ANNEX I

EUROPEAN SUSTAINABILITY REPORTING STANDARDS

ESRS 1

GENERAL REQUIREMENTS

Table of contents

Objective

1.Categories of ESRS Standards, reporting areas and drafting conventions

1.1 Categories of ESRS Standards

1.2 Reporting areas and minimum content disclosure requirements on policies, actions, targets

and metrics

1.3 Drafting conventions

2.Qualitative characteristics of information

3.Double materiality as the basis for sustainability disclosures

3.1 Stakeholders and their relevance to the materiality assessment process

3.2 Material matters and materiality of information

3.3 Double materiality

3.4 Impact materiality

3.5 Financial materiality

3.6 Material impacts or risks arising from actions to address sustainability matters

3.7 Level of disaggregation

4.Due diligence

5.Value chain

5.1 Reporting undertaking and value chain

5.2 Estimation using sector averages and proxies

6.Time horizons

6.1 Reporting period

6.2 Linking past, present and future

6.3 Reporting progress against the base year

6.4 Definition of short-, medium- and long-term for reporting purposes

7Preparation and presentation of sustainability information

7.1Presenting comparative information

7.2Sources of estimation and outcome uncertainty

7.3Updating disclosures about events after the end of the reporting period

7.4Changes in preparation or presentation of sustainability information

7.5Reporting errors in prior periods

7.6Consolidated reporting and subsidiary exemption

7.7Classified and sensitive information, and information on intellectual property, know-how or results of innovation

7.8 Reporting on opportunities

8.Structure of sustainability statement

8.1General presentation requirement

8.2Content and structure of the sustainability statement

9.Linkages with other parts of corporate reporting and connected information

9.1Incorporation by reference

9.2Connected information and connectivity with financial statement

10.Transitional provisions

10.1Transitional provision related to section 1.4 Entity-specific disclosures

10.2Transitional provision related to chapter 5 Value chain

10.3Transitional provision related to section 7.1 Presenting comparative information

10.4 Transitional provision: List of Disclosure Requirements that are phased-in for ESRS to year 2 or subsequent years

Appendix A: Application Requirements

Entity-specific disclosures

Double materiality

Estimation using sector averages and proxies

Content and structure of the sustainability statement

Appendix B: Qualitative characteristics of information

Appendix C: List of phased-in Disclosure Requirements

Appendix D: Structure of ESRS sustainability statement

Appendix E: Flowchart for determining disclosures to be included

Appendix F: Example of structure of ESRS sustainability statement

Appendix G: Example of incorporation by reference

Objective

1.The objective of European Sustainability Reporting Standards (ESRS) is to specify the sustainability information that an undertaking shall disclose in accordance with Directive 2013/34/EU of the European Parliament and of the Council, 1 as amended by Directive (EU) 2022/2464. 2 Reporting in accordance with ESRS does not exempt undertakings from other obligations laid down in substantive Union law.

2.Specifically, ESRS specify the information that an undertaking shall disclose about its material impacts, risks and opportunities in relation to environmental, social, and governance sustainability matters. ESRS do not require undertakings to disclose any information on environmental, social and governance topics covered by ESRS that the undertaking has assessed as non-material (See Appendix E flowchart for determining disclosures under ESRS).The information disclosed in accordance with ESRS enables users of the sustainability statement to understand the undertaking’s material impacts on people and environment and the material effects of sustainability matters on the undertaking’s development, performance and position.

3.The objective of this Standard (ESRS 1) is to provide an understanding of the architecture of ESRS, the drafting conventions and fundamental concepts used, and the general requirements for preparing and presenting sustainability information in accordance with Directive 2013/34, as amended by Directive 2022/2464..

1.Categories of ESRS Standards, reporting areas and drafting conventions

1.1 Categories of ESRS standards

4.There are three categories of ESRS:

a)cross-cutting standards;

b)topical standards (Environmental, Social and Governance standards); and

c)sector-specific standards.

Cross-cutting standards and topical standards are sector-agnostic, meaning that they apply to all undertakings regardless of which sector or sectors the undertaking operates in.

5.The cross-cutting standards ESRS 1 General requirements and ESRS 2 General disclosures apply to the sustainability matters covered by topical standards and sector-specific standards.

6.This standard (ESRS 1) describes the architecture of ESRS standards, explains drafting conventions and fundamental concepts, and sets out general requirements for preparing and presenting sustainability-related information.

7.ESRS 2 establishes Disclosure Requirements on the information that the undertaking shall provide at a general level across all material sustainability matters on the reporting areas governance, strategy, impact, risk and opportunity management, and metrics and targets.

8.Topical ESRS cover a sustainability topic and are structured into topics and sub-topics, and where necessary sub-sub-topics. The table in Application Requirement 16 (AR 16) to this standard provides an overview of the sustainability topics, sub-topics and sub-sub-topics (collectively ‘sustainability matters’) covered by topical ESRS.

9.Topical ESRS can include specific requirements that complement the general level Disclosure Requirements of ESRS 2. ESRS 2 Appendix C Disclosure/Application Requirements in topical ESRS that are applicable jointly with ESRS 2 General Disclosures provides a list of the additional requirements in topical ESRS that the undertaking shall apply in conjunction with the general level disclosure requirements of ESRS 2.

10.Sector-specific standards are applicable to all undertakings within a sector. They address impacts, risks and opportunities that are likely to be material for all undertakings in a specific sector and that are not covered, or not sufficiently covered, by topical standards. Sector-specific standards are multi-topical and cover the topics that are most relevant to the sector in question. Sector-specific standards achieve a high degree of comparability.

11.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. 

1.2 Reporting areas and minimum content disclosure requirements on policies, actions, targets and metrics  

12.The Disclosure Requirements in ESRS 2, in topical ESRS and in sector-specific ESRS are structured into the following reporting areas:

(a)Governance (GOV): the governance processes, controls and procedures used to monitor and manage impacts, risks and opportunities (see ESRS 2, chapter 2 Governance);

(b)Strategy (SBM): how the undertaking’s strategy and business model interact with its material impacts, risks and opportunities, including how the undertaking addresses those impacts, risks and opportunities (see ESRS 2, chapter 3 Strategy);

(c)Impact, risk and opportunity management (IRO): the process(es) by which the undertaking:

I.identifies impacts, risks and opportunities and assesses their materiality (see IRO-1 in section 4.1 of ESRS 2),

II.manages material sustainability matters through policies and actions (see section 4.2 of ESRS 2).

(d)Metrics and targets (MT): how the undertaking measures its performance, including targets it has set and progress towards meeting them (see ESRS 2, chapter 5 Metrics and targets).

13.ESRS 2 includes:

(a)in section 4.2 Minimum Disclosure Requirements regarding policies (MDR-P) and actions (MDR-A);

(b)in section 5 Minimum Disclosure Requirements regarding metrics (MDR-M) and targets (MDR-T).
 

The undertaking shall apply the minimum disclosure requirements regarding policies, actions, metrics and targets together with the corresponding Disclosure Requirements in topical and sector-specific ESRS.

1.3Drafting conventions

14.In all ESRS:

(a)the term “impacts” refers to positive and negative sustainability-related impacts that are connected with the undertaking’s business, as identified through an impact materiality assessment process (see section 3.4 Impact materiality). It refers both to actual impacts and to potential future impacts.

(b)The term “risks and opportunities” refers to the undertaking’s sustainability-related financial risks and opportunities, including those deriving from dependencies on natural, human and social resources, as identified through a financial materiality assessment process (see section 3.5).

Collectively, these are referred to as “impacts, risks and opportunities” (IROs). They reflect the double materiality perspective of ESRS described in section 3.

15.Throughout ESRS terms that are defined in the glossary of definitions (Annex II) are put in bold italic, except when a defined term is used more than once in the same paragraph.

16.ESRS structure the information to be disclosed under Disclosure Requirements. Each Disclosure Requirement consists of one or more distinct datapoints. The term “datapoint” can also refer to a narrative sub-element of a Disclosure Requirement.

17.In addition to Disclosure Requirements most ESRS also contain Application Requirements. Application Requirements support the application of Disclosure Requirements and have the same authority as other parts of an ESRS.

18.ESRS use the following terms to distinguish between different degrees of obligation on the undertaking to disclose information:

(a)“shall disclose” – indicates that the provision is prescribed by a Disclosure Requirement or datapoint;

(b)“may disclose” – indicates voluntary disclosure to encourage good practice.

In addition, ESRS use the term “shall consider” when referring to issues, resources or methodologies that the undertaking is expected to take into account or to use in the preparation of a given disclosure if applicable.

2.Qualitative characteristics of information

19.When preparing its sustainability statement, the undertaking shall apply:

(a)the fundamental qualitative characteristics of information, i.e. relevance and faithful representation; and

(b)the enhancing qualitative characteristics of information, i.e. comparability, verifiability and understandability.

20.These qualitative characteristics of information are defined and described in Appendix B of this Standard.

3. Double materiality as the basis for sustainability disclosures

21.The undertaking shall report on sustainability matters based on the double materiality principle as defined and explained in this chapter.

3.1Stakeholders and their relevance to the materiality assessment process

22.Stakeholders are those who can affect or be affected by the undertaking. There are two main groups of stakeholders:

(a)affected stakeholders: individuals or groups whose interests are affected or could be affected – positively or negatively – by the undertaking’s activities and its direct and indirect business relationships across its value chain; and

(b)users of sustainability statements: primary users of general-purpose financial reporting (existing and potential investors, lenders and other creditors, including asset managers, credit institutions, insurance undertakings), as well as other users, including the undertaking’s business partners, trade unions and social partners, civil society and non-governmental organisations, governments, analysts and academics.

23.Some, but not all, stakeholders may belong to both groups referred to in paragraph 22.

24.Engagement with affected stakeholders is central to the undertaking’s on-going due diligence process (see chapter 4 Due diligence) and sustainability materiality assessment. This includes its processes to identify and assess actual and potential negative impacts, which then inform the assessment process to identify the material impacts for the purposes of sustainability reporting (see section 3.4 of this Standard).

3.2Material matters and materiality of information

25.Performing a materiality assessment (see sections 3.4 Impact materiality and 3.5 Financial materiality) is necessary for the undertaking to identify the material impacts, risks and opportunities to be reported.

26.Materiality assessment is the starting point for sustainability reporting under ESRS. IRO-1 in section 4.1 of ESRS 2 includes general disclosure requirements about the undertaking’s process to identify impacts, risks and opportunities and assess their materiality. SBM-3 of ESRS 2 provides general disclosures requirements on the material impacts, risks and opportunities resulting from the undertaking’s materiality assessment.

27.The Application Requirements in Appendix A of this Standard include the list of sustainability matters covered in topical ESRS, categorised by topics, sub-topics and sub-sub-topics, to support the materiality assessment. Appendix E Flowchart for determining disclosures to be included of this Standard provides an illustration of the materiality assessment described in this section.

28.A sustainability matter is “material” when it meets the criteria defined for impact materiality (see section 3.4 of this Standard) or financial materiality (see section 3.5 of this Standard) or both.

29.Irrespective of the outcome of its materiality assessment, the undertaking shall always disclose the information required by ESRS 2 General Disclosures (i.e. all the Disclosure Requirements and data points specified in ESRS 2).

30.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:

(a)disclose information according to the Disclosure Requirements (including Application Requirements) related to that specific sustainability matter in the corresponding topical ESRS; and

(b)disclose additional entity-specific disclosures (see paragraph 11 and AR 1 to AR 5 of this Standard) when the material sustainability matter is not covered by an ESRS or is covered with insufficient granularity.

31.If the undertaking concludes that a topic is not material and therefore it omits all the Disclosure Requirements in a topical ESRS, it may briefly explain the conclusions of its materiality assessment for that topic (see ESRS 2 IRO-2 Disclosure Requirements in ESRS covered by the undertaking’s sustainability statement).

32.Subject to paragraph 33, when disclosing information on policies, actions and targets in relation to a sustainability matter that has been assessed to be material, the undertaking shall include the information prescribed by all the Disclosure Requirements and datapoints in the topical and sector-specific ESRS related to that matter and in the corresponding Minimum Disclosure Requirement on policies, actions, and targets required under ESRS 2. If the undertaking cannot disclose the information prescribed by either the Disclosure Requirements and datapoints in the topical or sector-specific ESRS, or the Minimum Disclosure Requirements in ESRS 2  on policies, actions and targets, because it has not adopted the respective policies, implemented the respective actions or set the respective targets, it shall disclose this to be the case and it may report a timeframe in which it aims to have these in place.

33.When disclosing information on metrics for a material sustainability matter according to the Metrics and Targets section of the relevant topical ESRS and when disclosing the datapoints that derive from other EU legislation listed in Appendix B of ESRS 2, the undertaking:

(a)shall include the information prescribed by a Disclosure Requirement, if it assesses such information to be material; and

(b)may omit the information prescribed by a datapoint of a Disclosure Requirement, if it assesses such information to be not material, and concludes that such information is not needed to meet the objective of the Disclosure Requirement.

34.The applicable information prescribed within a Disclosure Requirement (including its datapoints), or an entity-specific disclosure, shall be disclosed when the undertaking assesses it to be relevant from one or more of the following perspectives in the sustainability statement:

(a)the significance of the information in relation to the matter it purports to depict or explain; or

(b)the capacity of such information to meet the users’ decision-making needs, including the needs of primary users of general-purpose financial reporting described in paragraph 48 and/or the needs of users whose principal interest is in information about the undertaking’s impacts.

35.The undertaking shall establish how it applies criteria, including appropriate thresholds, to determine:

(a)the information it discloses on metrics for a material sustainability matter according to the Metrics and Targets section of the relevant topical ESRS, in accordance with paragraph 33; and

(b)the information to be disclosed as entity-specific disclosures.

36.When reporting on metrics and when disclosing the datapoints that derive from other EU legislation listed in Appendix B of ESRS 2, if the undertaking omits information prescribed by either a Disclosure Requirement or a datapoint of a Disclosure Requirement in the Metrics and Targets section of a topical ESRS, such information is considered to be implicitly reported as “not material for the undertaking”.

3.3Double materiality

37.Double materiality has two dimensions, namely: impact materiality and financial materiality. Unless specified otherwise, the terms “material” and “materiality” are used throughout ESRS to refer to double materiality.

38.Impact materiality and financial materiality assessments are inter-related and the interdependencies between these two dimensions shall be considered. In general, the starting point is the assessment of impacts, although there may also be material risks and opportunities that are not related to the undertaking’s impacts. A sustainability impact may be financially material from inception or become financially material, when it could reasonably be expected to affect the undertaking’s financial position, financial performance, cash flows, its access to finance or cost of capital over the short-, medium- or long-term. Impacts are captured by the impact materiality perspective irrespective of whether or not they are financially material.

39.In identifying and assessing the impacts, risks and opportunities in the undertaking’s value chain to determine their materiality, the undertaking shall focus on areas where impacts, risks and opportunities are deemed likely to arise, based on the nature of the activities, business relationships, geographies or other factors concerned.

40.The undertaking shall consider how it is affected by its dependencies on the availability of natural, human and social resources at appropriate prices and quality, irrespective of its potential impacts on those resources.

41.An undertaking’s principal impacts, risks and opportunities are understood to be the same as the material impacts, risks and opportunities identified under the double materiality principle and therefore reported on in its sustainability statement.

42.The undertaking shall apply the criteria set under sections 3.4 and 3.5 in this Standard, using appropriate quantitative and/or qualitative thresholds. Appropriate thresholds are necessary to determine which impacts, risks and opportunities are identified and addressed by the undertaking as material and to determine which sustainability matters are material for reporting purposes. Some existing standards and frameworks use the term "most significant impacts” when referring to the threshold used to identify the impacts that are described in ESRS as "material impacts."

3.4Impact materiality

43.A sustainability matter is material from an impact perspective when it pertains to the undertaking’s material actual or potential, positive or negative impacts on people or the environment over the short-, medium- or long-term. Impacts include those connected with the undertaking’s own operations and value chain, including through its products and services, as well as through its business relationships. Business relationships include those in the undertaking’s upstream and downstream value chain and are not limited to direct contractual relationships.

44.In this context, impacts on people or the environment include impacts in relation to environmental, social and governance matters.

45.The materiality assessment of a negative impact is informed by the due diligence process defined in the international instruments of the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. For actual negative impacts, materiality is based on the severity of the impact, while for potential negative impacts it is based on the severity and likelihood of the impact. Severity is based on the following factors:

(a)the scale;

(b)scope; and

(c)irremediable character of the impact.

In the case of a potential negative human rights impact, the severity of the impact takes precedence over its likelihood.

46.For positive impacts, materiality is based on:

(a)the scale and scope of the impact for actual impacts; and

(b)the scale, scope and likelihood of the impact for potential impacts.

3.5Financial materiality

47.The scope of financial materiality for sustainability reporting is an expansion of the scope of materiality used in the process of determining which information should be included in the undertaking’s financial statements.

