Questions & Answers
Is it mandatory to make explicit reference to the specific Disclosure Requirement when incorporating by reference, or is referring to Disclosure Requirements in other parts of the annual report in the IRO-2 table sufficient?
- Incorporation by reference
- content index
Background
ESRS 1 paragraphs 119 and 120 state:
‘119. Provided that the conditions in paragraph 120 are met, information prescribed by a Disclosure Requirement of an ESRS, including a specific datapoint prescribed by a Disclosure Requirement, may be incorporated in the sustainability statement by reference to:
(a) another section of the management report;
(b) the financial statements;
(c) the corporate governance statement (if not part of the management report);
(d) the remuneration report required by Directive 2007/36/EC of the European Parliament and of the Council (9);
(e) the universal registration document, as referred to in Article 9 of Regulation (EU) 2017/1129(10); and
(f) public disclosures under Regulation (EU) No 575/2013 of the European Parliament and of the Council (11) (Pillar 3 disclosures). If the undertaking incorporates by reference information from Pillar 3 disclosures, it shall ensure that the information matches the scope of consolidation used for the sustainability statement by complementing the incorporated information with additional elements as necessary.
120. The undertaking may incorporate information by reference to the documents, or part of the documents, listed in paragraph 119, provided that the disclosures incorporated by reference:
(a) constitute a separate element of information and are clearly identified in the document concerned as addressing the relevant Disclosure Requirement, or the relevant specific datapoint prescribed by a Disclosure Requirement;
(b) are published before or at the same time as the management report;
(c) are in the same language as the sustainability statement;
(d) are subject to at least the same level of assurance as the sustainability statement; and
(e) meet the same technical digitalisation requirements as the sustainability statement.’
ESRS 1 paragraph 56 states: ‘The undertaking shall include a list of the Disclosure Requirements complied with in preparing the sustainability statement, following the outcome of the materiality assessment (see ESRS 1 Chapter 3), including the page numbers and/or paragraphs where the related disclosures are located in the sustainability statement. This may be presented as a content index. The undertaking shall also include a table of all the datapoints that derive from other EU legislation as listed in Appendix B of this Standard, indicating where they can be found in the sustainability statement and including those that the undertaking has assessed as not material, in which case the undertaking shall indicate “not material” in the table in accordance with ESRS 1 paragraph 35.’
Answer
Yes, it is mandatory to make explicit reference in the sustainability statement to the specific Disclosure Requirement (and, where applicable, to the datapoint of a Disclosure Requirement) when incorporating by reference. At the same time, it is also necessary to clearly identify in the source document (i.e. the document that the sustainability statement refers to) the content that the undertaking intends to incorporate by reference as the information that corresponds to the relevant ESRS Disclosure Requirement (or the relevant specific datapoint) prescribed by an ESRS Disclosure Requirement.
Incorporation by reference according to ESRS 1 paragraph 119 requires that all the conditions of ESRS 1 paragraph 120 be met. One of those conditions is that the disclosure incorporated by reference ‘constitute a separate element of information and be clearly identified in the document concerned as addressing the relevant Disclosure Requirement(s), or the relevant specific datapoint(s) prescribed by a Disclosure Requirement’ (see ESRS 1 paragraph 120(a)). Reference in the sustainability statement only – for example, as part of the ‘content index’ as required by ESRS 1 paragraph 56 – to the sections that are incorporated by reference is not sufficient to meet the ESRS 1 paragraph 120(a) requirement. A clear identification in the document incorporated by reference (for example, in another section of the management report or the financial statements) addressing the relevant Disclosure Requirement(s) or the datapoint(s) is also needed.
Relations
Paragraph | Content |
|---|---|
The undertaking may incorporate information by reference to the documents, or part of the documents, listed in paragraph 119, provided that the disclosures incorporated by reference: | |
Provided that the conditions in paragraph 120 are met, information prescribed by a Disclosure Requirement of an ESRS, including a specific datapoint prescribed by a Disclosure Requirement, may be incorporated in the sustainability statement by reference to: | |
The undertaking shall include a list of the Disclosure Requirements complied with in preparing the sustainability statement, following the outcome of the materiality assessment (see ESRS 1 chapter 3), including the page numbers and/or paragraphs where the related disclosures are located in the sustainability statement. This may be presented as a content index. The undertaking shall also include a table of all the datapoints that derive from other EU legislation as listed in Appendix B of this standard, indicating where they can be found in the sustainability statement and including those that the undertaking has assessed as not material, in which case the undertaking shall indicate “Not material” in the table in accordance with ESRS 1 paragraph 35. | |
The undertaking may incorporate information by reference to the documents, or part of the documents, listed in paragraph 119, provided that the disclosures incorporated by reference: | |
Provided that the conditions in paragraph 120 are met, information prescribed by a Disclosure Requirement of an ESRS, including a specific datapoint prescribed by a Disclosure Requirement, may be incorporated in the sustainability statement by reference to: | |
The undertaking shall include a list of the Disclosure Requirements complied with in preparing the sustainability statement, following the outcome of the materiality assessment (see ESRS 1 chapter 3), including the page numbers and/or paragraphs where the related disclosures are located in the sustainability statement. This may be presented as a content index. The undertaking shall also include a table of all the datapoints that derive from other EU legislation as listed in Appendix B of this standard, indicating where they can be found in the sustainability statement and including those that the undertaking has assessed as not material, in which case the undertaking shall indicate “Not material” in the table in accordance with ESRS 1 paragraph 35. | |
Provided that the conditions in paragraph 120 are met, information prescribed by a Disclosure Requirement of an ESRS, including a specific datapoint prescribed by a Disclosure Requirement, may be incorporated in the sustainability statement by reference to: | |
The undertaking may incorporate information by reference to the documents, or part of the documents, listed in paragraph 119, provided that the disclosures incorporated by reference: | |
The undertaking shall include a list of the Disclosure Requirements complied with in preparing the sustainability statement, following the outcome of the materiality assessment (see ESRS 1 chapter 3), including the page numbers and/or paragraphs where the related disclosures are located in the sustainability statement. This may be presented as a content index. The undertaking shall also include a table of all the datapoints that derive from other EU legislation as listed in Appendix B of this standard, indicating where they can be found in the sustainability statement and including those that the undertaking has assessed as not material, in which case the undertaking shall indicate “Not material” in the table in accordance with ESRS 1 paragraph 35. | |
The undertaking may incorporate information by reference to the documents, or part of the documents, listed in paragraph 119, provided that the disclosures incorporated by reference: |