Question-ID: 180

ESRS 1 paragraph 77 states: ‘When preparing its sustainability statement, the undertaking shall adopt the following time intervals as of the end of the reporting period:

(a) for the short-term time horizon: the period adopted by the undertaking as the reporting period in its financial statements;

(b) for the medium-term time horizon: from the end of the short-term reporting period defined in (a) up to five years; and

(c) for the long-term time horizon: more than five years.’

ESRS 1 paragraph 80 states: ‘There may be circumstances where the use of the medium- or long-term time horizons defined in paragraph 77 results in non-relevant information, as the undertaking uses a different definition for (i) its processes of identification and management of material impacts, risks and opportunities or (ii) the definition of its actions and setting targets. These circumstances may be due to industry-specific characteristics, such as cash flow and business cycles, the expected duration of capital investments, the time horizons over which the users of sustainability statements conduct their assessments or the planning horizons typically used in the undertaking’s industry for decision-making. In these circumstances, the undertaking may adopt a different definition of medium- and/or long-term time horizons (see ESRS 2 BP-2, paragraph 9).’

ESRS 1 Basis of Conclusions paragraph 124 states: ‘The SRB discussed whether to prescribe mandatory time horizons for short-, medium- and long-term for reporting purposes or whether they should be entity-specific based on its business model, industry-characteristics, and its planning horizon. Feedback from public consultation in that respect was ambiguous. Preparers generally preferred an entity-specific approach to be able to use already existing data consistent with their managerial processes, whereas users a more standardized approach for better comparability across undertakings. Noticing that many of the forthcoming first-time sustainability reporters need guidance, to increase comparability the SRB decided to prescribe conventional time periods but to allow deviations from the medium- and long- term time horizons based on entity-specific circumstances, acknowledging also that – depending on the sustainability matter and sector concerned – other time horizons within the long-term horizon might be useful and therefore prevail at topical level.’