ANNEX I

European sustainability reporting standards (ESRS)

ESRS 1	General requirements
ESRS 2	General disclosures
ESRS E1	Climate change
ESRS E2	Pollution
ESRS E3	Water and marine resources
ESRS E4	Biodiversity and ecosystems
ESRS E5	Resource use and circular economy
ESRS S1	Own workforce
ESRS S2	Workers in the value chain
ESRS S3	Affected communities
ESRS S4	Consumers and end-users
ESRS G1	Business conduct

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

7

Preparation and presentation of sustainability information

7.1

Presenting comparative information

7.2

Sources of estimation and outcome uncertainty

7.3

Updating disclosures about events after the end of the reporting period

7.4

Changes in preparation or presentation of sustainability information

7.5

Reporting errors in prior periods

7.6

Consolidated reporting and subsidiary exemption

7.7

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

7.8

Reporting on opportunities

8.

Structure of sustainability statement

8.1

General presentation requirement

8.2

Content and structure of the sustainability statement

9.

Linkages with other parts of corporate reporting and connected information

9.1

Incorporation by reference

9.2

Connected information and connectivity with financial statements

10.

Transitional provisions

10.1

Transitional provision related to entity-specific disclosures

10.2

Transitional provision related to chapter 5 Value chain

10.3

Transitional provision related to section 7.1 Presenting comparative information

10.4

Transitional provision: List of Disclosure Requirements that are phased-in

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 of the European Parliament and of the Council. (2) Reporting in accordance with ESRS does not exempt undertakings from other obligations laid down in 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 when the undertaking has assessed the topic in question as non-material (See Appendix E of this Standard “Flowchart for determining disclosures to be included”).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/EU, as amended by Directive (EU) 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, manage and oversee 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): the undertaking’s 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.

1.3    Drafting 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 (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 (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, the 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.

3.1    Stakeholders 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), and other users of sustainability statements, 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).

3.2    Material 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 disclosure 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 a 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) and the Disclosure Requirements (including their datapoints) in topical ESRS related to the Disclosure Requirement IRO-1 Description of the process to identify and assess material impacts, risks and opportunities, as listed in ESRS 2 Appendix C Disclosure/Application Requirements in topical ESRS that are applicable jointly with ESRS 2 General Disclosures.

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 and sector-specific 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.

The applicable information prescribed within a Disclosure Requirement, including its datapoints, or an entity-specific disclosure, shall be disclosed when the undertaking assesses, as part of its assessment of material information, that the information is relevant from one or more of the following perspectives: (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.

32.

If the undertaking concludes that climate change is not material and therefore omits all disclosure requirements in ESRS E1 Climate change, it shall disclose a detailed explanation of the conclusions of its materiality assessment with regard to climate change (see ESRS 2 IRO-2 Disclosure Requirements in ESRS covered by the undertaking’s sustainability statement), including a forward-looking analysis of the conditions that could lead the undertaking to conclude that climate change is material in the future. If the undertaking concludes that a topic other than climate change is not material and therefore it omits all the Disclosure Requirements in the corresponding topical ESRS, it may briefly explain the conclusions of its materiality assessment for that topic.

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.

34.

When disclosing information on metrics for a material sustainability matter according to the Metrics and Targets section of the relevant topical ESRS, 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.

35.

If the undertaking omits the information prescribed by a datapoint that derives from other EU legislation listed in Appendix B of ESRS 2, it shall explicitly state that the information in question is “not material”.

36.

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

3.3    Double 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."

3.4    Impact 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 upstream and downstream 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.

3.5    Financial 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 corresponds to the identification of information that is considered material for primary users of general-purpose financial reports in making decisions relating to providing resources to the entity. In particular, information is considered material for primary users of general-purpose financial reports 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 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 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 .

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

52.

The undertaking’s materiality assessment 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) disclose 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.

3.7    Level 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 undertaking’s specific 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 to be specified in a delegated act adopted by the Commission pursuant to article 29b(1) third subparagraph, point (ii), of Directive 2013/34/EU. 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 upstream and downstream 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 its upstream and downstream 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

5.1    Reporting 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 parent company required to prepare consolidated financial statements, the sustainability statement will be for the group. This requirement does not apply where the reporting undertaking is not required to draw-up financial statements or where the reporting undertaking is preparing consolidated sustainability reporting pursuant to Article 48i of Directive 2013/34/EU.