48.The financial materiality assessment described in paragraph 37 includes, but is not limited to, the identification of information that is considered material for primary users of general-purpose financial reporting in making decisions relating to providing resources to the entity. In particular, information is considered material for primary users of general-purpose financial reporting if omitting, misstating or obscuring that information could reasonably be expected to influence decisions that they make on the basis of the undertaking’s sustainability statement.

49.A sustainability matter is material from a financial perspective if it triggers or could reasonably be expected to trigger material financial effects on the undertaking. This is the case when a sustainability matter generates or may generate risks or opportunities that have a material influence, or could reasonably be expected to have a material influence, on the undertaking’s development, financial position, financial performance, cash flows, access to finance or cost of capital over the short-, medium- or long-term. Risks and opportunities may derive from past events or future events.  The financial materiality of a sustainability matter is not constrained to matters that are within the control of the undertaking but includes information on material risks and opportunities attributable to business relationships with other undertakings or stakeholders beyond the scope of consolidation used in the preparation of financial statements.

50.Dependencies on natural, human and social resources can be sources of financial risks or opportunities. Dependencies may trigger effects in two possible ways:

(a)they may influence the undertaking’s ability to continue to use or obtain the resources needed in its business processes, as well as the quality and pricing of those resources; and

(b)they may affect the undertaking’s ability to rely on relationships needed in its business processes on acceptable terms.

51.The materiality of risks and opportunities is assessed based on a combination of the likelihood of occurrence and the potential magnitude of the financial effects.

3.6Material impacts or risks arising from actions to address sustainability matters

52.The undertaking’s materiality assessment process may lead to the identification of situations in which its actions to address certain impacts or risks, or to benefit from certain opportunities in relation to a sustainability matter, might have material negative impacts or cause material risks in relation to one or more other sustainability matters. For example:

(a)an action plan to decarbonise production that involves abandoning certain products might have material negative impacts on the undertaking’s own workforce and result in material risks due to redundancy payments; or

(b)an action plan of an automotive supplier to focus on the supply of e-vehicles might lead to stranded assets for the production of supply parts for conventional vehicles.

53.In such situations, the undertaking shall:

(a)mention the existence of material negative impacts or material risks together with the actions that generate them, with a cross-reference to the topic to which the impacts or risks relate; and

(b)provide a description of how the material negative impacts or material risks are addressed under the topic to which they relate.

3.7Level of disaggregation

54.When needed for a proper understanding of its material impacts, risks and opportunities, the undertaking shall disaggregate the reported information:

(a)by country, when there are significant variations of material impacts, risks and opportunities across countries and when presenting the information at a higher level of aggregation would obscure material information about impacts, risks or opportunities; or

(b)by significant site or by significant asset, when material impacts, risks and opportunities are highly dependent on a specific location or asset.

55.When defining the appropriate level of disaggregation for reporting, the undertaking shall consider the disaggregation adopted in its materiality assessment. Depending on the facts and circumstances, a disaggregation by subsidiary may be necessary.

56.Where data from different levels, or multiple locations within a level, is aggregated, the undertaking shall ensure that this aggregation does not obscure the specificity and context necessary to interpret the information. The undertaking shall not aggregate material items that differ in nature.

57.When the undertaking presents information disaggregated by sectors, it shall adopt the ESRS sector classification. When a topical or sector-specific ESRS requires that a specific level of disaggregation is adopted in preparing a specific item of information, the requirement in the topical or sector-specific ESRS shall prevail.

4.Due diligence

58.The outcome of the undertaking’s sustainability due diligence process (referred to as “due diligence” in the international instruments mentioned below) informs the undertaking’s assessment of its material impacts, risks and opportunities. ESRS do not impose any conduct requirements in relation to due diligence; nor do they extend or modify the role of the administrative, management or supervisory bodies of the undertaking with regard to the conduct of due diligence.

59.Due diligence is the process by which undertakings identify, prevent, mitigate and account for how they address the actual and potential negative impacts on the environment and people connected with their business. These include negative impacts connected with the undertaking’s own operations and its value chain, including through its products or services, as well as through its business relationships. Due diligence is an on-going practice that responds to and may trigger changes in the undertaking’s strategy, business model, activities, business relationships, operating, sourcing and selling contexts. This process is described in the international instruments of the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises.

60.These international instruments identify a number of steps in the due diligence process, including the identification and assessment of negative impacts connected with the undertaking’s own operations and value chain, including through its products or services, as well as through its business relationships. Where the undertaking cannot address all impacts at once, the due diligence process allows for action to be prioritised based on the severity and likelihood of the impacts. It is this aspect of the due diligence process that informs the assessment of material impacts (see section 3.4 of this Standard). The identification of material impacts also supports the identification of material sustainability risks and opportunities, which are often a product of such impacts.

61.The core elements of due diligence are reflected directly in Disclosure Requirements set out in ESRS 2 and in the topical ESRS, as illustrated below:

(a)embedding due diligence in governance, strategy and business model 3 . This is addressed under:

I.ESRS 2 GOV-2: Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies;

II.ESRS 2 GOV-3: Integration of sustainability-related performance in incentive schemes; and

III.ESRS 2 SBM-3: Material impacts, risks and opportunities and their interaction with strategy and business model.

(b)engaging with affected stakeholders 4 . This is addressed under:

I.ESRS 2 GOV-2;

II.ESRS 2 SBM-2: Interests and views of stakeholders;

III.ESRS 2 IRO-1;

IV.ESRS 2 MDR-P; and

V.Topical ESRS: reflecting the different stages and purposes of stakeholder engagement throughout the due diligence process.

(c)identifying and assessing negative impacts on people and the environment 5 . This is addressed under: 

I.ESRS 2 IRO-1 (including Application Requirements related to specific sustainability matters in the relevant ESRS); and

II.ESRS 2 SBM-3;

(d)taking action to address negative impacts on people and the environment 6 . This is addressed under:

I.ESRS 2 MDR-A; and

II.Topical ESRS: reflecting the range of actions, including transition plans, through which impacts are addressed.

(e)tracking the effectiveness of these efforts 7 . This is addressed under:

I.ESRS 2 MDR-M;

II.ESRS 2 MDR-T; and

III.Topical ESRS: regarding metrics and targets.

5.Value chain

5.1Reporting undertaking and value chain

62.The sustainability statement shall be for the same reporting undertaking as the financial statements. For example, if the reporting undertaking is a group and if the parent company is required to prepare consolidated financial statements, the consolidated financial and sustainability statements will be for the parent and its subsidiaries.

63.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(s):

(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.

64.Paragraph 63 does not require information on each and every actor in the value chain, but only the inclusion of material value chain information. Different sustainability matters can be material in relation to different parts of the undertaking’s value chain. The information shall be extended to include value chain information only in relation to the parts of the value chain for which the matter is material.

65.The undertaking shall include material value chain information when this is necessary to:

(a)allow users of sustainability statements to understand the undertaking’s material impacts, risks and opportunities; and/or

(b)produce a set of information that meets the qualitative characteristics of information (see Appendix B of this Standard).

66.When determining at which level within its own operations and its upstream and downstream value chain a material sustainability matter arises, the undertaking shall use its assessment of impacts, risks and opportunities following the double materiality principle (see chapter 3 of this Standard).

67.When associates or joint ventures, accounted for under the equity method or proportionally consolidated in the financial statements, are part of the undertaking’s value chain, the undertaking shall include information related to those associates or joint ventures, in accordance with paragraph 63 consistent with the approach adopted for the other business relationships in the value chain. In this case, when determining impact metrics, the data of the associate or joint venture are not limited to the share of equity held, but shall be taken into account on the basis of the impacts that are directly linked to the undertaking’s products and services through its business relationships.

5.2Estimation using sector averages and proxies

68.The undertaking’s ability to obtain the necessary value chain information may vary depending on various factors, such as the undertaking’s contractual arrangements, the level of control that it exercises on the operations outside the consolidation scope and its buying power. When the undertaking does not have the ability to control the activities of its value chain and its business relationships, obtaining value chain information may be more challenging.

69.There are circumstances where the undertaking cannot collect the information about its upstream and downstream value chain as required by paragraph 63  after making reasonable efforts to do so. In these circumstances, the undertaking shall estimate the information to be reported about its upstream and downstream value chain, by using all reasonable and supportable information, such as sector-average data and other proxies.

70.Obtaining value chain information could also be challenging in the case of SMEs and other value chain entities that are not in the scope of the sustainability reporting required by Articles 19a and 29a of Directive 2013/34/EU  (see ESRS 2 BP-2 Disclosures in relation to specific circumstances).

71.With reference to policies, actions and targets, the undertaking’s reporting shall include value chain information to the extent that those policies, actions and targets involve actors in the value chain. With reference to metrics, in many cases, in particular for environmental matters for which proxies are available, the undertaking may be able to comply with the reporting requirements without collecting data from the actors in its value chain, for example, when calculating the undertaking’s GHG Scope 3 emissions.

72.The incorporation of estimates made using sector-average data or other proxies shall not result in information that does not meet the qualitative characteristics of information (see chapter 2 and section 7.2 Sources of estimation and outcome uncertainty of this Standard).

6.Time horizons

6.1Reporting period

73.The reporting period for the undertaking’s sustainability statement shall be consistent with that of its financial statements.

6.2Linking past, present and future

74.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.

6.3Reporting progress against the base year

75.A base year is the historical reference date or period for which information is available and against which subsequent information can be compared over time.

76.The undertaking shall present comparative information in respect of the base year for amounts reported in the current period when reporting the developments and progress towards a target, unless the relevant Disclosure Requirement already defines how to report progress. The undertaking may also include historical information about achieved milestones between the base year and the reporting period when this is relevant information.

6.4Definition of short-, medium- and long-term for reporting purposes

77.When preparing its sustainability statement, the undertaking shall adopt the following time intervals as of the end of the reporting period:

(a)for the short-term time horizon: the period adopted by the undertaking as the reporting period in its financial statements;

(b)for the medium-term time horizon: from the end of the short-term reporting period per (a) above to five years; and

(c)for the long-term time horizon: more than five years.

78.The undertaking shall use an additional breakdown for the long-term time horizon when impacts or actions are expected in a period longer than five years if necessary to provide relevant information to users of sustainability statements.

79.If different definitions of medium- or long-term time horizons are required for specific items of disclosure in other ESRS, the definitions in those ESRS shall prevail.

80.There may be circumstances where the use of the medium- or long-term time horizons defined in paragraph 77 results in non-relevant information, as the undertaking uses a different definition for (i) its processes of identification and management of material impacts, risks and opportunities or (ii) the definition of its actions and setting targets. These circumstances may be due to industry-specific characteristics, such as cash flow and business cycles, the expected duration of capital investments, the time horizons over which the users of sustainability statements conduct their assessments or the planning horizons typically used in the undertaking’s industry for decision-making. In these circumstances, the undertaking may adopt a different definition of medium- and/or long- term time horizons (see ESRS 2 BP–2, paragraph 9).

81.References to “short-term”, “medium-term”, and “long-term” in ESRS refer to the time horizon as determined by the undertaking according to the provisions in paragraphs 77 to 80.

7.Preparation and presentation of sustainability information

82.This chapter provides general requirements to be applied when preparing and presenting sustainability information.

7.1Presenting comparative information

83.The undertaking shall disclose comparative information in respect of the previous period for all metrics disclosed in the current period. When relevant to an understanding of the current period’s sustainability statement, the undertaking shall also disclose comparative information for narrative disclosures.

84.The undertaking shall disclose comparative information that reflects updated estimates. When the undertaking reports comparative information that differs from the information reported in the previous period it shall disclose:

(a)the difference between the figure reported in the previous period and the revised comparative figure; and

(b)the reasons for the revision of the figure.

85.Sometimes, it is impracticable to adjust comparative information for one or more prior periods to achieve comparability with the current period. For example, data might not have been collected in the prior period(s) in a way that allows either retrospective application of a new definition of a metric or target, or retrospective restatement to correct a prior period error, and it may be impracticable to recreate the information (see ESRS 2 BP-2). When it is impracticable to adjust comparative information for one or more prior periods, the undertaking shall disclose this fact.

86.When an ESRS requires the undertaking to present more than one comparative period for a metric or datapoint, the requirements of that ESRS shall prevail.

7.2Sources of estimation and outcome uncertainty

87.When metrics, including value chain information (see chapter 5 of this Standard), cannot be measured directly and can only be estimated, measurement uncertainty may arise.

88.The use of reasonable assumptions and estimates, including scenario or sensitivity analysis, is an essential part of preparing sustainability-related metrics and does not undermine the usefulness of the information, provided that the assumptions and estimates are accurately described and explained. Even a high level of measurement uncertainty would not necessarily prevent such an assumption or estimate from providing useful information or meeting the qualitative characteristics of information (see Appendix B of this Standard).

89.When the sustainability statement includes or is related to financial data and assumptions, such data and assumptions shall be consistent to the extent possible with the corresponding financial data and assumptions used in the undertaking’s financial statements.

90.Some ESRS require the disclosure of information such as explanations about possible future events that have uncertain outcomes. In judging whether information about such possible future events is material, the undertaking shall refer to the criteria in Chapter 3 of this Standard and consider:

(a)the potential financial effects of the events (the possible outcome);

(b)the severity and likelihood of the impacts on people or the environment resulting from the possible events, taking account of the factors of severity specified in paragraph 45; and

(c)the full range of possible outcomes and the likelihood of the possible outcomes within that range.

91.When assessing the possible outcomes, the undertaking shall consider all relevant facts and circumstances, including information about low-probability and high-impact outcomes, which, when aggregated, could become material. For example, the undertaking might be exposed to several impacts or risks, each of which could cause the same type of disruption, such as disruptions to the undertaking’s supply chain. Information about an individual source of risk might not be material if disruption from that source is highly unlikely to occur. However, information about the aggregate risk of supply chain disruption from all sources might be material (see ESRS 2 BP-2).

7.3Updating disclosures about events after the end of the reporting period

92.In some cases, the undertaking may receive information after the reporting period but before the management report is approved for issuance. If such information provides evidence or insights about conditions existing at period end, the undertaking shall consider it and, where appropriate, update estimates and sustainability disclosures, in the light of the new information.

93.When such information provides evidence or insights about conditions that arise after the end of the reporting period, the undertaking shall provide narrative information indicating the existence, nature and potential consequences of these post-year end events.

7.4Changes in preparation or presentation of sustainability information

94.The definition and calculation of metrics, including metrics used to set and monitor targets, shall be consistent over time. If a metric or target is redefined or replaced, the undertaking shall provide restated comparative figures, unless it is impracticable to do so (see ESRS 2 BP-2).

7.5Reporting errors in prior periods

95.The undertaking shall correct material prior period errors by restating the comparative amounts for the prior period(s) disclosed, unless it is impracticable to do so. This requirement does not extend to reporting periods before the first year of application of ESRS by the undertaking.

96.Prior period errors are omissions from, and misstatements in, the undertaking’s sustainability statement for one or more prior periods. Such errors arise from a failure to use, or misuse of, reliable information that:

(a)was available when the management report that includes the sustainability statement for those periods was authorised for issuance; and

(b)could reasonably be expected to have been obtained and considered in the preparation of sustainability disclosures included in these reports.

97.Such errors include: the effects of mathematical mistakes, mistakes in applying the definitions for metrics and targets, oversights or misinterpretations of facts, and fraud.

98.Potential errors in the current period discovered in that period are corrected before the management report is authorised for issuance. However, material errors are sometimes only discovered in a subsequent period.

99.When it is impracticable to determine the effect of an error on all prior periods presented, the undertaking shall restate the comparative information to correct the error from the earliest date practicable. When correcting disclosures for a prior period, the undertaking shall not use hindsight either in making assumptions about what the management’s intentions would have been in a prior period or in estimating the amounts disclosed in a prior period. This requirement applies to correction of both backward-looking and forward- looking disclosures.

100.Corrections of errors are distinguished from changes in estimates. Estimates are to be revised as soon as additional information becomes available (see ESRS 2 BP-2).

7.6Consolidated reporting and subsidiary exemption

101.When the undertaking is reporting at a consolidated level, it shall perform its assessment of material impacts, risks and opportunities for the entire consolidated group, regardless of its group legal structure. It shall ensure that all subsidiaries are covered in a way that allows for the unbiased identification of material impacts, risks and opportunities. Criteria and thresholds for assessing an impact, risk or opportunity as material shall be determined based on chapter 3 of this Standard.

102.Where the undertaking identifies significant differences between material impacts, risks or opportunities at group level and material impacts, risks or opportunities of one or more of its subsidiaries, the undertaking shall provide an adequate description of the impacts, risks and opportunities, as appropriate, of the subsidiary or subsidiaries concerned.

103.When assessing whether the differences between material impacts, risks or opportunities at group level and material impacts, risks or opportunities of one or more of its subsidiaries are significant, the undertaking may consider different circumstances, such as whether the subsidiary or subsidiaries operate in a different sector than the rest of the group or the circumstances reflected in section 3.7 Level of disaggregation.

