Questions & Answers
(1) What does ‘consultation with affected communities’ – in the case of pollution, for instance – mean in terms of actions?
(2) Could a company be compliant if it states that it has not done it even though its pollution levels are under control under current law?
- Pollution
- affected community
- ESRS S3
Background
ESRS E2 paragraph 11 states: ‘The undertaking shall describe the process to identify material impacts, risks and opportunities and shall provide information on: … (b) whether and how the undertaking has conducted consultations, in particular with affected communities’.
ESRS 2 paragraph 53 (b) states: ‘(b) an overview of the process to identify, assess, prioritise and monitor the undertaking’s potential and actual impacts on people and the environment, informed by the undertaking’s due diligence process, including an explanation of whether and how the process: …
iii. includes consultation with affected stakeholders to understand how they may be impacted and with external experts; …’.
EFRAG IG 1 Materiality assessment paragraph 102 states: ‘… Even though the ESRS do not mandate behaviour, the undertaking is required to disclose whether and how the materiality assessment process identifies and assesses its impacts, including consultation with affected stakeholders, to understand how they may be impacted’.
ESRS E4 paragraph 17 (e) states that undertakings: ‘… (ii) … shall disclose how these communities were involved in the materiality assessment … and (iii) … how negative impacts may be avoided. If these impacts are unavoidable, the undertaking may indicate its plans to minimise them and implement mitigation measures that aim to maintain the value and functionality of priority services’.
ESRS E4 paragraph AR 20 states: ‘… (a) … impacts or benefits created for affected communities, smallholders, indigenous peoples or other persons in vulnerable situations …’.
ESRS S3 paragraph 21 states: ‘… whether and how the perspectives of affected communities inform its decisions or activities aimed at managing actual and potential impacts on communities. This shall include …:
(a) whether engagement occurs with affected communities or their legitimate representatives directly, or with credible proxies that have insight into their situation;
(b) the stage(s) at which engagement occurs, the type of engagement, and the frequency of the engagement;
(c) the function and the most senior role within the undertaking that has operational responsibility for ensuring this engagement happens, and that the results inform the undertaking’s approach;
(d) where applicable, how the undertaking assesses the effectiveness of its engagement with affected communities, including, where relevant, any agreements or outcomes that result’.
ESRS S3 paragraph 22 states: ‘… steps it takes to gain insight into the perspectives of affected communities that may be particularly vulnerable to impacts and/or marginalised, and into the perspective of specific groups within the affected communities, such as women and girls’.
ESRS S3 paragraph 23 states: ‘Where affected communities are indigenous peoples, the undertaking shall also disclose how it takes into account and ensures respect of their particular rights in its stakeholder engagement approach, including their right to free, prior and informed consent …’.
ESRS S3 paragraph 24 states: ‘If the undertaking cannot disclose the above required information because it has not adopted a general process to engage with affected communities, it shall disclose this to be the case. It may disclose a timeframe in which it aims to have such a process in place’.
Answer
(1) What does ‘consultation with affected communities’ – in the case of pollution, for instance – mean in terms of actions?
ESRS E2 does not specify the type of actions that an undertaking is to take to consult with affected communities. In general, the ESRS do not mandate behaviour. However, ESRS 2 requires transparency on the undertaking’s consultation with affected stakeholders or experts (ESRS 2 paragraph 53 (b)(iii)). This disclosure of ESRS 2 is complemented with ESRS E2 IRO paragraph 11 (b) for the pollution topical standard; therefore, the undertaking is to comply with the IRO-1 specifications in ESRS 2 and ESRS E2 regardless of whether pollution has been assessed as material by the undertaking. In terms of examples as to how this engagement could be disclosed, ESRS S3-2 on processes for engaging with affected communities about impacts and ESRS E4 paragraph 17 (e), provides reference points for this datapoint.
(2) Could a company be compliant if it states that it has not done it even though its pollution levels are under control under current law?
Yes, the undertaking is compliant with ESRS E2 paragraph 11 (b) if it disclosed that it did not conduct a consultation with affected communities. It is to be noted that the focus of this specific disclosure requirement is not on legal compliance with regard to pollution levels and it cannot be considered an exemption to satisfy this requirement. Here, ESRS E2 only requires stating whether the undertaking conducted consultations with affected communities as input for the pollution-related materiality assessment. If such consultation process was not adopted, the undertaking is to state that fact and, optionally, it can also provide a timeframe in which it expects to have a consultation process in place. Only in the case in which the undertaking did have this consultation process in place will it also need to explain how it consulted the affected communities on pollution-related impacts, risks and opportunities.
Supporting Material
Implementation Guidance IG 1 Materiality assessment (EFRAG, 2023).
Relations
Paragraph | Content |
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whether and how the undertaking has conducted consultations, in particular with affected communities. | |
whether and how the undertaking has conducted consultations, in particular with affected communities. | |
whether and how the undertaking has conducted consultations, in particular with affected communities. |