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: (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 upstream and downstream value chain information. Different sustainability matters can be material in relation to different parts of the undertaking’s upstream and downstream 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, for example as suppliers, 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 connected with the undertaking’s products and services through its business relationships.

5.2    Estimation using sector averages and proxies

68.

The undertaking’s ability to obtain the necessary upstream and downstream 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 upstream and/or downstream 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 upstream and/or downstream 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 upstream and/or downstream 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 upstream and downstream value chain, especially from SMEs, 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

6.1    Reporting period

73.

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

6.2    Linking 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.

6.3    Reporting 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.

6.4    Definition 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 defined in (a) up to 5 years; and (c) for the long-term time horizon: more than 5 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 5 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.

7.1    Presenting comparative information

83.

The undertaking shall disclose comparative information in respect of the previous period for all quantitative metrics and monetary amounts 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.

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.

7.2    Sources of estimation and outcome uncertainty

87.

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

88.

An undertaking shall disclose information to enable users to understand the most significant uncertainties affecting the quantitative metrics and monetary amounts reported in its sustainability statement.

89.

The use of reasonable assumptions and estimates, including scenario or sensitivity analysis, is an essential part of preparing sustainability-related information and does not undermine the usefulness of that 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).

90.

Data and assumptions used in preparing the sustainability statement shall be consistent to the extent possible with the corresponding financial data and assumptions used in the undertaking’s financial statements.

91.

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.

92.

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).

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

93.

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, where appropriate, update estimates and sustainability disclosures, in the light of the new information.

94.

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

7.4    Changes in preparation or presentation of sustainability information

95.

The definition and calculation of metrics , including metrics used to set targets and monitor progress towards them, shall be consistent over time. The undertaking shall provide restated comparative figures, unless it is impracticable to do so (see ESRS 2 BP-2), when it has: (a) redefined or replaced a metric or target; (b) identified new information in relation to the estimated figures disclosed in the preceding period and the new information provides evidence of circumstances that existed in that period.

7.5    Reporting errors in prior periods

96.

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.

97.

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.

98.

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

99.

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.

100.

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.

101.

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

7.6    Consolidated reporting and subsidiary exemption

102.

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.

103.

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.

104.

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.

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

105.

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

106.

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.

107.

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.

108.

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.

7.8    Reporting on opportunities

109.

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 anticipated financial effects is appropriate, taking into account the number of assumptions that it could require and consequential uncertainty.

8.   Structure of the sustainability statement

110.

This chapter provides the basis for the presentation of the information about sustainability matters prepared in compliance with Articles 19a and 29a of Directive 2013/34/EU (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

111.

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

112.

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.

113.

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 to the Commission Delegated Regulations that specify the content and other modalities 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 provisions of ESRS, with the exception of this paragraph and the first sentence of paragraph 115 of this standard.

114.

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.

115.

The undertaking shall structure its sustainability statement in four parts, in the following order: general information, environmental information (including disclosures pursuant to 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.

116.

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.

117.

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

118.

The undertaking shall provide information that enables users of its sustainability statement to understand the connections between different pieces of information in the statement, and the connections between the information in the sustainability statement and other information that the undertaking discloses in other parts of its corporate reporting.

9.1    Incorporation by reference

119.

Provided that the conditions in paragraph 120 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 (EU) 2017/1129 (10); and (f) public disclosures under Regulation (EU) No 575/2013 of the European Parliament and of the Council (Pillar 3 disclosures) (11). 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.

120.

The undertaking may incorporate information by reference to the documents, or part of the documents, listed in paragraph 119, 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.

121.

Provided that the conditions established in paragraph 120 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 (12). 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.

122.

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

123.

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, in providing connected information, the undertaking may need to explain the effect or likely effect of its strategy on its financial statements or financial plans, or explain how its strategy relates to metrics and targets used to measure progress against performance. Furthermore, the undertaking may 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 information about current or anticipated financial effects on its production costs, to its strategic response to mitigate such impacts or risks, and to its related investment in new assets. The undertaking may also need to link narrative information to the related metrics and targets and to information in the financial statements. Information that describes connections shall be clear and concise.

124.

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.

125.

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.

126.

In the case of information not covered by paragraphs 124 and 125, 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.

127.

Consistency as required by paragraph 126 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.

128.

Examples of items for which the explanation in paragraph 126 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.

129.

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 entity-specific disclosures

130.

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, in particular as a result of the future adoption of sector specific standards.

131.

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 may 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 industry-based guidance and GRI Sector Standards.