7.7Classified and sensitive information, and information on intellectual property, know-how or results of innovation

104.The undertaking is not required to disclose classified information or sensitive information, even if such information is considered material.

105.When disclosing information about its strategy, plans and actions, where a specific piece of information corresponding to intellectual property, know-how or the results of innovation is relevant to meet the objective of a Disclosure Requirement, the undertaking may nevertheless omit that specific piece of information if it:

(a)is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;

(b)has commercial value because it is secret; and

(c)has been subject to reasonable steps by the undertaking to keep it secret.

106.If the undertaking omits classified information or sensitive information, or a specific piece of information corresponding to intellectual property, know-how or the results of innovation because it meets the criteria established in the previous paragraph, it shall comply with the disclosure requirement in question by disclosing all other required information.

107.The undertaking shall make every reasonable effort to ensure that beyond the omission of the classified information or sensitive information, or of the specific piece of information corresponding to intellectual property, know-how or the results of innovation, the overall relevance of the disclosure in question is not impaired.

7.8Reporting on opportunities

108.When reporting on opportunities, the disclosure should consist of descriptive information allowing the reader to understand the opportunity for the undertaking or the entire sector. When reporting on opportunities, the undertaking shall consider the materiality of the information to be disclosed. In this context, it shall consider, among other factors:

(a)whether the opportunity is currently being pursued and is incorporated in its general strategy, as opposed to a general opportunity for the undertaking or the sector; and

(b)whether the inclusion of quantitative measures of financial effects is appropriate, taking into account the number of assumptions that it could require and consequential uncertainty.

8.    Structure of the sustainability statement

109.This chapter provides the basis for the presentation of the information about sustainability matters prepared in compliance with the CSRD and the ESRS (i.e., the sustainability statement) within the undertaking’s management report. Such information is presented in a dedicated section of the management report identified as the sustainability statement. Appendix F Example of structure of ESRS sustainability statement of this Standard provides an illustrative example of a sustainability statement structured according to the requirements of this chapter.

8.1 General presentation requirement

110.Sustainability information shall be presented:

(a)in a way that allows a distinction between information required by disclosures in ESRS and other information included in the management report; and

(b)under a structure that facilitates access to and understanding of the sustainability statement, in a format that is both human-readable and machine-readable.

8.2 Content and structure of the sustainability statement

111.Except for the possibility to incorporate information by reference in accordance with section 9.1 Incorporation by reference of this Standard, the undertaking shall report all the applicable disclosures required by ESRS in accordance with chapter 1 of this Standard, within a dedicated section of the management report.

112.The undertaking shall include in its sustainability statement the disclosures pursuant to Article 8 of Regulation (EU) 2020/852 of the European Parliament and the Council 8   and Commission Delegated Regulations that specify the content of those disclosures.  The undertaking shall ensure that these disclosures are separately identifiable within the sustainability statement. The disclosures relating to each of the environmental objectives defined in the Taxonomy Regulation shall be presented together in a clearly identifiable part of the environmental section of the sustainability statement. These disclosures are not subject to the qualitative characteristics of information defined in Appendix B of this Standard.  

113.When the undertaking  includes in its sustainability statement additional disclosures stemming from (i) other legislation which requires the undertaking to disclose sustainability information, or (ii) generally accepted sustainability reporting standards and frameworks, including non-mandatory guidance and sector-specific guidance, published by other standard-setting bodies (such as technical material issued by the International Sustainability Standards Board or the Global Reporting Initiative), such disclosures shall:

(a) be clearly identified with an appropriate reference to the related legislation, standard or framework (see ESRS 2 BP-2, paragraph 15);

(b) meet the requirements for qualitative characteristics of information specified in chapter 2 and Appendix B of this standard.

114.The undertaking shall structure its sustainability statement in four parts, in the following order: general information, environmental information (including disclosures pursuant to the Article 8 of Regulation (EU) 2020/852), social information and governance information. Respecting the provision in section 3.6 Material impacts or risks arising from actions to address sustainability matters of this Standard, when information provided in one part contains information to be reported in another part, the undertaking may refer in one part to information presented in another part, avoiding duplications. The undertaking may apply the detailed structure illustrated in Appendix F of this Standard.

115.The disclosures required by sector-specific ESRS shall be grouped by reporting area and, where applicable, by sustainability topic. They shall be presented alongside the disclosures required by ESRS 2 and the corresponding topical ESRS.

116.Where the undertaking develops material entity-specific disclosures in accordance with paragraph 11 it shall report those disclosures alongside the most relevant sector-agnostic and sector-specific disclosures.

9.Linkages with other parts of corporate reporting and connected information

117.The undertaking shall provide information that enables users of its sustainability statement to assess the connections between various information about impacts, risks and opportunities in the statement and related information in other parts of its corporate reporting.

9.1 Incorporation by reference

118.Provided that the conditions in paragraph 119 are met, information prescribed by a Disclosure Requirement of an ESRS, including a specific datapoint prescribed by a Disclosure Requirement, may be incorporated in the sustainability statement by reference to:

(a)another section of the management report;

(b)the financial statements;

(c)the corporate governance statement (if not part of the management report);

(d)the remuneration report required by Directive 2007/36/EC of the European Parliament and of the Council  9 ; 

(e)the universal registration document, as referred to in Article 9 of Regulation 2017/1128; and

(f)public disclosures under Regulation 575/2013 of the European Parliament and of the Council (Pillar 3 disclosures) 10 . If the undertaking incorporates by reference information from Pillar 3 disclosures, it shall ensure that the information matches the scope of consolidation used for the sustainability statement by complementing the incorporated information with additional elements as necessary.

119.The undertaking may incorporate information by reference to the documents, or part of the documents, listed in paragraph 118, provided that the disclosures incorporated by reference:

(a)constitute a separate element of information and are clearly identified in the document concerned as addressing the relevant Disclosure Requirement, or the relevant specific datapoint prescribed by a Disclosure Requirement;

(b)are published before or at the same time as the management report;

(c)are in the same language as the sustainability statement;

(d)are subject to at least the same level of assurance as the sustainability statement; and

(e)meet the same technical digitalisation requirements as the sustainability statement.

120.Provided that these conditions are met, information prescribed by a Disclosure Requirement of an ESRS, including a specific datapoint prescribed by a Disclosure Requirement, may be incorporated in the sustainability statement by reference to the undertaking’s report prepared according to EU Eco-Management and Audit Scheme (EMAS) Regulation (EU) No. 1221/2009. In this case, the undertaking shall ensure that the information incorporated by reference is produced using the same basis for preparation of ESRS information, including scope of consolidation and treatment of value chain information.

121.In the preparation of its sustainability statement using incorporation by reference, the undertaking shall consider the overall cohesiveness of the reported information and ensure that the incorporation by reference does not impair the readability of the sustainability statement. Appendix G Example of incorporation by reference of this Standard is an illustrative example of incorporation by reference (See ESRS 2 BP-2).

9.2 Connected information and connectivity with financial statements

122.The undertaking shall describe the relationships between different pieces of information. Doing so could require connecting narrative information on governance, strategy and risk management to related metrics and targets. For example, to allow users to assess connections in information, the undertaking might need to explain the effect or likely effect of its strategy on its financial statements or financial plans, or on metrics and targets used to measure progress against performance. Furthermore, the undertaking might need to explain how its use of natural resources and changes within its supply chain could amplify, change or reduce its material impacts, risks and opportunities. It may need to link this information to the potential or actual effects on its production costs, to its strategic response to mitigate such impacts or risks, and to its related investment in new assets. This information may also need to be linked to information in the financial statements and to specific metrics and targets. Information that describes connections shall be clear and concise.

123.When the sustainability statement includes monetary amounts or other quantitative data points that exceed a threshold of materiality and that are presented in the financial statements (direct connectivity between information disclosed in sustainability statement and information disclosed in financial statements), the undertaking shall include a reference to the relevant paragraph of its financial statements where the corresponding information can be found.

124.The sustainability statement may include monetary amounts or other quantitative datapoints that exceed a threshold of materiality and that are either an aggregation of, or a part of, monetary amounts or quantitative data presented in the undertaking’s financial statements (indirect connectivity between information disclosed in sustainability statement and information disclosed in financial statements). If this is the case, the undertaking shall explain how these amounts or datapoints in the sustainability statement relate to the most relevant amounts presented in the financial statements. This disclosure shall include a reference to the line item and/or to the relevant paragraphs of its financial statements where the corresponding information can be found. Where appropriate, a reconciliation may be provided, and it may be presented in a tabular form.

125.In the case of information not covered by paragraphs 123 and 124, the undertaking shall explain, based on a threshold of materiality, the consistency of significant data, assumptions, and qualitative information included in its sustainability statement with the corresponding data, assumptions and qualitative information included in the financial statements. This may occur when the sustainability statement includes:

(a)monetary amounts or other quantitative data linked to monetary amounts or other quantitative data presented in the financial statements; or

(b)qualitative information linked to qualitative information presented in the financial statements.

126.Consistency as required by paragraph 125 shall be at the level of a single datapoint and shall include a reference to the relevant line item or paragraph of notes to the financial statements. When significant data, assumptions and qualitative information are not consistent, the undertaking shall state that fact and explain the reason.

127.Examples of items for which the explanation in paragraph 123 is required, are:

(a)when the same metric is presented as of the reporting date in financial statements and as a forecast for future periods in the sustainability statement; and

(b)when macroeconomic or business projections are used to develop metrics in the sustainability statement and they are also relevant in estimating the recoverable amount of assets, the amount of liabilities or provisions in financial statements.

128.Topical and sector-specific ESRS may include requirements to include reconciliations or to illustrate consistency of data and assumptions for specific Disclosure Requirements. In such cases, the requirements in those ESRS shall prevail.

10 Transitional provisions

10.1 Transitional provision related to section 1.4 Entity-specific disclosures

129.The extent to which sustainability matters are covered by ESRS is expected to evolve as further Disclosure Requirements are developed. Therefore, the need for entity-specific disclosures is likely to decrease over time.

130.When defining its entity-specific disclosures, the undertaking may adopt transitional measures for their preparation in the first three annual sustainability statements under which it shall as a priority:

(a)introduce in its reporting those entity-specific disclosures that it reported in prior periods, if these disclosures meet or are adapted to meet the qualitative characteristics of information referred to under chapter 2 of this Standard; and

(b)complement its disclosures prepared on the basis of the topical ESRS with an appropriate set of additional disclosures to cover sustainability matters that are material for the undertaking in its sector(s), using available best practice and/or available frameworks or reporting standards, such as IFRS sector-specific material and GRI Sector Standards.

10.2 Transitional provision related to chapter 5 Value chain

131.For the first three years of the undertaking’s sustainability reporting under the ESRS, in the event that not all the necessary information regarding its value chain is available, the undertaking shall explain the efforts made to obtain the necessary information about its value chain, the reasons why not all of the necessary information could be obtained, and its plans to obtain the necessary information in the future.

132.For the first three 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:

(a)when disclosing information on policies, actions and targets in accordance with ESRS2 and other ESRS, the undertaking may limit value chain information to information available in-house, such as data already available to the undertaking and publicly available information; and

(b)when disclosing metrics, the undertaking is not required to include value chain information, except for datapoints derived from other EU legislation, as listed in ESRS 2 Appendix B.

133.Paragraphs 1131 and 132 apply irrespective of whether or not the relevant actor in the value chain is an SME.

134.Starting from the fourth year of its reporting under the ESRS, the undertaking shall include value chain information according to paragraph 67. In this context, the information required by ESRS to be obtained from SME undertakings in the undertaking’s value chain will not exceed the content of the future ESRS for listed SMEs.

10.3 Transitional provision related to section 7.1 Presenting comparative information

135.To ease the first-time application of this Standard, the undertaking is not required to disclose the comparative information required by section 7.1 Presenting comparative information in the first year of preparation of the sustainability statement under the ESRS.

10.4 Transitional provision: List of Disclosure Requirements that are phased-in for ESRS to year 2 or subsequent years

136.Appendix C List of phased-in Disclosure Requirements in this Standard sets phase-in provisions for the Disclosure Requirements or datapoints of Disclosure Requirements in topical ESRS that may be omitted or that are not applicable in the first year(s) of preparation of the sustainability statement under the ESRS.

Appendix A: Application Requirements

This appendix is an integral part of ESRS 1 and has the same authority as the other parts of the Standard.

Application requirements – Entity specific disclosures

AR 1. The entity-specific disclosures shall enable users to understand the undertaking’s impacts, risks and opportunities in relation to environmental, social or governance matters. 

AR 2. When developing entity-specific disclosures, the undertaking shall ensure that: 

(a)the disclosures meet the qualitative characteristics of information as set out in chapter 2 Qualitative characteristics of information; and 

(b)its disclosures include, where applicable, all material information related to the reporting areas of governance; strategy; impact, risk and opportunity management; and metrics and targets (see ESRS 2 chapters 2 to 5). 

AR 3.    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. 

AR 4. When developing its entity-specific disclosures, the undertaking shall carefully consider: 

(a)comparability between undertakings, while still ensuring relevance of the information provided, recognising that comparability may be limited for entity- specific disclosures. The undertaking shall consider whether the available and relevant frameworks, initiatives, reporting standards and benchmarks (such as technical material issued by the International Sustainability Standards Board or the Global Reporting Initiative) provide elements that can support comparability to the maximum extent possible; and 

(b)comparability over time: consistency of methodologies and disclosures is a key factor for achieving comparability over time. 

AR 5.    Further guidance for developing entity-specific disclosures can be found by considering the information required under topical ESRS that addresses similar sustainability matters.

3.3 Application requirements – Double materiality

Stakeholders and their relevance to the materiality assessment process

AR 6. In addition to the categories of stakeholder listed in paragraph 22, common categories of stakeholders are: employees and other workers, suppliers, consumers, customers, end- users, local communities and persons in vulnerable situations , and public authorities, including regulators, supervisors and central banks.

AR 7. Nature may be considered as a silent stakeholder. In this case, ecological data and data on the conservation of species may support the undertaking’s materiality assessment.

AR 8. Materiality assessment is informed by the dialogue with affected stakeholders. The undertaking may engage with affected stakeholders or their representatives (such as employees or trade unions), along with users of sustainability reporting and other experts, to provide inputs or feedback on its conclusions regarding its material impacts, risks and opportunities.

Assessment of impact materiality

AR 9. In assessing impact materiality and determining the material matters to be reported, the undertaking shall consider the following four steps:

(a)understanding of the context in relation to its impacts including its activities, business relationships, and stakeholders;

(b)identification of actual and potential impacts (both negative and positive), including through engaging with relevant stakeholders and experts. In this step, the undertaking may rely on scientific and analytical research on impacts on sustainability matters;

(c)assessment of the materiality of its actual and potential impacts; and

(d)determination of the material matters. In this step, the undertaking shall adopt thresholds to determine which of the impacts will be covered in its sustainability statement.

Characteristics of severity

AR 10. The severity is determined by the following factors:

(a)scale: how grave the negative impact is or how beneficial the positive impact is for people or the environment;

(b)scope: how widespread the negative or positive impacts are. In the case of environmental impacts, the scope may be understood as the extent of environmental damage or a geographical perimeter. In the case of impacts on people, the scope may be understood as the number of people adversely affected; and

(c)irremediable character: whether and to what extent the negative impacts could be remediated, i.e., restoring the environment or affected people to their prior state.

AR 11. Any of the three characteristics (scale, scope, and irremediable character) can make a negative impact severe. In the case of a potential negative human rights impact, the severity of the impact takes precedence over its likelihood.

Impacts connected with the undertaking

AR 12.    As an illustration:

(a)if the undertaking uses cobalt in its products that is mined using child labour, the negative impact (i.e., child labour) is connected with the undertaking’s products through the tiers of business relationships in its value chain. These relationships include the smelter and minerals trader and the mining enterprise that uses child labour; and

(b)if the undertaking provides financial loans to an enterprise for business activities that, in breach of agreed standards, result in the contamination of water and land surrounding the operations, this negative impact is connected with the undertaking through its relationship with the enterprise it provides the loans to.

Assessment of financial materiality

AR 13. The following are examples of how impacts and dependencies are sources of risks or opportunities:

(a)when the undertaking’s business model depends, on a natural resource – for example water – it is likely to be affected by changes in the quality, availability and pricing of that resource;

(b)when the undertaking’s activities result in negative impacts, e.g., on local communities, the activities could become subject to stricter government regulation and/or the impact could trigger consequences of a reputational nature. These have negative effects on the undertaking’s brand and higher recruitment costs might arise; and

(c)when the undertaking’s business partners face material sustainability-related risks, the undertaking could be exposed to related consequences as well.

AR 14. The identification of risks and opportunities that have a material influence, or could reasonably be expected to have a material influence, on the undertaking’s financial position, financial performance, cash flows, access to finance or cost of capital over the short-, medium- or long-term is the starting point for financial materiality assessment. In this context, the undertaking shall consider:

(a)the existence of dependencies on natural and social resources as sources of financial effects (see paragraph50);

(b)their classification as sources of:

I.risks (contributing to negative deviation in future expected cash inflows or increase in deviation in future expected cash outflows and/or negative deviation from an expected change in capitals not recognised in the financial statements); or

II.opportunities (contributing to positive deviation in future expected cash inflows or decrease in deviation in future cash outflows and/or positive deviation from expected change in capitals not recognised in financial statements).

