laid down in the three categories of ESRS, when an undertaking concludes that an impact, risk or opportunity is not covered or not covered with sufficient granularity by an ESRS but is material due to its specific facts and circumstances, it shall provide additional entity-specific disclosures to enable users to understand the undertaking’s sustainability-related impacts, risks or opportunities. Application requirements AR 1 to AR 5 provide further guidance regarding entity-specific disclosures.’
ESRS 1 paragraphs AR 1 and AR 2 state: ‘AR 1. The entity-specific disclosures shall enable users to understand the undertaking’s impacts, risks and opportunities in relation to environmental, social or governance matters.
AR 2. When developing entity-specific disclosures, the undertaking shall ensure that:
(a) the disclosures meet the qualitative characteristics of information as set out in chapter 2 Qualitative characteristics of information; and
(b) its disclosures include where applicable all material information related to the reporting areas of governance; strategy; impact, risk and opportunity management; and metrics and targets (see ESRS 2 chapters 2 to 5).’
ESRS 1 paragraph 65 states: ‘The undertaking shall include material value chain information when this is necessary to:
(a) allow users of sustainability statements to understand the undertaking’s material impacts, risks and opportunities; and/or
(b) produce a set of information that meets the qualitative characteristics of information (see Appendix B of this Standard).’
Answer
Entity-specific disclosure shall be provided in addition to the Disclosure Requirements laid down in the three categories of ESRS (i.e., cross-cutting, topical and sector-specific standards) when an undertaking concludes that an impact, risk or opportunity is not covered or not covered with sufficient granularity by an ESRS but is material due to its specific facts and circumstances (ESRS 1 paragraph 11).
If an undertaking has concluded that a topic is material in its value chain, but the relevant topical standard only requires to disclose metrics related to own operations, the provision of metrics that cover specifically the value chain shall be considered and provided if such metrics are necessary according to paragraph 11 of ESRS 1. Sector ESRS may introduce additional metrics, including on the value chain.
Relations
Paragraph | Content |
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When performing its materiality assessment, the undertaking shall consider the following list of sustainability matters covered in the topical ESRS. When, as a result of the undertaking’s materiality assessment (see ESRS 2 IRO-1), a given sustainability matter in this list is assessed to be material, the undertaking shall report according to the corresponding Disclosure Requirements of the relevant topical ESRS. Using this list is not a substitute for the process of determining material matters. This list is a tool to support the undertaking’s materiality assessment. The undertaking still needs to consider its own specific circumstances when determining its material matters. The undertaking, where necessary, also shall develop entity-specific disclosures on material impacts, risks and opportunities not covered by ESRS as described in paragraph 11 of this Standard. | |
Further guidance for developing entity-specific disclosures can be found by considering the information required under topical ESRS that addresses similar sustainability matters. | |
When developing its entity-specific disclosures, the undertaking shall carefully consider: | |
When developing entity-specific disclosures, the undertaking shall ensure that: | |
When determining the usefulness of metrics for inclusion in its entity-specific disclosures, the undertaking shall consider whether: | |
The entity-specific disclosures shall enable users to understand the undertaking’s impacts, risks and opportunities in relation to environmental, social or governance matters. | |
When the undertaking concludes that a sustainability matter is material as a result of its materiality assessment, on which ESRS 2 IRO-1, IRO-2 and SBM-3 set disclosure requirements, it shall: | |
In addition to the disclosure requirements laid down in the three categories of ESRS, when an undertaking concludes that an impact, risk or opportunity is not covered or not covered with sufficient granularity by an ESRS but is material due to its specific facts and circumstances, it shall provide additional entity-specific disclosures to enable users to understand the undertaking’s sustainability-related impacts, risks or opportunities. Application requirements AR 1 to AR 5 provide further guidance regarding entity-specific disclosures. | |
The undertaking shall disclose its process to identify its impacts, risks and opportunities and to assess which ones are material. | |
a specification of those impacts, risks and opportunities that are covered by ESRS Disclosure Requirements as opposed to those covered by the undertaking using additional entity-specific disclosures. |