10.2    Transitional provision related to chapter 5 Value chain

132.

For the first 3 years of the undertaking’s sustainability reporting under the ESRS, in the event that not all the necessary information regarding its upstream and downstream value chain is available, the undertaking shall explain the efforts made to obtain the necessary information about its upstream and downstream 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.

133.

For the first 3 years of its sustainability reporting under the ESRS, in order to take account of the difficulties that undertakings may encounter in gathering information from actors throughout their value chain and in order to limit the burden for SMEs in the value chain: (a) when disclosing information on policies, actions and targets in accordance with ESRS2 and other ESRS, the undertaking may limit upstream and downstream 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 upstream and downstream value chain information, except for datapoints derived from other EU legislation, as listed in ESRS 2 Appendix B.

134.

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

135.

Starting from the fourth year of its reporting under the ESRS, the undertaking shall include upstream and/or downstream value chain information according to paragraph 63. In this context, the information required by ESRS to be obtained from SME undertakings in the undertaking’s upstream and/or downstream 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

136.

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. For disclosure requirements listed in Appendix C List of phased-in Disclosure Requirements, this transitional provision applies with reference to the first year of mandatory application of the phased-in disclosure requirement.

10.4    Transitional provision: List of Disclosure Requirements that are phased-in

137.

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 ESRS that may be omitted or that are not applicable in the first year(s) of preparation of the sustainability statement under the ESRS.

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 derive from other EU legislation

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 of this Standard Disclosure/Application Requirements in topical ESRS that are applicable jointly with ESRS 2 General Disclosures. 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 upstream and downstream 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 statements: i. a confirmation that the scope of consolidation is the same as for the financial statements, or, where applicable, a declaration that the reporting undertaking is not required to draw-up financial statements or that the reporting undertaking is preparing consolidated sustainability reporting pursuant to Article 48i of Directive 2013/34/EU; and ii. where applicable, an indication of which subsidiary undertakings included in the consolidation are exempted from individual or consolidated sustainability reporting pursuant to Articles 19a(9) or 29a(8) of Directive 2013/34/EU; (c) 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); (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 the course of negotiation, as provided for in articles 19a(3) and 29a(3) of Directive 2013/34/EU, 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 upstream and/or downstream 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.

In accordance with ESRS 1 section 7.2 Sources of estimation and outcome uncertainty, the undertaking shall: (a) identify the quantitative metrics and monetary amounts it has disclosed that are subject to a high level of measurement uncertainty; (b) in relation to each quantitative metric and monetary amount identified: i. disclose information about the sources of measurement uncertainty (for example, the dependence of the amount on the outcome of a future event, on a measurement technique or on the availability and quality of data from the entity’s upstream and/or downstream value chain); and ii. disclose the assumptions, approximations and judgements the entity has made in measuring it.

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), (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 them, including why the replaced metric provides more useful information; (b) disclose revised 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; and (c) disclose the difference between the figure disclosed in the preceding period and the revised comparative figure.

Reporting errors in prior periods

14.

When the undertaking identifies material prior period errors (see ESRS 1 section 7.5 Reporting errors in prior periods), it shall disclose: (a) the nature of the prior period material error; (b) to the extent practicable, the correction for each prior period included in the sustainability statement; 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 briefly describe 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, manage and oversee 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 (13) shall be calculated as an average ratio of female to male board members; and (e) the percentage of independent board members  (14). 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(s) within a body responsible for oversight of impacts, risks and opportunities ; (b) how each body’s or individual’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 the governance processes, controls and procedures used to monitor, manage and oversee 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 determine whether appropriate skills and expertise are available or will be developed 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 process, 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 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 (15).

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.

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 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; (b) a breakdown of total revenue, as included in its financial statements, by significant ESRS sectors. When the undertaking provides segment reporting as required by IFRS 8 Operating segments in its financial statements, 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 (16), (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 (17)), including a disaggregation of revenues derived from coal, from oil and from gas, as well as the revenues derived from Taxonomy-aligned economic activities related to fossil gas as required under Article 8(7)(a) of Commission Delegated Regulation 2021/2178 (18); ii. chemicals production (19), i.e., its activities fall under Division 20.2 of Annex I to Regulation (EC) No 1893/2006; iii. controversial weapons (20) (anti-personnel mines, cluster munitions, chemical weapons and biological weapons); and/or iv. the cultivation and production of tobacco (21); (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 (22), 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.