AR 15. Once the undertaking has identified its risks and opportunities, it shall determine which of them are material for reporting. This shall be based on a combination of (i) the likelihood of occurrence and (ii) the potential magnitude of financial effects determined on the basis of appropriate thresholds. In this step it shall consider the contribution of those risks and opportunities to financial effects in the short-, medium- and long-term time horizons based on:

(a)scenarios/forecasts that are deemed likely to materialise; and

(b)potential financial effects related to sustainability matters deriving either from situations with a below the “more likely than not” threshold or assets/liabilities not (or not yet) reflected in financial statements. This includes:

I.potential situations that following the occurrence of future events may affect cash flow generation potential;

II.Capitals that are not recognised as assets from an accounting and financial reporting perspective but have a significant influence on financial performance, such as natural, intellectual (organisational), human, social and relationship capitals; and

III.Possible future events that may have an influence on the evolution of such capitals.

Sustainability matters to be included in the materiality assessment

AR 16. When performing its materiality assessment, the undertaking shall consider the following list of sustainability matters covered in the topical ESRS. When, as a result of the undertaking’s materiality assessment (see ESRS 2 IRO-1), a given sustainability matter in this list is assessed to be material, the undertaking shall report according to the corresponding Disclosure Requirements of the relevant topical ESRS. Using this list is not a substitute for the process of determining material matters. This list is a tool to support the undertaking’s materiality assessment. The undertaking still needs to consider its own specific circumstances when determining its material matters. The undertaking also shall develop entity-specific disclosures on material impacts, risks and opportunities not covered by ESRS as described in paragraph 11 of this Standard.

5.2 Application requirements – Estimation using sector averages and proxies

AR 17. When the undertaking cannot collect value chain information as required by paragraph 63 after making reasonable efforts to do so, it shall estimate the information to be reported using all reasonable and supportable information that is available to the undertaking at the reporting date without undue cost or effort. This includes, but is not limited to, internal and external information, such as data from indirect sources, sector-average data, sample analyses, market and peer groups data, other proxies or spend-based data.

8.2 Application requirements – Content and structure of the sustainability statement

AR 18. As an illustration for paragraph 114 in section 8.2 Content and structure of the sustainability statement of this Standard, the undertaking that covers environmental and social matters in the same policy may cross-refer. That means that the undertaking may report on the policy in its environmental disclosures and cross-refer to it from the relevant social disclosures or vice versa. Consolidated presentation of policies across topics is allowed.

Appendix B: Qualitative characteristics of information

This appendix is an integral part of ESRS 1 and has the same authority as the other parts of the Standard.

This appendix defines the qualitative characteristics that the information presented in the sustainability statement prepared according to ESRS shall meet.

Relevance

QC 1. Sustainability information is relevant when it may make a difference in the decisions of users under a double materiality approach (see chapter 3 of this Standard).

QC 2. Information may make a difference in a decision even if some users choose not to take advantage of it or are already aware of it from other sources. Sustainability information may impact decisions of users if it has predictive value, confirmatory value or both. Information has predictive value if it can be used as an input to processes employed by users to predict future outcomes. Sustainability information does not need to be a prediction or forecast to have predictive value, but rather has predictive value if employed by users in making their own predictions.

QC 3. Information has confirmatory value if it provides feedback about (confirms or changes) previous evaluations.

QC 4. Materiality is an entity-specific aspect of relevance based on the nature or magnitude, or both, of the items to which the information relates, as assessed in the context of the undertaking’s sustainability reporting (see chapter 3 of this Standard).

Faithful representation

QC 5. To be useful, the information must not only represent relevant phenomena, it must also faithfully represent the substance of the phenomena that it purports to represent. Faithful representation requires information to be (i) complete, (ii) neutral and (iii) free from error.

QC 6. A complete depiction of an impact, a risk or an opportunity includes all material information necessary for the users to understand that impact, risk or opportunity. This includes how the undertaking has adapted its strategy, risk management and governance in response to that impact, risk or opportunity, as well as the metrics identified to set targets and measure performance.

QC 7. A neutral depiction is without bias in its selection or disclosure of information. Information is neutral if it is not slanted, weighted, emphasised, de-emphasised or otherwise manipulated to make it more likely that the users will receive that information favourably or unfavourably. It shall be balanced, so as to cover favourable/positive and unfavourable/negative aspects. Both negative and positive material impacts from an impact materiality perspective as well as material risks and opportunities from a financial materiality perspective shall receive equal attention. Any aspirational sustainability information, for example targets or plans, shall cover both aspirations and factors that could prevent the undertaking from achieving these aspirations in order to have a neutral depiction.

QC 8. Neutrality is supported by the exercise of prudence which is the exercise of caution when making judgements under conditions of uncertainty. Information shall not be netted or compensated to be neutral. The exercise of prudence means that opportunities are not overstated and risks are not understated. Equally, the exercise of prudence does not allow for the understatement of opportunities or the overstatement of risks. The undertaking may present net information, in addition to gross values, if such presentation does not obscure relevant information and includes a clear explanation about the effects of the netting and the reasons for the netting.

QC 9. Information can be accurate without being perfectly precise in all respects. Accurate information implies that the undertaking has implemented adequate processes and internal controls to avoid material errors or material misstatements. As such, estimates shall be presented with a clear emphasis on their possible limitations and associated uncertainty (see section 7.2 of this Standard). The amount of precision needed and attainable, and the factors that make information accurate, depend on the nature of the information and the nature of the matters it addresses. For example, accuracy requires that:

(a)factual information is free from material error;

(b)descriptions are precise;

(c)estimates, approximations and forecasts are clearly identified as such;

(d)no material errors have been made in selecting and applying an appropriate process for developing an estimate, approximation or forecast, and the inputs to that process are reasonable and supportable;

(e)assertions are reasonable and based on information of sufficient quality and quantity; and

(f)information about judgements about the future faithfully reflects both those judgements and the information on which they are based.

Comparability

QC 10. Sustainability information is comparable when it can be compared with information provided by the undertaking in previous periods and, can be compared with information provided by other undertakings, in particular those with similar activities or operating within the same industry. A point of reference for comparison can be a target, a baseline, an industry benchmark, comparable information from either other undertakings or from an internationally recognised organisation, etc.

QC 11. Consistency is related to, but is not the same as, comparability. Consistency refers to the use of the same approaches or methods for the same sustainability matter, from period to period by the undertaking and other undertakings. Consistency helps to achieve the goal of comparability.

QC 12. Comparability is not uniformity. For information to be comparable, like components shall look alike and different components shall look different. Comparability of sustainability information is not enhanced by making unlike things look alike any more than it is enhanced by making like things look different.

Verifiability

QC 13. Verifiability helps to give users confidence that information is complete, neutral and accurate. Sustainability information is verifiable if it is possible to corroborate the information itself or the inputs used to derive it.

QC 14. Verifiability means that various knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation. Sustainability information shall be provided in a way that enhances its verifiability, for example:

(a)including information that can be corroborated by comparing it with other information available to users about the undertaking’s business, about other businesses or about the external environment;

(b)providing information about inputs and methods of calculation used to produce estimates or approximations; and

(c)providing information reviewed and agreed by the administrative, management and supervisory bodies or their committees.

QC 15. Some sustainability information will be in the form of explanations or forward-looking information. Those disclosures can be supportable by faithfully representing on a factual basis for example the strategies, plans and risk analyses of the undertaking. To help users decide whether to use such information, the undertaking shall describe the underlying assumptions and methods of producing the information, as well as other factors that provide evidence that verify that it reflects the actual plans or decisions made by the undertaking.

Understandability

QC 16. Sustainability information is understandable when it is clear and concise. Understandable information enables any reasonably knowledgeable user to readily comprehend the information being communicated.

QC 17. For sustainability disclosures to be concise, they need to (a) avoid generic “boilerplate” information, which is not specific to the undertaking; (b) avoid unnecessary duplication of information, including information also provided in financial statements; and (c) use clear language and well-structured sentences and paragraphs. Concise disclosures shall only include material information. Complementary information presented pursuant to paragraph 113 shall be provided in a way that avoids obscuring material information.

QC 18. Clarity might be enhanced by distinguishing information about developments in the reporting period from “standing” information that remains relatively unchanged from one period to the next. This can be done, for example, by separately describing features of the undertaking’s sustainability-related governance and risk management processes that have changed since the previous reporting period compared to those that remain unchanged.

QC 19. The completeness, clarity and comparability of sustainability disclosures all rely on information being presented as a coherent whole. For sustainability disclosures to be coherent, they shall be presented in a way that explains the context and the relationships between the related information. Coherence also requires the undertaking to provide information in a way that allows users to relate information about its sustainability-related impacts, risks and opportunities to information in the undertaking’s financial statements.

QC 20. If sustainability-related risks and opportunities discussed in the financial statements have implications for sustainability reporting, the undertaking shall include in the sustainability statement the information necessary for users to assess those implications and present appropriate links to the financial statements (see chapter 9 of this Standard). The level of information, granularity and technicality shall be aligned with the needs and expectations of users. Abbreviations shall be avoided and the units of measure shall be defined and disclosed.

Appendix C: List of phased-in Disclosure Requirements

This appendix is an integral part of ESRS 1 and has the same authority as the other parts of the Standard.

Appendix D: Structure of the ESRS sustainability statement

This appendix is an integral part of ESRS 1 and has the same authority as the other parts of the Standard with respect to reporting in four parts as outlined in paragraph 114.

Appendix E: Flowchart for determining disclosures under ESRS

Materiality assessment is the starting point for sustainability reporting under ESRS. This appendix provides a non-binding illustration of the impact- and financial materiality assessment outlined in chapter 3. IRO-1 in section 4.1 of ESRS 2 includes general disclosure requirements about the undertaking’s process to identify impacts, risks and opportunities and assess their materiality. SBM-3 of ESRS 2 provides general disclosures requirements on the material impact, risks and opportunities resulting from the undertaking’s materiality assessment. The undertaking may omit all disclosure requirements in a topical standard if it assessed that the topic in question is not material. In that case it may disclose a brief explanation of the conclusions of the materiality assessment for that topic (IRO-2 ESRS 2). ESRS set disclosure requirements, not behavioral requirements. Disclosure requirements in relation to action plans, targets, policies, scenario analysis and transition plans are proportionate because they are contingent on the undertaking having these, which may depend on the size, capacity, resources, and skills of the undertaking.

Appendix F: Example of structure of ESRS sustainability statement

This appendix complements ESRS 1. It provides non-binding illustrations of the structure of the sustainability statement outlined in section 8.2 of this Standard.

Appendix G: Example of incorporation by reference

This appendix complements ESRS 1. It provides non-binding illustrations of incorporation by reference of another section of the management report into the sustainability statement as outlined in section 9.1 of this Standard.

ESRS 2

GENERAL DISCLOSURES

Table of contents

Objective    

1.    Basis for preparation    

Disclosure Requirement BP-1 – General basis for preparation of sustainability statements

Disclosure Requirement BP-2 – Disclosures in relation to specific circumstances

2.    Governance

Disclosure Requirement GOV-1 – The role of the administrative, management and supervisory bodies

Disclosure Requirement GOV-2 – Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies    

Disclosure Requirement GOV-3 - Integration of sustainability-related performance in incentive schemes

Disclosure Requirement GOV-4 - Statement on due diligence    

Disclosure Requirement GOV-5 - Risk management and internal controls over sustainability reporting

3.    Strategy    

Disclosure Requirement SBM-1 – Strategy, business model and value chain Disclosure Requirement SBM-2 – Interests and views of stakeholders

Disclosure Requirement SBM-3 - Material impacts, risks and opportunities and their interaction with strategy and business model    

4.    Impact, risk and opportunity management    

4.1    Disclosures on the materiality assessment process    

Disclosure Requirement IRO-1 - Description of the processes to identify and assess material impacts, risks and opportunities    

Disclosure Requirement IRO-2 – Disclosure requirements in ESRS covered by the undertaking’s sustainability statement

4.2    Minimum disclosure requirement on policies and actions    

Minimum disclosure requirement - Policies MDR-P – Policies adopted to manage material sustainability matters

Minimum disclosure requirement - Actions MDR-A – Actions and resources in relation to material sustainability matters

5.    Metrics and targets    

Minimum disclosure requirement - Metrics MDR-M – Metrics in relation to material

 sustainability matters    

Minimum disclosure requirement – Targets MDR-T – Tracking effectiveness of policies and

actions through targets

Appendix A: Application Requirements    

1. Basis for preparation

Disclosure Requirement BP-1 – General basis for preparation of the sustainability

statement

2. Governance    

Disclosure Requirement GOV-1 – The role of the administrative, management and

supervisory bodies

Disclosure Requirement GOV-2 – Information provided to and sustainability matters

addressed by the undertaking’s administrative, management and supervisory bodies

Disclosure Requirement GOV-3 – Integration of sustainability-related performance in

incentive schemes    

Disclosure Requirement GOV-4 – Statement on due diligence    

Disclosure Requirement GOV-5 – Risk management and internal controls over

sustainability reporting

3.Strategy    

Disclosure Requirement SBM–1 Strategy, business model and value chain

Disclosure Requirement SBM-2 – Interests and views of stakeholders    

Disclosure Requirement SBM-3 - Material impacts, risks and opportunities and their interaction with strategy and business model    

4.Impact, risk and opportunity management    

Disclosure Requirement IRO-2 – Disclosure requirements in ESRS covered by the

undertaking’s sustainability statement

Minimum Disclosure Requirement - Policies MDR-P – Policies adopted to manage material

sustainability matters

Minimum Disclosure Requirement - Actions MDR-A – Actions and resources in relation to

material sustainability matters

5. Metrics and targets    

Minimum Disclosure Requirement - Targets MDR-T – Tracking effectiveness of policies

and actions through targets

Appendix B: List of datapoints in cross-cutting and topical standards that are required by EU law

Appendix C: Disclosure/Application Requirements in topical ESRS that are applicable jointly

with ESRS 2 General Disclosures

Objective

1.This ESRS sets out the disclosure requirements that apply to all undertakings regardless of their sector of activity (i.e., sector agnostic) and apply across sustainability topics (i.e., cross-cutting). This ESRS covers the reporting areas defined in ESRS 1 General requirements section 1.2 Cross-Cutting Standards and reporting areas.

2.In the preparation of disclosures under this Standard, the undertaking shall apply the Disclosure Requirements (including their datapoints) set in topical ESRS, as listed in Appendix C Disclosure/Application Requirements in topical ESRS that are applicable jointly with ESRS 2 General Disclosures of this Standard. The undertaking shall apply the requirements listed in appendix C:

a)in all instances for the requirements in topical standards related to Disclosure Requirement IRO-1 Description of the processes to identify and assess material impacts, risks and opportunities; and

b)for all other requirements listed in appendix C, only if the sustainability topic is material based on the undertaking’s materiality assessment (see ESRS 1 chapter 3 Double materiality as the basis for sustainability disclosures).

(1)Basis for preparation

Disclosure Requirement BP-1 – General basis for preparation of the sustainability statement

3.The undertaking shall disclose the general basis for preparation of its sustainability statement.

4.The objective of this Disclosure Requirement is to provide an understanding of how the undertaking prepares its sustainability statement, including the scope of consolidation, the value chain information and, where relevant, whether the undertaking has used any of the options for omitting information referred to in points d) and e) in the following paragraph.

5.The undertaking shall disclose the following information:

a)whether the sustainability statement has been prepared on a consolidated or individual basis;

b)for consolidated sustainability statement:

I)a confirmation that the scope of consolidation is the same as for the financial statement; and

II)where applicable, an indication of which subsidiary undertakings included in the consolidation are exempted from individual or consolidated sustainability reporting;

c)to what extent the sustainability statement cover the undertaking’s upstream and downstream value chain (see ESRS 1 section 5.1 Reporting undertaking and value chain);

d)whether the undertaking has used the option to omit a specific piece of information corresponding to intellectual property, know-how or the results of innovation (see ESRS 1 section 7.7 Classified and sensitive information and information on intellectual property, know-how or results of innovation); and

e)for undertakings based in an EU member state that allows for the exemption from disclosure of impending developments or matters in course of negotiation, as provided for in articles 19a(3) and 29a (3) of the Directive 2013/34/EU of the European Parliament and of the Council, whether the undertaking has used that exemption.

Disclosure Requirement BP-2 – Disclosures in relation to specific circumstances

6.The undertaking shall provide disclosures in relation to specific circumstances.

7.The objective of this Disclosure Requirement is to provide an understanding of the effect of these specific circumstances on the preparation of the sustainability statement.

8.The undertaking may report this information alongside the disclosures to which they refer.

