Questions & Answers
How can preparers take ‘the changes over time’ into account when disclosing the amounts of pollutants?
- Pollution
- microplastics
Background
ESRS E2 paragraph 30 states: ‘The undertaking shall put its disclosure into context and describe:
(a) the changes over time …’.
ESRS E2 paragraph AR 25 states: ‘Where the undertaking’s activities are subject to Directive 2010/75/EU of the European Parliament and of the Council on industrial emissions (IED) (67) and relevant Best Available Techniques Reference Documents (BREFs), irrespective of whether the activity takes place within the European Union or not, the undertaking may disclose the following additional information’.
ESRS E4 paragraph 38 states: ‘The undertaking may disclose metrics that measure: …
(b) changes over time (e.g. 1 or 5 years) in the management of the ecosystem …’.
ESRS E4 paragraph AR 27 states: ‘When preparing the information required under this Disclosure Requirement, the undertaking shall consider and may describe:
(a) the methodologies and metrics used and an explanation for why these methodologies and metrics are selected, as well as their assumptions, limitations and uncertainties, and any changes in methodologies made over time and why they occurred;...’
ESRS 1 paragraph 77 provides definitions of three main time intervals for the undertaking to adopt: short-term, corresponding to the ‘reporting period in its financial statements’; medium-term, lasting ‘from the end of the short-term reporting period … up to 5 years’; and long-term for periods of ‘more than 5 years’.
ESRS 1 paragraph 74 states: ‘The undertaking shall establish appropriate linkages in its sustainability statement between retrospective and forward-looking information, when relevant, to foster a clear understanding of how historical information relates to future-oriented information’.
ESRS 1 paragraph 83 states: ‘The undertaking shall disclose comparative information in respect of the previous period for all quantitative metrics and monetary amounts disclosed in the current period.’
ESRS 2 Disclosure Requirement SBM-3 paragraph 48 (c) (iii) states that the undertaking shall disclose ‘the reasonably expected time horizons of the impacts’.
Answer
The undertaking would be reflecting changes over time by disclosing for its quantitative metrics, at the very least, comparative information in respect to the previous reporting period (see ESRS 1 paragraph 83). In this case, this means that the undertaking would, at the very least, disclose the amount of pollutants of the current reporting year and the amount of pollutants reported for the previous year (if reported) to describe changes in the amount. Should the measurement methodologies or approaches for pollutant quantification have changed regarding the previous reporting period, the undertaking may describe, if relevant, those methodology changes to help understand the changes in the amount of pollutants disclosed (as recommended for E4-5 paragraph AR 27 (a)).
In addition, and in more generic terms, when disclosing the amounts of pollutants, preparers shall consider the ESRS 1 paragraph 77 provision on establishing appropriate linkages with their sustainability statements between past, present and future information when relevant to allow for a better understandability of how its historical information relates to current and to future-oriented information.
As no specific indication is provided on the type of changes that undertakings need to report regarding pollutants’ emissions, an approach shall be selected that supports understandability and comparability over time (see ESRS 1 Chapter 2 Qualitative characteristics of information) and that considers the materiality of the pollution (materiality concept). Additionally, although no specific example is provided for ESRS Disclosure Requirement E2-4, preparers may consider the one given under ESRS Disclosure Requirement E4-5 for metrics on biodiversity, which suggests looking into changes expressed as a variation from one year to the next (short-term) or in five-year intervals (medium-term).
It is to be noted that the implementation of pollution prevention and pollution control measures, and the adoption of BATs, can lead to significant changes over time of the amounts, types and form of pollutant releases which provide relevant contextual information to the disclosure of metrics.
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