Questions & Answers
When are incidents and deposits considered to be ‘major’? Is there a qualitative or quantitative threshold to consider?
- Anticipated financial effect
- major incident
- deposit
Background
ESRS E2 paragraph 38 states: ‘The objective of this Disclosure Requirement is to provide an understanding of:
(a) anticipated financial effects due to material risks arising from pollution-related impacts and dependencies and how those risks have (or could reasonably be expected to have) a material influence on the undertaking’s financial position, financial performance, and cash flows, over the short-, medium- and long term- …’.
ESRS E2 paragraph 39 states: ‘The disclosure shall include:
(a) a quantification of the anticipated financial effects in monetary terms before considering pollution-related actions, or where not possible without undue cost or effort, qualitative information.’
ESRS E2 paragraph 40 states: ‘The information provided under paragraph 39 (a) shall include …
(b) operating and capital expenditures incurred in the reporting period in conjunction with major incidents and deposits’.
ESRS E2 paragraph 15 states: ‘The undertaking shall indicate, with regard to its own operations and its upstream and downstream value chain, whether and how its policies address the following areas where material … (c) avoiding incidents and emergency situations’.
ESRS E2 paragraph 41 states: ‘The undertaking shall disclose any relevant contextual information including a description of material incidents and deposits whereby pollution had negative impacts on the environment and/or is expected to have negative effects on the undertaking’s financial cash flows, financial position and financial performance with short-, medium- and long-term time horizons’.
The Industrial Emissions Directive, recital 16, stipulates that ‘The impact of pollution, including when caused by incidents or accidents, can extend beyond the territory of a Member State. In such cases, without prejudice to Directive 2012/18/EU of the European Parliament and of the Council (9), limiting the consequences for human health and the environment of incidents or accidents and preventing further possible incidents or accidents requires prompt exchange of information and close coordination between the competent authorities of the Member States which are or could be affected by such events. Therefore, in the event of any incident or accident significantly affecting the environment or human health in another Member State, exchange of information and transboundary and multidisciplinary cooperation between the affected Member States should be fostered to limit the consequences for the environment and human health and to prevent further possible incidents or accidents’.
The Industrial Emissions Directive, Article 7(b), adds that ‘in the event of any incident or accident significantly affecting the environment …the operator immediately takes the measures to limit the consequences for human health or the environment and to prevent further possible incidents or accidents’.
The Seveso-III Directive, Article 3, paragraph 13 defines a major accident as ‘an occurrence such as a major emission, fire, or explosion resulting from uncontrolled developments in the course of the operation of any establishment covered by this Directive, and leading to serious danger to human health or the environment, immediate or delayed, inside or outside the establishment, and involving one or more dangerous substances’.
Answer
ESRS do not provide a threshold for distinguishing major incidents and deposits from regular occurrences. The evaluation of incidents should, in all cases, be based on the undertaking’s materiality assessment and incidents identified as major are likely connected to material impacts and risks and, therefore, likely to be identified as material. At the same time, incidents of lower scale can carry material impacts or financial risks and, therefore, be assessed by the undertaking as material, too.
It is also to be noted that based on the provisions of materiality of information of ESRS 1 paragraph 34, the disclosure of operating and capital expenditures incurred in the reporting period, in conjunction with major incidents and deposits as required by ESRS E2 paragraph 40 (b), depends more on whether the expenditures are financially material and not on what kind of major incidents or deposits caused them.
The undertaking may also need to consider the provisions in the Seveso-III Directive on major accidents as well as those in the IED 2.0 on incidents and accidents that significantly affect the environment. The IED stipulates in particular that incidents or accident may significantly affect the environment and may become a national matter or even extend beyond national borders. The Seveso-III Directive (used in the development of ESRS E2) explicitly defines major accidents and includes examples that can be considered for reporting. In the cases in which an undertaking’s incidents or accidents fall within the scope of major or significant incidents or accidents according to existing law (i.e. IED 2.0 and Seveso-III Directive), such incidents and accidents would also be considered as major incidents according to ESRS. Should any of the undertaking’s facilities or installations not be covered by the IED 2.0 or the Seveso-III Directive, the undertaking can nonetheless consider the definitions provided in those Directives when applying its materiality assessment.
Relations
Paragraph | Content |
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the operating and capital expenditures incurred in the reporting period in conjunction with major incidents and deposits; | |
the operating and capital expenditures incurred in the reporting period in conjunction with major incidents and deposits; | |
the operating and capital expenditures incurred in the reporting period in conjunction with major incidents and deposits; |