Time horizons

9.When the undertaking has deviated from the medium- or long-term time horizons defined by ESRS 1 section 6.4 Definition of short-, medium- and long-term for reporting purposes, it shall describe:

(a)its definitions of medium- or long-term time horizons; and

(b)the reasons for applying those definitions.

Value chain estimation

10.When metrics include value chain data estimated using indirect sources, such as sector-average data or other proxies, the undertaking shall:

a)identify the metrics; 

b)describe the basis for preparation; 

c)describe the resulting level of accuracy; and

d)where applicable, describe the planned actions to improve the accuracy in the future (see ESRS 1 chapter 5 Value chain).

Sources of estimation and outcome uncertainty

11.When significant estimation uncertainty or significant outcome uncertainty exists (see ESRS 1 section 7.2 Sources of estimation and outcome uncertainty), the undertaking shall:

a)identify metrics it has disclosed that have significant estimation uncertainty, disclose the sources and nature of the estimation uncertainties and the factors affecting the uncertainties; and

b)when there is significant outcome uncertainty, disclose information about the assumptions it makes about the future and other sources of significant uncertainty, related to the information it discloses.

12.When disclosing forward-looking information, the undertaking may indicate that it considers such information to be uncertain.

Changes in preparation or presentation of sustainability information

13.When changes in the preparation and presentation of sustainability information occur compared to the previous reporting period(s), such as the redefinition or replacement of a metric or target (see ESRS 1 section 7.4 Changes in preparation or presentation in sustainability information), the undertaking shall:

a)explain the changes and the reasons for those changes, including why the replaced metric provides more useful information; and

b)provide restated comparative figures, unless it is impracticable to do so. When it is impracticable to adjust comparative information for one or more prior periods, the undertaking shall disclose that fact.

Reporting errors in prior periods

14.When material prior period errors exist (see ESRS 1 section 7.5 Reporting errors in prior periods), the undertaking shall disclose:

a)the nature of the prior period material error;

b)to the extent practicable, the correction for each prior period disclosed; and

c)if correction of the error is not practicable, the circumstances that led to the existence of that condition.

Disclosures stemming from other legislation or generally accepted sustainability reporting pronouncements

15.When the undertaking includes in its sustainability statement information stemming from other legislation which requires the undertaking to disclose sustainability information or from generally accepted sustainability reporting standards and frameworks (see ESRS 1 section 8.2 Content and structure of the sustainability statement), in addition to the information prescribed by ESRS, it shall disclose this fact. In case of partial application of other reporting standards or frameworks, the undertaking shall provide a precise reference to the paragraphs of the standard or framework applied.

Incorporation by reference

16.When the undertaking incorporates information by reference (see ESRS 1 section 9.1 Incorporation by reference), it shall disclose a list of the disclosure requirements of ESRS, or the specific datapoints mandated by a Disclosure Requirement, that have been incorporated by reference.

Use of phase-In provisions in accordance with Appendix C of ESRS 1

17.If an undertaking or group not exceeding on its balance sheet date the average number of 750 employees during the financial year decides to omit the information required by ESRS E4, ESRS S1, ESRS S2, ESRS S3 or ESRS S4 in accordance with Appendix C of ESRS 1, it shall nevertheless disclose whether the sustainability topics covered respectively by ESRS E4, ESRS S1, ESRS S2, ESRS S3 and ESRS S4 have been assessed to be material as a result of the undertaking’s materiality assessment. In addition, if one or more of these topics has been assessed to be material, the undertaking shall, for each material topic:

a)disclose the list of matters (i.e. topic, sub-topic or sub-sub-topic) in AR 16 ESRS 1 Appendix A that are assessed to be material and how the undertaking’s business model and strategy take account of the impacts of the undertaking related to those matters. The undertaking may identify the matter at the level of topic, sub-topic or sub-sub-topic;

b)briefly describe any time-bound targets it has set related to the matters in question, the progress it has made towards achieving those targets, and whether its targets related to biodiversity and ecosystems are based on conclusive scientific evidence;

c)briefly describe its policies in relation to the matters in question;

d)briefly describe actions it has taken to identify, monitor, prevent, mitigate, remediate or bring an end to actual or potential adverse impacts related to the matters in question, and the result of such actions; and

e)disclose metrics relevant to the matters in question.

2.Governance

18.The objective of this chapter is to set disclosure requirements that enable an understanding of the governance processes, controls and procedures put in place to monitor and manage sustainability matters.

Disclosure Requirement GOV-1 – The role of the administrative, management and supervisory bodies

19.The undertaking shall disclose the composition of the administrative, management and supervisory bodies, their roles and responsibilities and access to expertise and skills with regard to sustainability matters.

20.The objective of this Disclosure Requirement is to provide an understanding of:

a)the composition and diversity of the administrative, management and supervisory bodies;

b)the roles and responsibilities of the administrative, management and supervisory bodies in exercising oversight of the process to manage material impacts, risks and opportunities, including management’s role in these processes; and

c)the expertise and skills of its administrative, management and supervisory bodies on sustainability matters or access to such expertise and skills.

21.The undertaking shall disclose the following information about the composition and diversity of the members of the undertaking’s administrative, management and supervisory bodies:

(a)the number of executive and non-executive members;

(b)representation of employees and other workers;

(c)experience relevant to the sectors, products and geographic locations of the undertaking;

(d)percentage by gender and other aspects of diversity that the undertaking considers. The board's gender diversity 11 shall be calculated as an average ratio of female to male board members; and

(e)the percentage of independent board members 12 . For undertakings with a unitary board, this corresponds to the percentage of independent non-executive board members. For undertakings with a dual board, it corresponds to the percentage of independent members of the supervisory body.

22.The undertaking shall disclose the following information about the roles and responsibilities of the administrative, management and supervisory bodies:

a)the identity of the administrative, management and supervisory bodies (such as a board committee or similar) or individual within a body responsible for oversight of impacts, risks and opportunities;

b)how each body’s responsibilities for impacts, risks and opportunities are reflected in the undertaking’s terms of reference, board mandates and other related policies;

c)a description of management’s role in assessing and managing impacts, risks and opportunities, including:

I) whether that role is delegated to a specific management-level position or committee and how oversight is exercised over that position or committee;

II)information about the reporting lines to the administrative, management and supervisory bodies;

III)whether dedicated controls and procedures are applied to the management of impacts, risks and opportunities and, if so, how they are integrated with other internal functions; and

d)how the administrative, management and supervisory bodies and senior executive management oversee the setting of targets related to material impacts, risks and opportunities, and how they monitor progress towards them.

23.The disclosure shall include a description of how the administrative, management and supervisory bodies ensure the availability of the appropriate skills and expertise to oversee sustainability matters, including:

a)the sustainability-related expertise that the bodies, as a whole, either directly possess or can leverage, for example through access to experts or training; and

b)how those skills and expertise relate to the undertaking's material impacts, risks and opportunities.

Disclosure Requirement GOV-2 – Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies

24.The undertaking shall disclose how the administrative, management and supervisory bodies are informed about sustainability matters and how these matters were addressed during the reporting period.

25.The objective of this Disclosure Requirement is to provide an understanding of how administrative, management and supervisory bodies are informed about sustainability matters, as well as what information and matters they addressed during the reporting period. This in turn allows an understanding of whether the members of these bodies were adequately informed and whether they were able to fulfil their roles.

26.The undertaking shall disclose the following information:

a)whether, by whom and how frequently the administrative, management and supervisory bodies, including their relevant committees, are informed about material impacts, risks and opportunities (see Disclosure Requirement IRO–1 - Description of the processes to identify and assess material impacts, risks and opportunities of this Standard), the implementation of due diligence, and the results and effectiveness of policies, actions, metrics and targets adopted to address them;

b)how the administrative, management and supervisory bodies consider impacts, risks and opportunities when overseeing the undertaking’s strategy, its decisions on major transactions, and its risk management policies, including whether they have considered trade-offs associated with those impacts, risks and opportunities; and

c)a list of the material impacts, risks and opportunities addressed by the administrative, management and supervisory bodies, or their relevant committees during the reporting period.

Disclosure Requirement GOV–3 – Integration of sustainability-related performance in incentive schemes

27.The undertaking shall disclose information about the integration of its sustainability-related performance in incentive schemes.

28.The objective of this Disclosure Requirement is to provide an understanding of whether incentive schemes are offered to members of the administrative, management and supervisory bodies that are linked to sustainability matters.

29.The undertaking shall disclose the following information about the incentive schemes and remuneration policies linked to sustainability matters for members of the undertaking's administrative, management and supervisory bodies, where they exist:

a)a description of the key characteristics of the incentive schemes;

b)whether performance is being assessed against specific sustainability-related targets and/or impacts, and if so, which ones;

c)whether and how sustainability-related performance metrics are being considered as performance benchmarks or included in remuneration policies;

d)the proportion of variable remuneration dependent on sustainability-related targets and/or impacts; and

e)the level in the undertaking at which the terms of incentive schemes are approved and updated.

Disclosure Requirement GOV–4 - Statement on due diligence

30.The undertaking shall disclose a mapping of the information provided in its sustainability statement about the due diligence process.

31.The objective of this Disclosure Requirement is to facilitate an understanding of the undertaking’s due diligence process with regard to sustainability matters.

32.The main aspects and steps of due diligence referred to under ESRS 1 chapter 4 Due diligence are related to a number of cross-cutting and topical Disclosure Requirements under the ESRS. The undertaking shall provide a mapping that explains how and where its application of the main aspects and steps of the due diligence process are reflected in its sustainability statement, to allow a depiction of the actual practices of the undertaking with regard to due diligence 13 .

33.This disclosure requirement does not mandate any specific behavioural requirements with regard to due diligence actions and does not extend or modify the role of administrative, management and supervisory bodies as mandated by other legislation or regulation.

Disclosure Requirement GOV–5 - Risk management and internal controls over sustainability reporting

34.The undertaking shall disclose the main features of its risk management and internal control system in relation to the sustainability reporting process(es).

35.The objective of this Disclosure Requirement is to provide an understanding of the undertaking’s risk management and internal control processes in relation to sustainability reporting.

36.The undertaking shall disclose the following information:

a)the scope, main features and components of the risk management and internal control processes and systems in relation to sustainability reporting;

b)the risk assessment approach followed, including the risk prioritisation methodology;

c)the main risks identified, actual and potential, and their mitigation strategies including related controls;

d)a description of how the undertaking integrates the findings of its risk assessment and internal controls as regards the sustainability reporting process into relevant internal functions and processes; and

e)a description of the periodic reporting of the findings referred to in point (d) to the administrative, management and supervisory bodies.

3.Strategy

37.This chapter sets disclosure requirements that enable an understanding of:

a)the elements of the undertaking’s strategy that relate to or affect sustainability matters, its business model and its value chain;

b)how the interests and views of the undertaking’s stakeholders are taken into account by the undertaking’s strategy and business model; and

c)the outcome of the undertaking’s assessment of material impacts, risks and opportunities, including how they inform its strategy and business model.

Disclosure Requirement SBM-1 – Strategy, business model and value chain

38.The undertaking shall disclose the elements of its strategy that relate to or impact sustainability matters, its business model and its value chain.

39.The objective of this Disclosure Requirement is to describe the key elements of the undertaking’s general strategy that relate to or affect sustainability matters, and the key elements of the undertaking’s business model and value chain, in order to provide an understanding of its exposure to impacts, risks and opportunities and where they originate.

40.The undertaking shall disclose the following information about the key elements of its general strategy that relate to or affect sustainability matters:

a)a description of:

I)significant groups of products and/or services offered, including changes in the reporting period (new/removed products and/or services);

II)significant markets and/or customer groups served, including changes in the reporting period (new/removed markets and/or customer groups);

III)headcount of employees by geographical areas; and

IV)where applicable and material, products and services that are banned in certain markets, including potential bans in relation to material public initiatives and considerations;

b)a breakdown of total revenue, as included in its financial statement, by significant ESRS sectors. When the undertaking provides segment reporting as required by IFRS 8 Operating segments in its financial statement, this sector revenue information shall be, as far as possible, reconciled with IFRS 8 information;

c)a list of the additional significant ESRS sectors beyond the ones reflected under paragraph 40(b), such as activities that give rise to intercompany revenues, in which the undertaking develops significant activities, or in which it is or may be connected to material impacts. The identification of these additional ESRS sectors shall be consistent with the way they have been considered by the undertaking when performing its materiality assessment and with the way it discloses material sector-specific information;

d)where applicable, a statement indicating, together with the related revenues, that the undertaking is active in:

I)the fossil fuel (coal, oil and gas) sector 14 , i.e., it derives revenues from exploration, mining, extraction, production, processing, storage, refining or distribution, including transportation, storage and trade, of fossil fuels as defined in Article 2, point (62), of Regulation (EU) 2018/1999 of the European Parliament and the Council;

II)chemicals production 15 , i.e., its activities fall under Division 20.2 of Annex I to Regulation (EC) No 1893/2006;

III)controversial weapons 16 such as anti-personnel mines, cluster munitions, chemical weapons and biological weapons; and/or

IV)the cultivation and production of tobacco 17 ;

e)its sustainability-related goals in terms of significant groups of products and services, customer categories, geographical areas and relationships with stakeholders;

f)an assessment of its current significant products and/or services, and significant markets and customer groups, in relation to its sustainability-related goals; and

g)the elements of the undertaking’s strategy that relate to or impact sustainability matters, including the main challenges ahead, critical solutions or projects to be put in place, when relevant for sustainability reporting.

41.If the undertaking is based in an EU Member State that allows for an exemption from the disclosure of the information referred to in Article 18, paragraph 1, sub-point (a) of Directive 2013/34/EU 18 , and if the undertaking has made use of that exemption, it may omit the breakdown of revenue by significant ESRS sector required by paragraph 40(b). In this case the undertaking shall nevertheless disclose the list of ESRS sectors that are significant for the undertaking.

42.The undertaking shall disclose a description of its business model and value chain, including:

a)its inputs and its approach to gathering, developing and securing those inputs;

b)its outputs and outcomes in terms of current and expected benefits for customers, investors and other stakeholders; and

c)the main features of its upstream and downstream value chain and the undertaking’s position in its value chain, including a description of the main business actors (such as key suppliers, customers, distribution channels and end-users) and their relationship to the undertaking. When the undertaking has multiple value chains, the disclosure shall cover the key value chains.

Disclosure Requirement SBM-2 – Interests and views of stakeholders

43.The undertaking shall disclose how the interests and views of its stakeholders are taken into account by the undertaking’s strategy and business model(s)model.

44.The objective of this Disclosure Requirement is to provide an understanding of how stakeholders’ interests and views inform the undertaking’s strategy and business model.

45.The undertaking shall disclose a summarised description of:

a)its stakeholder engagement, including:

I)the undertaking’s key stakeholders;

II)whether engagement with them occurs and for which categories of stakeholders;

III)how it is organised;

IV)its purpose; and 

V)how its outcome is taken into account by the undertaking;

b)the undertaking’s understanding of the interests and views of its key stakeholders as they relate to the undertaking’s strategy and business model, to the extent that these were analysed during the undertaking’s due diligence process and/or materiality assessment process (see Disclosure Requirement IRO-1 of this Standard);

c)where applicable, amendments to its strategy and/or business model, including:

I)how the undertaking has amended or expects to amend its strategy and/or business model to address the interests and views of its stakeholders;

II)any further steps that are being planned and in what timeline; and 

III)whether these steps are likely to modify the relationship with and views of stakeholders; and

d)whether and how the administrative, management and supervisory bodies are informed about the views and interests of affected stakeholders with regard to the undertaking’s sustainability- related impacts.

Disclosure Requirement SBM-3 - Material impacts, risks and opportunities and their interaction with strategy and business model

46.The undertaking shall disclose its material impacts, risks and opportunities and how they interact with its strategy and business model.

47.The objective of this Disclosure Requirement is to provide an understanding of the material impacts, risks and opportunities as they result from the undertaking’s materiality assessment and how they originate from and trigger adaptation of the undertaking’s strategy and business model including its resources allocation. The information to be disclosed about the management of the undertaking’s material impacts, risks and opportunities is prescribed in topical ESRS and in sector-specific standards, which shall be applied in conjunction with the Minimum Disclosure Requirements on policies, actions and targets established in this Standard.