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: (a) a brief description of its material impacts, risks and opportunities resulting from its materiality assessment (see Disclosure Requirement IRO-1 of this standard), including a description of where in its business model , its own operations and its upstream and downstream value chain these material impacts, risks and opportunities are concentrated; (b) the current and anticipated effects of its material impacts, risks and opportunities on its business model, value chain, strategy and decision-making, and how it has responded or plans to respond to these effects, including any changes it has made or plans to make to its strategy or business model as part of its actions to address particular material impacts or risks, or to pursue particular material opportunities; (c) with reference to the undertaking’s material impacts : i. how the undertaking’s material negative and positive impacts 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 of the impacts; 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; (d) the current financial effects of the undertaking’s material risks and opportunities on its financial position, financial performance and cash flows and the material 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 of the undertaking’s material risks and opportunities on its financial position, financial performance and cash flows over the short-, medium- and long-term, including the reasonably expected time horizons for those effects. This shall include how the undertaking expects its financial position, financial performance and cash flows 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) a 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 disclosures.

49.

The undertaking may disclose the descriptive information required in paragraph 46 alongside the disclosures provided under the corresponding topical ESRS, in which case 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 statement (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, prioritise and monitor 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 activities, business relationships, geographies or other factors that give rise 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; (c) an overview of the process used to identify, assess, prioritise and monitor risks and opportunities that have or may have financial effects . The disclosure shall include: i. how the undertaking has considered the connections of its impacts and dependencies with the risks and opportunities that may arise from those impacts and dependencies; ii. 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); iii. 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 was 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. The undertaking shall also include a table of all the datapoints that derive from other EU legislation as listed in Appendix B of this standard, indicating where they can be found in the sustainability statement and including those that the undertaking has assessed as not material, in which case the undertaking shall indicate “Not material” in the table in accordance with ESRS 1 paragraph 35.

57.

If the undertaking concludes that climate change is not material and therefore omits all disclosure requirements in ESRS E1 Climate change, it shall disclose a detailed explanation of the conclusions of its materiality assessment with regard to climate change (see ESRS 2 IRO-2 Disclosure Requirements in ESRS covered by the undertaking’s sustainability statement), including a forward-looking analysis of the conditions that could lead the undertaking to conclude that climate change is material in the future.

58.

If the undertaking concludes that a topic other than climate change is not material and therefore omits all the Disclosure Requirements in the corresponding topical ESRS, it may provide a brief explanation of the conclusions of its materiality assessment for that topic.

59.

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

60.

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 material 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 sector-specific ESRS. They shall also be applied when the undertaking prepares entity-specific disclosures.

61.

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.

62.

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 disclose a timeframe in which it aims to adopt them.

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

63.

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.

64.

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 .

65.

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, upstream and/or downstream 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

66.

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.

67.

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 .

68.

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, upstream and/or downstream 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.

69.

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

70.

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.

71.

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

72.

If the undertaking cannot disclose the information on targets required under the relevant topical ESRS, because it has not set 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 disclose a timeframe in which it aims to adopt them.

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

73.

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 .

74.

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 .

75.

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

76.

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.

77.

For each metric , the undertaking shall: (a) disclose the methodologies and significant assumptions behind the metric, including the limitations of the methodologies used; (b) disclose whether the measurement of the metric is validated by an external body other than the assurance provider and, if so, which body; (c) label and define the metric 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

78.

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.

79.

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.

80.

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 upstream and/or downstream 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.

81.

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.

ESRS E1

CLIMATE CHANGE

TABLE OF CONTENTS

Objective

Interactions with other ESRS

Disclosure Requirements

–

ESRS 2 General disclosures

Governance

—

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

Strategy

—

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

Impact, risk and opportunity management

—

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

—

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

—

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

—

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

–

ESRS 2 General disclosures

Strategy

—

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

—

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

—

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

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 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 (30), Climate Benchmark Standards Regulation (31), Sustainable Finance Disclosure Regulation (SFDR) (32), EU Taxonomy (33), and EBA Pillar 3 disclosure requirements (34)).

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 (PFCs), 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 S2 Workers in the value chain, ESRS S3 Affected communities and ESRS S4 Consumers and end-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 11, 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 (35) .

