Questions & Answers
Can undertakings report different metrics related to the same sustainability matter in different parts of the value chain depending on the nature of the impact, for example water withdrawal for own operations and water consumption for upstream value chain?
- Value chain metrics
- water metrics
- water withdrawal
- water consumption
Background
ESRS 1 paragraph 11 states: ‘In addition to the disclosure requirements laid down in the three categories of ESRS, when an undertaking concludes that an impact, risk or opportunity is not covered or not covered with sufficient granularity by an ESRS but is material due to its specific facts and circumstances, it shall provide additional entity-specific disclosures to enable users to understand the undertaking’s sustainability-related impacts, risks or opportunities. Application requirements AR 1 to AR 5 provide further guidance regarding entity-specific disclosures.’
ESRS 1 paragraph 63 states: ‘The information about the reporting undertaking provided in the sustainability statement shall be extended to include information on the material impacts, risks and opportunities connected with the undertaking through its direct and indirect business relationships in the upstream and/or downstream value chain (“value chain information”). In extending the information about the reporting undertaking, the undertaking shall include material impacts, risks and opportunities connected with its upstream and downstream value chain:
(a) following the outcome of its due diligence process and of its materiality assessment; and
(b) in accordance with any specific requirements related to the value chain in other ESRS.’
ESRS 1 paragraph 64 states: ‘Different sustainability matters can be material in relation to different parts of the undertaking’s upstream and downstream value chain.’
ESRS 2 paragraph 75 states: ‘The undertaking shall disclose any metrics that it uses to evaluate performance and effectiveness in relation to a material impact, risk or opportunity.’
ESRS 2 paragraph 76 states: ‘Metrics shall include those defined in ESRS, as well as metrics identified on an entity-specific basis, whether taken from other sources or developed by the undertaking itself.’
IG 2 Value chain, ‘Summary in 7 key points’, point 5 states: ‘Topical standards require to include VC data only for a few metrics. However, when the undertaking considers that a material IRO in the VC is not sufficiently covered by the requirements in ESRS, it shall include additional entity-specific disclosures, including metrics when such information is necessary in order to enable users to understand the undertaking’s material impacts, risks or opportunities.’
Answer
Yes, the undertaking can report different metrics for the same sustainability matter for different parts of its value chain based on which metrics are deemed material for its own operations and its value chain. In relation to the example provided by the submitter, this means that the undertaking would disclose its water consumption in relation to its upstream value chain if material (this would be an entity-specific disclosure when applying sector-agnostic standards), but it would not disclose its water consumption in its own operations if not material. At the same time, it could disclose water withdrawal for its own operations if material (this is an optional metric) but not disclose this metric in relation to its upstream or downstream value chain if impacts in the value chain are not material. If only impacts upstream are material, the metric in relation to own operation and downstream value chain are not disclosed.
More specifically, concerning this example the following is to be noted. ESRS E3-4 paragraph 28(a) requires reporting water consumption in the undertaking’s own operations only. If the undertaking deems that this metric is not material for its own operations, it shall not disclose it (see ESRS 1 paragraph 34 (b)). At the same time, if the metric water consumption is identified as material in the upstream or downstream value chain, the undertaking would be required to disclose it as an entity-specific metric (see ESRS 1 paragraph 11).
ESRS E3-4 paragraph AR 32 provides the option to disclose the metric on the undertaking’s water withdrawal. Therefore, if the undertaking considers this metric material for its own operation, it may choose to disclose it. At the same time, if this metric is deemed not material for its upstream or downstream value chain, it would not disclose it in connection to the value chain.