48.The undertaking shall disclose its material impacts, risks and opportunities resulting from its materiality assessment (see Disclosure Requirement IRO-1 of this Standard). The disclosure shall include the following:

a)the undertaking’s material impacts, risks and opportunities, including:

I)a brief description of the material negative or positive impacts and how they affect (or, in the case of potential impacts, are likely to affect) people or the environment; 

II)whether and how the impacts originate from or are connected to the undertaking's strategy and business model;

III)the reasonably expected time horizons for those effects; and 

IV)whether the undertaking is involved with the material impacts through its activities or because of its business relationships(describing the nature of the activities or business relationships concerned and where in its value chain material impacts are concentrated;

b)the effects of material impacts, risks and opportunities on its strategy and decision-making, including how the undertaking is responding to these effects. In this context, the undertaking shall disclose any changes the undertaking has made, or plans to make, to its strategy or business model(s) as part of its actions to address particular material impacts or risks, or to pursue particular material opportunities;

c)how the material risks and opportunities could reasonably be expected to have an influence on the undertaking’s business model, strategy, cash flows, financial performance, financial position and its access to finance and its cost of capital, over the short, medium or long-term   including: 

I)the reasonably expected time horizons for those effects; and

II)a description of where in its own operations or in its upstream and downstream value chain material risks and opportunities are concentrated;

d)the effects on the undertaking’s financial position, financial performance and cash flows for the reporting period (current financial effects) including information about how material impacts, risks and opportunities have affected the undertaking's most recently reported financial performance, financial position and cash flows and the material impacts, risks and opportunities for which there is a significant risk of a material adjustment within the next annual reporting period to the carrying amounts of assets and liabilities reported in the related financial statements;

e)the anticipated financial effects on the undertaking’s financial position, financial performance and cash flows over the short-, medium- and long-term. This shall include how the undertaking expects its financial position to change over the short, medium and long term, given its strategy to manage risks and opportunities, taking into consideration:

I)its investment and disposal plans (for example, capital expenditure, major acquisitions and divestments, joint ventures, business transformation, innovation, new business areas and asset retirements), including plans the undertaking is not contractually committed to; and

II)its planned sources of funding to implement its strategy.

f)information about the resilience of the undertaking's strategy and business model regarding its capacity to address its material impacts and risks and to take advantage of its material opportunities. The undertaking shall disclose a qualitative and, when applicable, a quantitative analysis of the resilience, including how the analysis was conducted and the time horizons that were applied as defined in ESRS 1 (see ESRS 1 chapter 6 Time horizons). When providing quantitative information, the undertaking may disclose single amounts or ranges;

g)changes to the material impacts, risks and opportunities compared to the previous reporting period; and

h)specification of those impacts, risks and opportunities that are covered by ESRS Disclosure Requirements as opposed to those covered by the undertaking using additional entity-specific disclosure.

49.The undertaking may disclose the descriptive information required in paragraph 46 alongside the disclosures provided under the corresponding topical ESRS. If the undertaking decides to do so, it shall still present a statement of its material impacts, risks and opportunities alongside its disclosures prepared under this chapter of ESRS 2.

4.Impact, risk and opportunity management

4.1 Disclosures on the materiality assessment process

50.This chapter sets disclosure requirements that enable an understanding of:

a)the process to identify material impacts, risks and opportunities; and

b)the information that, as a result of its materiality assessment, the undertaking has included in its sustainability statement.

Disclosure Requirement IRO-1 - Description of the process to identify and assess material impacts, risks and opportunities

51.The undertaking shall disclose its process to identify its impacts, risks and opportunities and to assess which ones are material.

52.The objective of this Disclosure Requirement is to provide an understanding of the process through which the undertaking identifies impacts, risks and opportunities and assesses their materiality, as the basis for determining the disclosures in its sustainability reporting (see ESRS 1 chapter 3 and its related Application Requirements, which set out requirements and principles regarding the process to identify and assess material impacts, risks and opportunities based on the principle of double materiality).

53.The undertaking shall disclose the following information:

a)a description of the methodologies and assumptions applied in the described process;

b)an overview of the process to identify, assess and prioritise the undertaking’s potential and actual impacts on people and the environment, informed by the undertaking’s due diligence process, including an explanation of whether and how the process:

I)focusses on specific issues due to heightened risk of adverse impacts;

II)considers the impacts with which the undertaking is involved through its own operations or as a result of its business relationships;

III)includes consultation with affected stakeholders to understand how they may be impacted and with external experts;

IV)prioritises negative impacts based on their relative severity and likelihood, (see ESRS 1 section 3.4 Impact materiality) and – if applicable – positive impacts on their relative scale, scope and likelihood, and determines which sustainability matters are material for reporting purposes (including the qualitative or quantitative thresholds and other criteria used as prescribed by ESRS 1 section 3.4 Impact materiality); and

c)an overview of the process used to identify, assess and prioritise risks and opportunities that have or may have financial effects. The disclosure shall include:

I)how the undertaking assesses the likelihood, magnitude, and nature of effects of the identified risk and opportunities (such as the qualitative or quantitative thresholds and other criteria used as prescribed by ESRS 1 section 3.3 Financial materiality);

II)how the undertaking prioritises sustainability-related risks relative to other types of risks, including its use of risk-assessment tools;

d)a description of the decision-making process and the related internal control procedures;

e)the extent to which and how the process to identify, assess and manage impacts and risks is integrated into the undertaking’s overall risk management process and used to evaluate the undertaking’s overall risk profile and risk management processes;

f)the extent to which and how the process to identify, assess and manage opportunities is integrated into the undertaking’s overall management process where applicable;

g)the input parameters it uses (for example, data sources, the scope of operations covered and the detail used in assumptions);and

h)whether and how the process has changed compared to the prior reporting period, when the process(es) was/were modified for the last time and future revision dates of the materiality assessment.

Disclosure Requirement IRO-2 – Disclosure Requirements in ESRS covered by the undertaking’s sustainability statement

54.The undertaking shall report on the Disclosure Requirements complied with in its sustainability statements.

55.The objective of this Disclosure Requirement is to provide an understanding of the Disclosure Requirements included in the undertaking’s sustainability statement and of the topics that have been omitted as not material, as a result of the materiality assessment.

56.The undertaking shall include a list of the Disclosure Requirements complied with in preparing the sustainability statement, following the outcome of the materiality assessment (see ESRS 1 chapter 3), including the page numbers and/or paragraphs where the related disclosures are located in the sustainability statement. This may be presented as a content index.

57.When all the Disclosure Requirements in a topical ESRS are omitted because the topic is assessed not to be material for the undertaking, the undertaking may provide a brief explanation of the conclusions of its materiality assessment for the topic in question.

58.The undertaking shall provide an explanation of how it has determined the material information to be disclosed in relation to the impacts, risks and opportunities that it has assessed to be material, including the use of thresholds and/or how it has implemented the criteria in ESRS 1 section 3.2 Material matters and materiality of information 

4.2 Minimum disclosure requirements on policies and actions

59.This section sets out minimum disclosure requirements to be included when the undertaking discloses information on its policies and actions to prevent, mitigate and remediate actual and potential material impacts, to address risks and/or to pursue material opportunities (collectively, to “manage material sustainability matters”). They shall be applied together with the Disclosure Requirements, including Application Requirements, provided in the relevant topical and/or sector-specific ESRS. They shall also be applied when the undertaking prepares entity-specific disclosures.

60.The corresponding disclosures shall be located alongside disclosures prescribed by the relevant ESRS. When a single policy or same actions address several interconnected sustainability matters, the undertaking may disclose the required information in its reporting under one topical ESRS and cross reference to it in its reporting under other topical ESRS.

61.If the undertaking cannot disclose the information on policies and actions required under relevant ESRS, because it has not adopted policies and/or actions with reference to the specific sustainability matter concerned, it shall disclose this to be the case, and provide reasons for not having adopted policies and/or actions. The undertaking may report a timeframe in which it aims to adopt them.

Minimum Disclosure Requirement – Policies MDR-P – Policies adopted to manage material sustainability matters

62.The undertaking shall apply the minimum disclosure requirements defined in this provision when it discloses the policies it has in place with regard to each sustainability matter identified as material.

63.The objective of this Minimum Disclosure Requirement is to provide an understanding of the policies that the undertaking has in place to prevent, mitigate and remediate actual and potential impacts, to address risks and to pursue opportunities.

64.The undertaking shall disclose information about policies adopted to manage material sustainability matters. The disclosure shall include the following information:

a)a description of the key contents of the policy, including its general objectives and which material impacts, risks or opportunities the policy relates to and the process for monitoring;

b)a description of the scope of the policy, or of its exclusions, in terms of activities, value chain, geographies and if relevant, affected stakeholder groups;

c)the most senior level in the undertaking’s organisation that is accountable for the implementation of the policy;

d)a reference, if relevant, to the third-party standards or initiatives the undertaking commits to respect through the implementation of the policy;

e)if relevant, a description of the consideration given to the interests of key stakeholders in setting the policy; and

f)if relevant, whether and how the undertaking makes the policy available to potentially affected stakeholders, and stakeholders who need to help implement it.

Minimum Disclosure Requirement – Actions MDR-A – Actions and resources in relation to material sustainability matters

65.The undertaking shall apply the requirements for the content of disclosures in this provision when it describes the actions through which it manages each material sustainability matter including action plans and resources allocated and/or planned.

66.The objective of this Minimum Disclosure Requirement is to provide an understanding of the key actions taken and/or planned to prevent, mitigate and remediate actual and potential impacts, and to address risks and opportunities, and where applicable achieve the objectives and targets of related policies.

67.Where the implementation of a policy requires actions, or a comprehensive action plan, to achieve its objectives, as well as when actions are implemented without a specific policy, the undertaking shall disclose the following information:

a)the list of key actions taken in the reporting year and planned for the future, their expected outcomes and, where relevant, how their implementation contributes to the achievement of policy objectives and targets;

b)the scope of the key actions (i.e., coverage in terms of activities, value chain geographies and, where applicable, affected stakeholder groups);

c)the time horizons under which the undertaking intends to complete each key action;

d)if applicable, key actions taken (along with results) to provide for and cooperate in or support the provision of remedy for those harmed by actual material impacts;

e)if applicable, quantitative and qualitative information regarding the progress of actions or action plans disclosed in prior periods.

68.Where the implementation of an action plan requires significant operational expenditures (Opex) and/or capital expenditures (Capex) the undertaking shall:

a)describe the type of current and future financial and other resources allocated to the action plan, including if applicable, the relevant terms of sustainable finance instruments, such as green bonds, social bonds and green loans, the environmental or social objectives, and whether the ability to implement the actions or action plan depends on specific preconditions, e.g., granting of financial support or public policy and market developments;

b)provide the amount of current financial resources and explain how they relate to the most relevant amounts presented in the financial statements; and

c)provide the amount of future financial resources.

5.Metrics and targets

69.This chapter sets out Minimum Disclosure Requirements that shall be included when the undertaking discloses information on its metrics and targets related to each material sustainability matter. They shall be applied together with the Disclosure Requirements, including Application Requirements, provided in the relevant topical ESRS. They shall also be applied when the undertaking prepares entity-specific disclosures.

70.The corresponding disclosures shall be located alongside disclosures prescribed by the topical ESRS.

71.If the undertaking cannot disclose the information on targets required under the relevant topical ESRS, because it has not adopted targets with reference to the specific sustainability matter concerned, it shall disclose this to be the case, and provide reasons for not having adopted targets. The undertaking may report a timeframe in which it aims to adopt them.

Minimum disclosure requirement – Metrics MDR-M – Metrics in relation to material sustainability matters

72.The undertaking shall apply the requirements for the content of disclosures in this provision when it discloses on the metrics it has in place with regard to each material sustainability matter.

73.The objective of this Minimum Disclosure Requirement is to provide an understanding of the metrics the undertaking uses to track the effectiveness of its actions to manage material sustainability matters.

74.The undertaking shall disclose any metrics that it uses to evaluate performance and effectiveness, in relation to a material impact, risk or opportunity.

75.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.

76.For each metric, the undertaking shall:

a)disclose the methodologies and significant assumptions behind the metric;

b)disclose whether the measurement of a metric is validated by an external body other than the assurance provider and, if so, which body;

c)label metrics using meaningful, clear and precise names and descriptions;

d)when currency is specified as the unit of measure, use the presentation currency of its financial statements.

Minimum Disclosure Requirement – Targets MDR-T – Tracking effectiveness of policies and actions through targets

77.The undertaking shall apply the requirements for the content of disclosures in this provision when it discloses information about the targets it has set with regard to each material sustainability matter.

78.The objective of this Minimum Disclosure Requirement is to provide for each material sustainability matter an understanding of:

a)whether and how the undertaking tracks the effectiveness of its actions to address material impacts, risks and opportunities, including the metrics it uses to do so;

b)measurable time-bound outcome-oriented targets set by the undertaking to meet the policy’s objectives, defined in terms of expected results for people, the environment or the undertaking regarding material impacts, risks and opportunities;

c)the overall progress towards the adopted targets over time;

d)in the case that the undertaking has not set measurable time-bound outcome-oriented targets, whether and how it nevertheless tracks the effectiveness of its actions to address material impacts, risks and opportunities and measures the progress in achieving its policy objectives; and 

e)whether and how stakeholders have been involved in target setting for each material sustainability matter.

79.The undertaking shall disclose the measurable, outcome-oriented and time-bound targets on material sustainability matters it has set to assess progress. For each target, the disclosure shall include the following information:

a)a description of the relationship of the target to the policy objectives;

b)the defined target level to be achieved, including, where applicable, whether the target is absolute or relative and in which unit it is measured;

c)the scope of the target, including the undertaking’s activities and/or its value chain where applicable and geographical boundaries;

d)the baseline value and base year from which progress is measured;

e)the period to which the target applies and if applicable, any milestones or interim targets;

f)the methodologies and significant assumptions used to define targets, including where applicable, the selected scenario, data sources, alignment with national, EU or international policy goals and how the targets consider the wider context of sustainable development and/or local situation in which impacts take place;

g)whether the undertaking’s targets related to environmental matters are based on conclusive scientific evidence;

h)whether and how stakeholders have been involved in target setting for each material sustainability matter;

i)any changes in targets and corresponding metrics or underlying measurement methodologies, significant assumptions, limitations, sources and processes to collect data adopted within the defined time horizon. This includes an explanation of the rationale for those changes and their effect on comparability (see Disclosure Requirement BP-2 Disclosures in relation to specific circumstances of this Standard); and

j)the performance against its disclosed targets, including information on how the target is monitored and reviewed and the metrics used, whether the progress is in line with what had been initially planned, and an analysis of trends or significant changes in the performance of the undertaking towards achieving the target.

80.If the undertaking has not set any measurable outcome-oriented targets:

a)it may disclose whether such targets will be set and the timeframe for setting them, or the reasons why the undertaking does not plan to set such targets;

b)it shall disclose whether it nevertheless tracks the effectiveness of its policies and actions in relation to the material sustainability-related impact, risk and opportunity, and if so:

I)any processes through which it does so;

II)the defined level of ambition to be achieved and any qualitative or quantitative indicators it uses to evaluate progress, including the base period from which progress is measured.

Appendix A: Application Requirements

This appendix is an integral part of ESRS 2 and has the same authority as other parts of the Standard.

1.Basis for preparation

Disclosure Requirement BP-1 – General basis for preparation of the sustainability statement

AR 1. When describing to what extent the sustainability statement covers the undertaking’s upstream and downstream value chain (see ESRS 1 section 5.1 Reporting undertaking and value chain), the undertaking may distinguish between:

(a)the extent to which its materiality assessment of impacts, risks and opportunities extends to its value chain;

(b)the extent to which its policies, actions and targets extend to its value chain; and

(c)the extent to which it includes value chain data when disclosing on metrics.

2.Governance

Disclosure Requirement GOV-1 – The role of the administrative, management and supervisory bodies

AR 2. In describing the role and responsibilities of the administrative, management and supervisory bodies with regard to sustainability matters, the undertaking may specify:

(a)the aspects of sustainability over which oversight is exercised, with regard to environmental, social and governance matters the undertaking may be facing, including:

I.any assessment of and changes to sustainability-related aspects of the undertaking’s strategy and business model;

II.the identification and assessment of material risks, opportunities and impacts;

III.related policies and targets, action plans and dedicated resources; and

IV.sustainability reporting;

(b)the form such oversight takes for each of the above aspects: i.e., information, consultation or decision-making; and

(c)the way such oversight is organised and formalised, i.e., processes by which the administrative, management and supervisory bodies engage with these aspects of sustainability.

AR 3. In describing the undertaking’s organisation of governance regarding sustainability matters, a description of complex governance structure may be complemented by their presentation in the form of a diagram.

AR 4. The description of the level of expertise or access to expertise of the administrative, management and supervisory bodies may be substantiated by illustrating the composition of the bodies, including members on whom these bodies rely for expertise to oversee sustainability matters, and how they leverage that expertise as a body. In the description, the undertaking shall consider how the expertise and skills are relevant to the undertaking’s material impacts, risks and opportunities and whether the bodies and/or its members have access to other sources of expertise, such as specific experts and training and other educational initiatives to update and develop sustainability-related expertise within these bodies.

Disclosure Requirement GOV-2 – Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies

AR 5. Depending on the undertaking’s structure, the administrative, management and supervisory bodies may focus on overarching targets, while management focuses on the more detailed targets. In this case, the undertaking may disclose how the governance bodies ensure that an appropriate mechanism for performance monitoring is in place.

Disclosure Requirement GOV-3 – Integration of sustainability-related performance in incentive schemes

AR 6. For listed undertakings, this Disclosure Requirement should be consistent with the remuneration report prescribed in articles 9a and 9b of the Directive 2007/36/EC on the exercise of certain rights of shareholders in listed companies. Subject to the provisions of ESRS 1, paragraphs 118 to 121, a listed undertaking may make a reference to its remuneration report.