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 14 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 the adoption of new technologies in its own operations, or the upstream and/or downstream value chain; (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, with a reference to the key performance indicators of taxonomy-aligned CapEx, and where relevant the CapEx plans, that the undertaking discloses in accordance with Commission Delegated Regulation (EU) 2021/2178; (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, OpEX) that the undertaking has for aligning its economic activities (revenues, CapEx, OpEx) with the criteria established in Commission Delegated Regulation 2021/2139 (36); (f) if applicable, a disclosure of significant CapEx amounts invested during the reporting period related to coal, oil and gas-related economic activities; (37) (g) a disclosure on whether or not the undertaking is excluded from the EU Paris-aligned Benchmarks; (38) (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 material 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.

Impact, risk and opportunity management

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 its process in relation to: (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 upstream and downstream 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 upstream and downstream 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 20 (b)and 20 (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.

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

22.

The undertaking shall describe its policies adopted to manage 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

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

26.

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

27.

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.

28.

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.

29.

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 taken or planned to: i. the relevant line items or notes in the financial statements; ii. the key performance indicators required under Commission Delegated Regulation (EU) 2021/2178; and iii. 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

30.

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

31.

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.

32.

The disclosure of the targets required in paragraph 30 shall contain the information required in ESRS 2 MDR-T Tracking effectiveness of policies and actions through targets.

33.

For the disclosure required by paragraph 30, 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.

34.

If the undertaking has set GHG emission reduction targets  (39), 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 5-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 the targets 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

35.

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

36.

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.

37.

The disclosure required by paragraph 35 shall include the total energy consumption in MWh related to own operations disaggregated by: (a) total energy consumption from fossil sources (40); (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 (41), 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.

38.

The undertaking with operations in high climate impact sectors  (42) 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;

39.

In addition, where applicable, the undertaking shall disaggregate and disclose separately its non-renewable energy production and renewable energy production in MWh. (43)

Energy intensity based on net revenue  (44)

40.

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

41.

The disclosure on energy intensity required by paragraph 40 shall only be derived from the total energy consumption and net revenue from activities in high climate impact sectors .

42.

The undertaking shall specify the high climate impact sectors that are used to determine the energy intensity required by paragraph 40.

43.

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 40).

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

44.

The undertaking shall disclose in metric tonnes of CO2eq its (45) : (a) gross Scope 1 GHG emissions; (b) gross Scope 2 GHG emissions; (c) gross Scope 3 GHG emissions; and (d) total GHG emissions.

45.

The objective of the Disclosure Requirement in paragraph 44 in respect of: (a) gross Scope 1 GHG emissions as required by paragraph 44 (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 44 (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 44 (c) is to provide an understanding of the GHG emissions that occur in the undertaking’s upstream and downstream 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 44 (d) is to provide an overall understanding of the undertaking’s GHG emissions and whether they occur from its own operations or the usptream and donwstream 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.

46.

When disclosing the information on GHG emissions required under paragraph 44, 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 upstream and downstream value chain (ESRS 1 Paragraph 67) 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.

47.

In case of significant changes in the definition of what constitutes the reporting undertaking and its upstream and downstream 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).

48.

The disclosure on gross Scope 1 GHG emissions required by paragraph 44 (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.

49.

The disclosure on gross Scope 2 GHG emissions required by paragraph 44 (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.

50.

For Scope 1 and Scope 2 emissions disclosed as required by paragraphs 44 (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.

51.

The disclosure of gross Scope 3 GHG emissions required by paragraph 44 (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) .

52.

The disclosure of total GHG emissions required by paragraph 44 (d) shall be the sum of Scope 1, 2 and 3 GHG emissions required by paragraphs 44 (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  (46)

53.

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

54.

The disclosure on GHG intensity required by paragraph 53 shall provide the total GHG emissions in metric tonnes of CO2eq (required by paragraph 44 (d)) per net revenue.

55.

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 53).

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

56.

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 upstream and downstream 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.

57.

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 60). (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 61).

58.

The disclosure on GHG removals and storage required by paragraph 56 (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 upstream and donwstream value chain, and broken down by removal activity; and (b) the calculation assumptions, methodologies and frameworks applied by the undertaking.

59.

The disclosure on carbon credits required by paragraph 56 (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.

60.

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 30, 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 upstream and donwstream value chain.

61.

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 (47), 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

62.

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.

63.

The information required in paragraph 62 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

64.

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 benefit from material climate-related opportunities.

65.

The information required by paragraph 64 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 10 to AR 13 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 key performance indicators to be disclosed in accordance with Commission Delegated Regulation (EU) 2021/2178.

66.

The disclosure of anticipated financial effects from material physical risks required by paragraph 64 (a) shall include (48): (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 (49); (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 (50); 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.

