Questions & Answers
If the matter of GHG emissions is material, should the undertaking also report under the ESRS E2 in addition to ESRS E1?
- Non-GHG emission
- ozone-depleting substance
- air pollution
Background
To better address the issue pointed out by the submitter, it was agreed to revise the question received, ‘If I have a material topic regarding GHG emissions, do I need to report under the E2 Standard, or is E2 just for non-GHG gases since GHGs are disclosed in accordance with E1 Climate Change?’ to the question above.
ESRS E2 paragraph 28 states: ‘The undertaking shall disclose the amounts of … (a) each pollutant … emitted to air, water and soil, with the exception of emissions of GHGs which are disclosed in accordance with ESRS E1 Climate Change’. The related footnote (65) refers to information derived from the Commission Delegated Regulation (EU) 2022/1288, supplementing Regulation (EU) 2019/2088 (SFDR), including ‘indicator #3 in Table II of Annex I (“Emissions of ozone- depleting substances”)’. ESRS E2, Basis for Conclusions, ‘EU legislation and policies alignment’, paragraph BC16 specifies that the aforementioned SFRD PAI indicator is a ‘European framework reference’ to be used when disclosing under ESRS E2-4.
ESRS E2 paragraph 7 states: ‘ … to provide a comprehensive overview of what could be material to pollution, relevant Disclosure Requirements are covered in other environmental Standards as follows: (a) ESRS E1 Climate change which addresses the following seven greenhouse gases connected to air pollution: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3)’.
ESRS E1 paragraph 4 states: ‘This Standard covers disclosure requirements related but not limited to the seven Greenhouse gases (GHG): carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3) …’.
While defining ‘Greenhouse Gases (GHG), ESRS Annex II also provides an indication of the source (Regulation on the Governance of the Energy Union and Climate Action) to consult for a detailed account of GHGs and therefore those that fall under the ESRS E1 domain: ‘The gases listed in Part 2 of Annex V of Regulation (EU) 2018/1999 of the European Parliament and of the Council (13). These include Carbon dioxide (CO2), Methane (CH4), Nitrous Oxide (N2O), Sulphur hexafluoride (SF6), Nitrogen trifluoride (NF3), Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs)’.
ESRS E1 paragraph 8 states: ‘Ozone-depleting substances (ODS), nitrogen oxides (NOX) and sulphur oxides (SOX), among other air emissions, are connected to climate change but are covered under the reporting requirements in ESRS E2’.
‘Ozone-depleting substances’ are defined in ESRS Annex II as ‘Substances listed in the Montreal Protocol on Substances that Deplete the Ozone Layer’. The Montreal Protocol identifies the individual ‘controlled substances’ with a high ozone-depleting potential (ODP). Such substances are considered substances of concern (SoC) under ESRS, as per the definition of SoC in Annex II, which includes, among others, substances that are ‘hazardous to the ozone layer’. SoC are to be disclosed on across the ESRS E2 Standard (E2-1, E2-2, E2-3, E2-5, E2-6).
The ESRS E2 Basis for Conclusions discusses the consistency with GRI’s metrics on ODS and air emissions under paragraph BC39 for Disclosure Requirement E2-4 as well as alignment with WHO Global Air Quality Guidelines, which additionally incorporate fine (‘PM₂.₅’) and inhalable particulate matter (‘PM₁₀’), Ozone(O₃), nitrogen dioxide (‘NO₂’), Sulphur dioxide (‘SO₂’) and carbon monoxide (‘CO’), and qualitative good practice statements for certain types of particulate matter.
ESRS E2 paragraph 24 states: ’In addition to ESRS 2 MDR-T, the undertaking may specify whether ecological thresholds (e.g. the biosphere integrity, stratospheric ozone-depletion, atmospheric aerosol loading, soil depletion, ocean acidification) and entity-specific allocations were taken into consideration when setting targets.’
IG 1 Materiality Assessment paragraph 46 states: ‘Once a matter has been identified as material, the undertaking refers to the DR in the respective topical ESRS to identify the information to be disclosed on the matter … Similarly, if an undertaking concludes that pollution of water is material, it shall provide information under the DR in ESRS E2-1 Policies, E2-2 Actions and resources, E2-3 Targets, E2-4 Pollution of air, water and soil and E2-6 Anticipated financial effects from material polluted-related risks and opportunities’.
Answer
When GHG emissions are material, the undertaking will report them under ESRS E1. If other air emissions (i.e. non-GHG emissions) are material, then the undertaking will need to report those under ESRS E2.
Under ESRS, GHGs include seven types, which are CO2, CH4, N2O, SF6, NF3, HFCs, and PFCs. GHG emissions are covered by ESRS E1 and should therefore be reported in accordance with it. All other air emissions – including, therefore, non-GHG discharges – are to be reported in accordance with ESRS E2. Among such air pollutants are ozone-depleting substances (ODS), nitrogen oxides (NOX) and sulphur oxides (SOX). Undertakings may refer to the E-PRTR for the other air pollutants.
It is to be noted that the reporting of non-GHG emissions is pervasive across all ESRS E2 Disclosure Requirements (from E2-1 to E2-6).
Supporting Material
The Montreal Protocol on Substances that Deplete the Ozone Layer (1987).