Disclosure Requirement GOV-4 – Statement on due diligence

AR 7. The mapping required by paragraph 30 may be presented in the form of a table, cross-referencing the core elements of due diligence, for impacts on people and the environment, to the relevant disclosures in the undertaking’s sustainability statement, as set out below.

AR 8. The undertaking may include additional columns to the table below to clearly identify those disclosures that relate to impacts on people and/or the environment given that, in some cases, more than one disclosure may provide information about the same due diligence step.

AR 9. The main references in the international instruments of the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises to the core elements of the due diligence process are listed in ESRS 1 chapter 4.

Disclosure Requirement GOV-5 – Risk management and internal controls over sustainability reporting

AR 10. This Disclosure Requirement focuses solely on the internal control processes over the sustainability reporting process. The undertaking may consider risks such as the completeness and integrity of the data, the accuracy of estimation results, the availability of value chain data, and the timing of the availability of the information.

3.Strategy

Disclosure Requirement SBM–1 Strategy, business model and value chain

AR 11. To provide the information on sectors required by paragraph 40, the undertaking shall map its significant activities in accordance with ESRS sectors. If a code for a sub-sector does not exist, the caption “others” is detailed.

AR 12. For the purposes of the disclosures required in paragraph 40, a group of products and/or services offered, a group of markets and/or customer groups served, or an ESRS sector, is significant for the undertaking if it meets one or both of the following criteria:

(a) it accounts for more than 10 per cent of the undertaking’s revenue; 

(b)it is connected with material actual impacts or material potential negative impacts of the undertaking. 

AR 13. In preparing disclosures relating to its business model and value chain, the undertaking shall consider:

(a)its key activities, resources, distribution channels and customer segments;

(b)its key business relationships and their key characteristics, including relationships with customers and suppliers;

(c)the cost structure and revenue of its business segments, in line with IFRS 8 disclosure requirements in the financial statement, where applicable;

(d)the potential impacts, risks and opportunities in its significant sector(s) and their possible relationship to its own business model or value chain.

AR 14. Contextual information may be particularly relevant for users of the undertaking’s sustainability reporting, to understand to what extent the reported disclosures include value chain information. The description of the main features of the value chain and where applicable the identification of key value chains should support an understanding of how the undertaking applies the requirements of ESRS 1 chapter 5 and the materiality assessment performed by the undertaking in line with ESRS 1 chapter 3. The description may provide a high-level overview of the key features of value chain entities indicating their relative contribution to the undertaking’s performance and position and explaining how they contribute to the value creation of the undertaking.

Disclosure Requirement SBM-2 – Interests and views of stakeholders

AR 15. The views and interests of stakeholders that are expressed as part of the undertaking’s engagement with stakeholders through its due diligence process(es) may be relevant to one or more aspects of its strategy or business model. As such, they may affect the undertaking’s decisions regarding the future direction of the strategy or business model.

Disclosure Requirement SBM-3 – Material impacts, risks and opportunities and their interaction with strategy and business model

AR 16. When describing where in its value chain material impacts, risks and opportunities are concentrated, the undertaking shall consider: geographical areas, facilities or types of assets, inputs, outputs and distribution channels.

AR 17. This disclosure may be expressed in terms of a single impact, risk or opportunity or by aggregating groups of material impacts, risks and opportunities, when this provides more relevant information and does not obscure material information.

4.Impact, risk and opportunity management

Disclosure Requirement IRO-2 – Disclosure Requirements in ESRS covered by the undertaking’s sustainability statement

AR 18. Notwithstanding the basis for the presentation of the information about sustainability matters included in ESRS 1 chapter 8 Structure of sustainability statement, the undertaking may disclose the list of the Disclosure Requirements complied with in preparing the sustainability statement (see paragraph 54) in the general information part or in other parts of the sustainability statement as it deems appropriate. The undertaking may use a content index, i.e., a tabular list of the Disclosure Requirements included in the sustainability statement, with the indication of where they are located (page/paragraphs).

Minimum Disclosure Requirement – Policies MDR-P – Policies adopted to manage material sustainability matters

AR 19. Due to the interdependency between impacts on people and the environment, risks and opportunities, a single policy may apply to several material sustainability matters, including matters addressed by more than one topical ESRS. For example, if a single policy covers both an environmental matter and a social matter, the undertaking may report on the policy in the environmental section of its sustainability statement. In this case, it should include in the social section a cross-reference to the environmental section where the policy is reported. Equally a policy may be reported in the social section with a cross-reference to it in the environmental section.

AR 20. The description of the scope of the policy may explain which activities and/or segments of the undertaking’s own operations or value chain it concerns. The description may also explain further boundaries relevant to the specific topic or the undertaking’s circumstances, which may include geographies, life cycles, etc. In certain cases, such as if the policy does not cover the full value chain, the undertaking may provide clear information regarding the extent of the value chain covered by the policy.

Minimum disclosure requirement – Actions MDR-A – Actions and resources in relation to material sustainability matters

AR 21. Key actions in the context of this Minimum Disclosure Requirement are those actions that materially contribute to achieving the undertaking’s objectives in addressing material impacts, risks and opportunities. For reasons of understandability, key actions may be aggregated where appropriate.

AR 22. Information on resource allocation may be presented in the form of a table and broken down between capital expenditure and operating expenditure, and across the relevant time horizons, and between resources applied in the current reporting year and resources the planned allocation of resources over specific time horizons.

5.Metrics and targets

Minimum Disclosure Requirement – Targets MDR-T – Tracking effectiveness of policies and actions through targets

AR 23. When disclosing targets related to the prevention or mitigation of environmental impacts, the undertaking shall prioritise targets related to the reduction of the impacts in absolute terms rather than in relative terms. When targets address the prevention or mitigation of social impacts, they may be specified in terms of the effects on human rights, welfare or positive outcomes for affected stakeholders.

AR 24. The information on progress made towards achieving the targets may be presented in a comprehensive table, including information on the baseline and target value, milestones, and achieved performance over the prior periods.

AR 25. Where the undertaking describes progress in achieving the objectives of a policy in the absence of a measurable target, it may specify a baseline against which the progress is considered. For example, the undertaking may assess an increase of wages by a certain percentage for those below a fair wage; or may assess the quality of its relationships with local communities by reference to the proportion of issues raised by communities that were resolved to their satisfaction. The baseline and the assessment of the progress shall be related to the impacts, risks and opportunities which underpin the materiality of the matter addressed by the policy.

Appendix B: List of datapoints in cross-cutting and topical standards that are required by EU law

This appendix is an integral part of the ESRS 2. The table below illustrates the datapoints in ESRS 2 and topical ESRS that emanate from other EU legislation.

Appendix C: Disclosure and Application Requirements in Topical ESRS that are applicable in conjunction with ESRS 2 General disclosures

This appendix is an integral part of ESRS 2 and has the same authority as the other parts of the standard. The following table outlines the requirements in topical ESRS that need to be taken into account when reporting against the Disclosure Requirements in ESRS 2.

ESRS E1

CLIMATE CHANGE

Table of contents

Objective    

Interactions with other ESRS    

Disclosure Requirements    

ESRS 2 General disclosures    

Disclosure requirement related to ESRS 2 GOV-3 Integration of sustainability-related performance in incentive schemes    

Disclosure Requirement E1-1 – Transition plan for climate change mitigation    

Disclosure Requirement related to ESRS 2 SBM-3 – Material impacts, risks and opportunities and their interaction with strategy and business model    

Disclosure requirement related to ESRS 2 IRO-1 – Description of the processes to identify and assess material climate-related impacts, risks and opportunities    

Impact, risk and opportunity management    

Disclosure Requirement E1-2 – Policies related to climate change mitigation and adaptation

Disclosure Requirement E1-3 – Actions and resources in relation to climate change policies

Metrics and targets    

Disclosure Requirement E1-4 – Targets related to climate change mitigation and adaptation

Disclosure Requirement E1-5 – Energy consumption and mix    

Energy intensity based on net revenue    

Disclosure Requirement E1-6 – Gross Scopes 1, 2, 3 and Total GHG emissions    

GHG Intensity based on net revenue    

Disclosure Requirement E1-7 – GHG removals and GHG mitigation projects financed through carbon credits    

Disclosure Requirement E1-8 – Internal carbon pricing    

Disclosure Requirement E1-9 – Anticipated financial effects from material physical and transition risks and potential climate-related opportunities    

Appendix A: Application Requirements    

Disclosure Requirement E1-1 – Transition plan for climate change mitigation    

Impact, risk and opportunity management    

Disclosure Requirement E1-2 – Policies related to climate change mitigation and adaptation

Disclosure Requirements E1-3 – Actions and resources in relation to climate change policies

Metrics and targets    

Disclosure Requirement E1-4 – Targets related to climate change mitigation and adaptation

Disclosure Requirement E1-5 – Energy consumption and mix    

Energy intensity based on net revenue    

Disclosure Requirements E1-6 – Gross Scopes 1, 2, 3 and Total GHG emissions    

GHG intensity based on net revenue    

Disclosure Requirement E1-7 – GHG removals and GHG mitigation projects financed through carbon credits    

GHG removals and storage in own operations and the value chain    

GHG mitigation projects financed through carbon credits    

Disclosure Requirement E1-8 – Internal carbon pricing    

Disclosure Requirement E1-9 – Anticipated financial effects from material physical and transition risks and potential climate-related opportunities    

Objective 

________________________________________________________________________________

1.The objective of this Standard is to specify Disclosure Requirements which will enable users of sustainability statements to understand:

(a)how the undertaking affects climate change, in terms of material positive and negative actual and potential impacts;

(b)the undertaking’s past, current, and future mitigation efforts in line with the Paris Agreement (or an updated international agreement on climate change) and compatible with limiting global warming to 1.5°C;

(c)the plans and capacity of the undertaking to adapt its strategy and business model, in line with the transition to a sustainable economy and to contribute to limiting global warming to 1.5°C;

(d)any other actions taken by the undertaking, and the result of such actions to prevent, mitigate or remediate actual or potential negative impacts, and to address risks and opportunities;

(e)the nature, type and extent of the undertaking’s material risks and opportunities arising from the undertaking’s impacts and dependencies on climate change, and how the undertaking manages them; and

(f)the financial effects on the undertaking over the short-, medium- and long-term time horizons of risks and opportunities arising from the undertaking’s impacts and dependencies on climate change.

2.The Disclosure Requirements of this Standard take into account the requirements of related EU legislation and regulation (i.e., EU Climate Law, Climate Benchmark Standards Regulation, Sustainable Finance Disclosure Regulation (SFDR), EU Taxonomy, and EBA Pillar 3 disclosure requirements).

3.This Standard covers Disclosure Requirements related to the following sustainability matters: “Climate change mitigation” and “Climate change adaptation”. It also covers energy-related matters, to the extent that they are relevant to climate change.

4.Climate change mitigation relates to the undertaking’s endeavours to the general process of limiting the increase in the global average temperature to 1,5 °C above pre-industrial levels in line with the Paris Agreement. 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 (PCFs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3). It also covers Disclosure Requirements on how the undertaking addresses its GHG emissions as well as the associated transition risks.

5.Climate change adaptation relates to the undertaking’s process of adjustment to actual and expected climate change.

6.This Standard covers Disclosure Requirements regarding climate-related hazards that can lead to physical climate risks for the undertaking and its adaptation solutions to reduce these risks. It also covers transition risks arising from the needed adaptation to climate- related hazards.

7.The Disclosure Requirements related to “Energy” cover all types of energy production and consumption.

Interactions with other ESRS    

8.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.

9.Impacts on people that may arise from the transition to a climate-neutral economy are covered under the ESRS S1 Own workforce, ESRS 2 Workers in the value chain, ESRS S3 Affected communities and ESRS S4 Consumers and users.

10.Climate change mitigation and adaptation are closely related to topics addressed in particular in ESRS E3 Water and marine resources and ESRS E4 Biodiversity and ecosystems. With regard to water and as illustrated in the table of climate-related hazards in AR 12, this standard addresses acute and chronic physical risks which arise from the water and ocean-related hazards. Biodiversity loss and ecosystem degradation that may be caused by climate change are addressed in ESRS E4 Biodiversity and ecosystems.

11.This Standard should be read and applied in conjunction with ESRS 1 General requirements and ESRS 2 General disclosures.

Disclosure Requirements

ESRS 2 General disclosures

12.The requirements of this section should be read and applied in conjunction with the disclosures required by ESRS 2 on Chapter 2 Governance, Chapter 3 Strategy and Chapter 4 Impact, risk and opportunity management. The resulting disclosures shall be presented in the sustainability statement alongside the disclosures required by ESRS 2, except for ESRS 2 SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model, for which the undertaking may, in accordance with ESRS2 paragraph 46, present the disclosures alongside the other disclosures required in this topical standard.

Governance

Disclosure requirement related to ESRS 2 GOV-3 Integration of sustainability-related performance in incentive schemes

13.The undertaking shall disclose whether and how climate-related considerations are factored into the remuneration of members of the administrative, management and supervisory bodies, including if their performance has been assessed against the GHG emission reduction targets reported under Disclosure Requirement E1-4 and the percentage of the remuneration recognised in the current period that is linked to climate related considerations, with an explanation of what the climate considerations are.

Strategy

Disclosure Requirement E1-1 – Transition plan for climate change mitigation

14.The undertaking shall disclose its transition plan for climate change mitigation 19

15.The objective of this Disclosure Requirement is to enable an understanding of the undertaking’s past, current, and future mitigation efforts to ensure that its strategy and business model are compatible with the transition to a sustainable economy, and with the limiting of global warming to 1.5 °C in line with the Paris Agreement and with the objective of achieving climate neutrality by 2050 and, where relevant, the undertaking’s exposure to coal, oil and gas-related activities.

16.The information required by paragraph 13 shall include:

a.by reference to GHG emission reduction targets (as required by Disclosure Requirement E1-4), an explanation of how the undertaking’s targets are compatible with the limiting of global warming to 1.5°C in line with the Paris Agreement;

b.by reference to GHG emission reduction targets (as required by Disclosure Requirement E1-4) and the climate change mitigation actions (as required by Disclosure Requirement E1-3), an explanation of the decarbonisation levers identified, and key actions planned, including changes in the undertaking’s product and service portfolio and its adoption of new technologies;

c.by reference to the climate change mitigation actions (as required by Disclosure Requirement E1-3), an explanation and quantification of the undertaking’s investments and funding supporting the implementation of its transition plan;

d.a qualitative assessment of the potential locked-in GHG emissions from the undertaking’s key assets and products. This shall include an explanation of if and how these emissions may jeopardise the achievement of the undertaking’s GHG emission reduction targets and drive transition risk, and if applicable, an explanation of the undertaking’s plans to manage its GHG-intensive and energy-intensive assets and products;

e.for undertakings with economic activities that are covered by delegated regulations on climate adaptation or mitigation under the Taxonomy Regulation, an explanation of any objective or plans (CapEX, CapEx plans) that the undertaking has for aligning its economic activities (revenues, CapEx) with the criteria established in those delegated regulations;

f.if applicable, a disclosure of significant CapEx amounts invested during the reporting period related to coal, oil and gas-related economic activities; 20

g.a disclosure on whether or not the undertaking is excluded from the EU Paris-aligned Benchmarks; 21

h.an explanation of how the transition plan is embedded in and aligned with the undertaking’s overall business strategy and financial planning;

i.whether the transition plan is approved by the administrative, management and supervisory bodies; and

j.an explanation of the undertaking’s progress in implementing the transition plan.

17.In case the undertaking does not have a transition plan in place, it shall indicate whether and, if so, when it will adopt a transition plan.

Disclosure Requirement related to ESRS 2 SBM-3 – Material impacts, risks and opportunities and their interaction with strategy and business model

18.The undertaking shall explain for each climate-related risk it has identified, whether the entity considers the risk to be a climate-related physical risk or climate-related transition risk.

19.The undertaking shall describe the resilience of its strategy and business model in relation to climate change. This description shall include:

a.the scope of the resilience analysis;

b.how and when the resilience analysis has been conducted, including the use of climate scenario analysis as referenced in the Disclosure Requirement related to ESRS 2 IRO-1 and the related application requirement paragraphs; and

c.the results of the resilience analysis including the results from the use of scenario analysis.

Disclosure requirement related to ESRS 2 IRO-1 – Description of the processes to identify and assess material climate-related impacts, risks and opportunities

20.The undertaking shall describe the process to identify and assess climate-related impacts, risks and opportunities. This description shall include:

a.impacts on climate change, in particular, the undertaking’s GHG emissions (as required by Disclosure Requirement ESRS E1-6);

b.climate-related physical risks in own operations and along the value chain, in particular:

I.the identification of climate-related hazards, considering at least high emission climate scenarios; and

II.the assessment of how its assets and business activities may be exposed and are sensitive to these climate-related hazards, creating gross physical risks for the undertaking.

c.climate-related transition risks and opportunities in own operations and along the value chain, in particular:

I.the identification of climate-related transition events, considering at least a climate scenario in line with limiting global warming to 1.5°C with no or limited overshoot; and

II.the assessment of how its assets and business activities may be exposed to these climate-related transition events, creating gross transition risks or opportunities for the undertaking.

