Questions & Answers
ESRS E4-5 paragraph 37 mentions that ‘For datapoints specified in paragraphs 38 to 41, the undertaking shall consider its own operations’. Does that mean that ESRS E4 paragraph 33 where it says ‘The undertaking shall report metrics related to its material impacts on biodiversity and ecosystems’ also refers to the undertaking’s own operations only?
- Metrics, own operations, materiality
Background
ESRS E4 paragraph 33 states: ‘The undertaking shall report metrics related to its material impacts on biodiversity and ecosystems.’
ESRS E4 paragraph 35 states: ‘If the undertaking identified sites located in or near biodiversity-sensitive areas that it is negatively affecting (see paragraph 19(a)), the undertaking shall disclose the number and area (in hectares) of sites owned, leased or managed in or near these protected areas or key biodiversity areas.’
ESRS E4 paragraph 36 states: ‘If the undertaking has identified material impacts with regards to land-use change, or impacts on the extent and condition of ecosystems , it may also disclose their land-use based on a Life Cycle Assessment.’
ESRS E4 paragraph 37 states: ‘For datapoints specified in paragraphs 38 to 41, the undertaking shall consider its own operations.’
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 133 states: ‘For the first 3 years of its sustainability reporting under the ESRS, in order to take account of the difficulties that undertakings may encounter in gathering information from actors throughout their value chain and in order to limit the burden for SMEs in the value chain ...
(b) when disclosing metrics, the undertaking is not required to include upstream and downstream value chain information, except for datapoints derived from other EU legislation, as listed in ESRS 2 Appendix B.’ ESRS 1 paragraph AR 3 states: ‘When determining the usefulness of metrics for inclusion in its entity-specific disclosures, the undertaking shall consider whether:
(a) its chosen performance metrics provide insight into:
i. how effective its practices are in reducing negative outcomes and/or increasing
positive outcomes for people and the environment (for impacts); and/or
ii. the likelihood that its practices result in financial effects on the undertaking (for risks and opportunities );
(b) the measured outcomes are sufficiently reliable, meaning that they do not involve an excessive number of assumptions and unknowns that would render the metrics too arbitrary to provide a faithful representation; and
(c) it has provided sufficient contextual information to interpret performance metrics appropriately, and whether variations in such contextual information may impact the comparability of the metrics over time.’
Answer
IG 2 Value chain specifies in its ‘VC coverage map of ESRS Set 1’ on page 44 that E4-5 ‘only reflects own operations, as no coverage of the value chain is required.’ For clarity, it is to be noted that:
(a) ESRS E4 paragraph 37 specifies, in relation to the Disclosure Requirements in paragraphs 38 to 41, that undertakings are to consider only own operations;
(b) ESRS E4 paragraph 35 specifies metrics focusing on sites owned, leased or managed by the undertaking; and
(c) ESRS E4 paragraph 36 is a voluntary disclosure on land use based on a life cycle assessment, which inherently considers the undertaking’s value chain, as it involves assessing the impact of products or services on land use across all stages, from raw material sourcing to production and disposal.
In addition, if the undertaking identified material impacts, risks or opportunities in the value chain, it shall determine whether and what additional entity-specific disclosures it needs to disclose in line with ESRS 1 paragraphs 11 and 30 (b). See in particular ESRS 1 paragraph AR 3 on how to determine the usefulness of metrics for inclusion in entity-specific disclosures. It is to be noted that transitional provisions apply to the disclosure of value chain information (see ESRS 1 paragraph 133 (b)).
Relations
Paragraph | Content |
|---|---|
When determining the usefulness of metrics for inclusion in its entity-specific disclosures, the undertaking shall consider whether: | |
When the undertaking concludes that a sustainability matter is material as a result of its materiality assessment, on which ESRS 2 IRO-1, IRO-2 and SBM-3 set disclosure requirements, it shall: | |
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. | |
If the undertaking identified material impacts related to ecosystems, it may disclose: | |
If the undertaking identified material impacts related to the state of species, the undertaking may report metrics it considers relevant. The undertaking may: | |
If the undertaking concluded that it directly contributes to the accidental or voluntary introduction of invasive alien species, the undertaking may disclose the metrics it uses to manage pathways of introduction and spread of invasive alien species and the risks posed by invasive alien species. | |
If the undertaking has concluded that it directly contributes to the impact drivers of land-use change, freshwater -use change and/or sea-use change, it shall report relevant metrics. The undertaking may disclose metrics that measure: | |
For datapoints specified in paragraphs 38 to 41, the undertaking shall consider its own operations. | |
If the undertaking has identified material impacts with regards to land-use change, or impacts on the extent and condition of ecosystems, it may also disclose their land-use based on a Life Cycle Assessment. | |
If the undertaking identified sites located in or near biodiversity-sensitive areas that it is negatively affecting (see paragraph 19(a)), the undertaking shall disclose the number and area (in hectares) of sites owned, leased or managed in or near these protected areas or key biodiversity areas. |