21.When disclosing the information required under paragraphs 19(b)and 19(c) the undertaking shall explain how it has used climate-related scenario analysis, including a range of climate scenarios, to inform the identification and assessment of physical risks and transition risks and opportunities over the short-, medium- and long-term time horizons.

Impact, risk and opportunity management

Disclosure Requirement E1-2 – Policies related to climate change mitigation and adaptation

22.The undertaking shall describe its policies that address its material impacts, risks and opportunities related to climate change mitigation and adaptation.

23.The objective of this Disclosure Requirement is to enable an understanding of the extent to which the undertaking has policies that address the identification, assessment, management and/or remediation of its material climate change mitigation and adaptation impacts, risks and opportunities.

24.The disclosure required by paragraph 22 shall contain the information on the policies the undertaking has in place to manage its material impacts, risks and opportunities related to climate change mitigation and adaptation in accordance with ESRS 2 MDR-P Policies adopted to manage material sustainability matters.

25.The undertaking shall indicate whether and how its policies address the following areas:

a.climate change mitigation;

b.climate change adaptation;

c.energy efficiency;

d.renewable energy deployment; and

e.Other.

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.In accordance with ESRS 2 paragraph 61, if the undertaking cannot disclose the information on policies required under this Disclosure Requirement because it has not adopted policies related to climate change mitigation or adaptation, it shall disclose this to be the case, and provide reasons for not having adopted such policies. The undertaking may report a timeframe in which it aims to adopt such policies.

Disclosure Requirement E1-3 – Actions and resources in relation to climate change policies

27.The undertaking shall disclose its climate change mitigation and adaptation actions and the resources allocated for their implementation.

28.The objective of this Disclosure Requirement is to provide an understanding of the key actions taken and planned to achieve climate-related policy objectives and targets.

29.The description of the actions and resources related to climate change mitigation and adaptation shall follow the principles stated in ESRS 2 MDR-A Actions and resources in relation to material sustainability matters.

30.In addition to ESRS 2 MDR-A, the undertaking shall:

a.when listing key actions taken in the reporting year and planned for the future, present the climate change mitigation actions by decarbonisation lever including the nature- based solutions;

b.when describing the outcome of the actions for climate change mitigation, include the achieved and expected GHG emission reductions; and

c.relate significant monetary amounts of CapEx and OpEx required to implement the actions to:

a.the relevant line items or notes in the financial statements;

b.the key performance indicators required under article 8 of Taxonomy Regulation (EU) 2020/852; and

c.if applicable, the CapEx plan required by Commission delegated regulation (EU) 2021/2178.

Metrics and targets

Disclosure Requirement E1-4 – Targets related to climate change mitigation and adaptation

31.The undertaking shall disclose the climate-related targets it has set.

32.The objective of this Disclosure Requirement is to enable an understanding of the targets the undertaking has set to support its climate change mitigation and adaptation policies and address its material climate-related impacts, risks and opportunities.

33.The disclosure of the targets required in paragraph 31 shall contain the information required in ESRS 2 MDR-T Tracking effectiveness of policies and actions through targets.

34.For the disclosure required by paragraph 31, the undertaking shall disclose whether and how it has set GHG emissions reduction targets and/or any other targets to manage material climate-related impacts, risks and opportunities, for example, renewable energy deployment, energy efficiency, climate change adaptation, and physical or transition risk mitigation.

35.If the undertaking has set GHG emission reduction targets 22 , ESRS 2 MDR-T and the following requirements shall apply:

a.GHG emission reduction targets shall be disclosed in absolute value (either in tonnes of CO2eq  or as a percentage of the emissions of a base year) and, where relevant, in intensity value;

b.GHG emission reduction targets shall be disclosed for Scope 1, 2, and 3 GHG emissions, either separately or combined. The undertaking shall specify, in case of combined GHG emission reduction targets, which GHG emission Scopes (1, 2 and/or 3) are covered by the target, the share related to each respective GHG emission Scope and which GHGs are covered. The undertaking shall explain how the consistency of these targets with its GHG inventory boundaries is ensured (as required by Disclosure Requirement E1-6). The GHG emission reduction targets shall be gross targets, meaning that the undertaking shall not include GHG removals, carbon credits or avoided emissions as a means of achieving the GHG emission reduction targets;

c.the undertaking shall disclose its current base year and baseline value, and from 2030 onwards, update the base year for its GHG emission reduction targets after every five-year period thereafter. The undertaking may disclose the past progress made in meeting its targets before its current base year provided that this information is consistent with the requirements of this Standard;

d.GHG emission reduction targets shall at least include target values for the year 2030 and, if available, for the year 2050. From 2030, target values shall be set after every five-year period thereafter;

e.the undertaking shall state whether the GHG emission reduction targets are science- based and compatible with limiting global warming to 1.5°C. The undertaking shall state which framework and methodology has been used to determine these targets including whether they are derived using a sectoral decarbonisation pathway and what the underlying climate and policy scenarios are and whether they have been externally assured. As part of the critical assumptions for setting GHG emission reduction targets, the undertaking shall briefly explain how it has considered future developments (e.g., changes in sales volumes, shifts in customer preferences and demand, regulatory factors, and new technologies) and how these will potentially impact both its GHG emissions and emissions reductions; and

f.the undertaking shall describe the expected decarbonisation levers and their overall quantitative contributions to achieve the GHG emission reduction targets (e.g., energy or material efficiency and consumption reduction, fuel switching, use of renewable energy, phase out or substitution of product and process).

Disclosure Requirement E1-5 – Energy consumption and mix

36.The undertaking shall provide information on its energy consumption and mix.

37.The objective of this Disclosure Requirement is to provide an understanding of the undertaking’s total energy consumption in absolute value, improvement in energy efficiency, exposure to coal, oil and gas-related activities, and the share of renewable energy in its overall energy mix.

38.The disclosure required by paragraph 36 shall include the total energy consumption in MWh related to own operations disaggregated by:

a.total energy consumption from fossil sources  23 :

b.total energy consumption from nuclear sources;

c.total energy consumption from renewable sources disaggregated by:

I.fuel consumption for renewable sources including biomass (also comprising industrial and municipal waste of biologic origin), biofuels, biogas, hydrogen from renewable sources 24 , etc.;

II.consumption of purchased or acquired electricity, heat, steam, and cooling from renewable sources; and

III.consumption of self-generated non-fuel renewable energy.

39.The undertaking with operations in high climate impact sectors 25 shall further disaggregate their total energy consumption from fossil sources by:

a.fuel consumption from coal and coal products;

b.fuel consumption from crude oil and petroleum products;

c.fuel consumption from natural gas;

d.fuel consumption from other fossil sources;

e.consumption of purchased or acquired electricity, heat, steam, or cooling from fossil sources;

40.In addition, where applicable, the undertaking shall disaggregate and disclose separately its non-renewable energy production and renewable energy production in MWh. 26

Energy intensity based on net revenue 27

41.The undertaking shall provide information on the energy intensity (total energy consumption per net revenue) associated with activities in high climate impact sectors.

42.The disclosure on energy intensity required by paragraph 41 shall only be derived from the total energy consumption and net revenue from activities in high climate impact sectors.

43.The undertaking shall specify the high climate impact sectors that are used to determine the energy intensity required by paragraph 41.

44.The undertaking shall disclose the reconciliation to the relevant line item or notes in the financial statements of the net revenue amount from activities in high climate impact sectors (the denominator in the calculation of the energy intensity required by paragraph 41).

Disclosure Requirement E1-6 – Gross Scopes 1, 2, 3 and Total GHG emissions

45.The undertaking shall disclose in metric tonnes of CO2eq its 28 :

a.gross Scope 1 GHG emissions;

b.gross Scope 2 GHG emissions;

c.gross Scope 3 GHG emissions; and

d.total GHG emissions.

46.The objective of the Disclosure Requirement in paragraph 45 in respect of:

a.gross Scope 1 GHG emissions as required by paragraph 45(a) is to provide an understanding of the direct impacts of the undertaking on climate change and the proportion of its total GHG emissions that are regulated under emission trading schemes.

b.gross Scope 2 GHG emissions as required by paragraph 45(b) is to provide an understanding of the indirect impacts on climate change caused by the undertaking’s consumed energy whether externally purchased or acquired.

c.gross Scope 3 GHG emissions as required by paragraph 45(c) is to provide an understanding of the GHG emissions that occur in the undertaking’s value chain beyond its Scope 1 and 2 GHG emissions. For many undertakings, Scope 3 GHG emissions may be the main component of their GHG inventory and are an important driver of the undertaking’s transition risks.

d.total GHG emissions as required by paragraph 45(d) is to provide an overall understanding of the undertaking’s GHG emissions and whether they occur from its own operations or the value chain. This disclosure is a prerequisite for measuring progress towards reducing GHG emissions in accordance with the undertaking’s climate-related targets and EU policy goals.

The information from this Disclosure Requirement is also needed to understand the undertaking’s climate-related transition risks.

47.When disclosing the information on GHG emissions required under paragraph 45, the undertaking shall refer to ESRS 1 paragraphs from 62 to 67. In principle, the data on GHG emissions of its associates or joint ventures that are part of the undertaking’s value chain (ESRS 1 Paragraph 71) are not limited to the share of equity held.  For its associates, joint ventures, unconsolidated subsidiaries (investment entities) and contractual arrangements that are joint arrangements not structured through an entity (i.e., jointly controlled operations and assets), the undertaking shall include the GHG emissions in accordance with the extent of the undertaking’s operational control over them.

48.In case of significant changes in the definition of what constitutes the reporting undertaking and its value chain, the undertaking shall disclose these changes and explain their effect on the year-to-year comparability of its reported GHG emissions (i.e., the effect on the comparability of current versus previous reporting period GHG emissions).

49.The disclosure on gross Scope 1 GHG emissions required by paragraph (a) shall include:

a.the gross Scope 1 GHG emissions in metric tonnes of CO2eq; and

b.the percentage of Scope 1 GHG emissions from regulated emission trading schemes.

50.The disclosure on gross Scope 2 GHG emissions required by paragraph (b) shall include:

a.the gross location-based Scope 2 GHG emissions in metric tonnes of CO2eq; and

b.the gross market-based Scope 2 GHG emissions in metric tonnes of CO2eq.

51.For Scope 1 and Scope 2 emissions disclosed as required by paragraphs  45 (a) and (b) the undertaking shall disaggregate the information, separately disclosing emissions from:

a.the consolidated accounting group (the parent and subsidiaries); and

b.investees such as associates, joint ventures, or unconsolidated subsidiaries that are not fully consolidated in the financial statements of the consolidated accounting group, as well as contractual arrangements that are joint arrangements not structured through an entity (i.e., jointly controlled operations and assets), for which it has operational control.

52.The disclosure of gross Scope 3 GHG emissions required by paragraph 45 (c) shall include GHG emissions in metric tonnes of CO2eq from each significant Scope 3 category (i.e. each Scope 3 category that is a priority for the undertaking).

53.The disclosure of total GHG emissions required by paragraph 45 (d) shall be the sum of Scope 1, 2 and 3 GHG emissions required by paragraphs 45 (a) to (c). The total GHG emissions shall be disclosed with a disaggregation that makes a distinction of:

a.the total GHG emissions derived from the underlying Scope 2 GHG emissions being measured using the location-based method; and

b.the total GHG emissions derived from the underlying Scope 2 GHG emissions being measured using the market-based method.

GHG Intensity based on net revenue 29

54.The undertaking shall disclose its GHG emissions intensity (total GHG emissions per net revenue).

55.The disclosure on GHG intensity required by paragraph 54 shall provide the total GHG emissions in metric tonnes of CO2eq (required by paragraph 45 (d)) per net revenue.

56.The undertaking shall disclose the reconciliation to the relevant line item or notes in the financial statements of the net revenue amounts (the denominator in the calculation of the GHG emissions intensity required by paragraph 54).

Disclosure Requirement E1-7 – GHG removals and GHG mitigation projects financed through carbon credits

57.The undertaking shall disclose:

a.GHG removals and storage in metric tonnes of CO2eq resulting from projects it may have developed in its own operations, or contributed to in its value chain; and

b.the amount of GHG emission reductions or removals from climate change mitigation projects outside its value chain it has financed or intends to finance through any purchase of carbon credits.

58.The objective of this Disclosure Requirement is:

a.to provide an understanding of the undertaking’s actions to permanently remove or actively support the removal of GHG from the atmosphere, potentially for achieving net-zero targets (as stated in paragraph 61).

b.to provide an understanding of the extent and quality of carbon credits the undertaking has purchased or intends to purchase from the voluntary market, potentially for supporting its GHG neutrality claims (as stated in paragraph 962).

59.The disclosure on GHG removals and storage required by paragraph 57 (a) shall include, if applicable:

a.the total amount of GHG removals and storage in metric tonnes of CO2eq disaggregated and separately disclosed for the amount related to the undertaking’s own operations and its value chain, and broken down by removal activity; and

b.the calculation assumptions, methodologies and frameworks applied by the undertaking.

60.The disclosure on carbon credits required by paragraph 57 (b) shall include, if applicable:

a.the total amount of carbon credits outside the undertaking’s value chain in metric tonnes of CO2eq that are verified against recognised quality standards and cancelled in the reporting period; and

b.the total amount of carbon credits outside the undertaking’s value chain in metric tonnes of CO2eq planned to be cancelled in the future and whether they are based on existing contractual agreements or not.

61.In the case where the undertaking discloses a net-zero target in addition to the gross GHG emission reduction targets in accordance with Disclosure Requirement E1-4, paragraph 31, it shall explain the scope, methodologies and frameworks applied and how the residual GHG emissions (after approximately 90-95% of GHG emission reduction with the possibility for justified sectoral variations in line with a recognised sectoral decarbonisation pathway) are intended to be neutralised by, for example, GHG removals in its own operations and value chain.

62.In the case where the undertaking may have made public claims of GHG neutrality that involve the use of carbon credits, it shall explain:

a.whether and how these claims are accompanied by GHG emission reduction targets as required by Disclosure requirement ESRS E1-4;

b.whether and how these claims and the reliance on carbon credits neither impede nor reduce the achievement of its GHG emission reduction targets 30 , or, if applicable, its net zero target; and

c.the credibility and integrity of the carbon credits used, including by reference to recognised quality standards.

Disclosure Requirement E1-8 – Internal carbon pricing

63.The undertaking shall disclose whether it applies internal carbon pricing schemes, and if so, how they support its decision making and incentivise the implementation of climate-related policies and targets.

64.The information required in paragraph 63 shall include:

a.the type of internal carbon pricing scheme, for example, the shadow prices applied for CapEX or research and development (R&D) investment decision making, internal carbon fees or internal carbon funds;

b.the specific scope of application of the carbon pricing schemes (activities, geographies, entities, etc.);

c.the carbon prices applied according to the type of scheme and critical assumptions made to determine the prices, including the source of the applied carbon prices and why these are deemed relevant for their chosen application. The undertaking may disclose the calculation methodology of the carbon prices including the extent to which these have been set using scientific guidance and how their future development is related to science-based carbon pricing trajectories; and

d.the current year approximate gross GHG emission volumes by Scopes 1, 2 and, where applicable, Scope 3 in metric tonnes of CO2eq covered by these schemes, as well as their share of the undertaking’s overall GHG emissions for each respective Scope.

Disclosure Requirement E1-9 – Anticipated financial effects from material physical and transition risks and potential climate-related opportunities

65.The undertaking shall disclose its:

a.anticipated financial effects from material physical risks;

b.anticipated financial effects from material transition risks; and

c.potential to pursue material climate-related opportunities.

66.The information required by paragraph 65 is in addition to the information on current   financial effects required under ESRS 2 SBM-3 para 48 (d). The objective of this Disclosure Requirement related to:

a.anticipated financial effects due to material physical risks and transition risks is to provide an understanding of how these 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.  The results of scenario analysis used to conduct resilience analysis as required under paragraphs AR 11 to AR 14 should inform the assessment of anticipated financial effects from material physical and transition risks.

b.potential to pursue material climate-related opportunities is to enable an understanding of how the undertaking may financially benefit from material climate- related opportunities. This disclosure is complementary to the information requested under the Taxonomy Regulation.

67.The disclosure of anticipated financial effects from material physical risks required by paragraph 65 (a) shall include 31 :

a.the monetary amount and proportion (percentage) of assets at material physical risk over the short-, medium- and long-term before considering climate change adaptation actions; with the monetary amounts of these assets disaggregated by acute and chronic physical risk 32 ;

b.the proportion of assets at material physical risk addressed by the climate change adaptation actions;

c.the location of significant assets at material physical risk 33 ; and

d.the monetary amount and proportion (percentage) of net revenue from its business activities at material physical risk over the short-, medium- and long-term.