67.

The disclosure of anticipated financial effects from material transition risks required by paragraph 64 (b) shall include: (a) the monetary amount and proportion (percentage) of assets at material transition risk over the short-, medium- and long-term before considering climate mitigation actions ; (b) the proportion of assets at material transition risk addressed by the climate change mitigation actions ; (c) a breakdown of the carrying value of the undertaking’s real estate assets by energy-efficiency classes (51); (d) liabilities that may have to be recognised in financial statements over the short-, medium- and long-term; and (e) the monetary amount and proportion (percentage) of net revenue from its business activities at material transition risk over the short-, medium- and long-term including, where relevant, the net revenue from the undertaking’s customers operating in coal, oil and gas-related activities.

68.

The undertaking shall disclose reconciliations to the relevant line items or notes in the financial statements of the following: (a) significant amounts of the assets and net revenue at material physical risk (as required by paragraph 66); (b) significant amounts of the assets, liabilities, and net revenue at material transition risk (as required by paragraph 67).

69.

For the disclosure of the potential to pursue climate-related opportunities required by paragraph 64 (c) the undertaking shall consider (52): (a) its expected cost savings from climate change mitigation and adaptation actions ; and (b) the potential market size or expected changes to net revenue from low-carbon products and services or adaptation solutions to which the undertaking has or may have access.

70.

A quantification of the financial effects that arise from opportunities is not required if such a disclosure does not meet the qualitative characteristics of useful information included under ESRS 1 Appendix B Qualitative characteristics of information.

ESRS E2

POLLUTION

TABLE OF CONTENTS

Objective

Interaction with other ESRS

Disclosure Requirements

–

ESRS 2 General disclosures

Impact, risk and opportunity management

—

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

—

Disclosure Requirement E2-1 – Policies related to pollution

—

Disclosure Requirement E2-2 – Actions and resources related to pollution

Metrics and targets

—

Disclosure Requirement E2-3 – Targets related to pollution

—

Disclosure Requirement E2-4 – Pollution of air, water and soil

—

Disclosure Requirement E2-5 – Substances of concern and substances of very high concern

—

Disclosure Requirement E2-6 – Anticipated financial effects from pollution-related impacts, risks and opportunities

Appendix A:

Application Requirements

–

ESRS 2 General disclosures

Impact, risk and opportunity management

—

Disclosure Requirement E2-1 – Policies related to pollution

—

Disclosure Requirement E2-2 – Actions and resources related to pollution

Metrics and targets

—

Disclosure Requirement E2-3 – Targets related to pollution

—

Disclosure Requirement E2-4 – Pollution of air, water and soil

—

Disclosure Requirement E2-5 – Substances of concern and substances of very high concern

—

Disclosure Requirement E2-6 – Anticipated financial effects from pollution-related, risks and opportunities

Objective

1.

The objective of this Standard is to specify Disclosure Requirements which will enable users of the sustainability statement to understand: (a) how the undertaking affects pollution of air, water and soil , in terms of material positive and negative actual or potential impacts ; (b) any actions taken, and the result of such actions, to prevent or mitigate actual or potential negative impacts, and to address risks and opportunities ; (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 with the need to prevent, control and eliminate pollution. This is to create a toxic-free environment with zero pollution also in support of the EU Action Plan “Towards a Zero Pollution for Air, Water and Soil”; (d) the nature, type and extent of the undertaking’s material risks and opportunities related to the undertaking’s pollution-related impacts and dependencies , as well as the prevention, control, elimination or reduction of pollution, including where this results from the application of regulations, and how the undertaking manages this; and (e) the financial effects on the undertaking over the short-, medium- and long-term of material risks and opportunities arising from the undertaking’s pollution-related impacts and dependencies.

2.

This Standard sets out Disclosure Requirements related to the following sustainability matters : pollution of air, water, soil , substances of concern , including substances of very high concern .

3.

“ Pollution of air” refers to the undertaking’s emissions into air (both indoor and outdoor), and prevention, control and reduction of such emissions.

4.

“ Pollution of water” refers to the undertaking’s emissions to water, and prevention, control and reduction of such emissions.

5.

“ Pollution of soil ” refers to the undertaking’s emissions into soil and the prevention, control and reduction of such emissions.

6.

With regard to “ substances of concern ”, this standard covers the undertaking’s production, use and/or distribution and commercialisation of substances of concern, including substances of very high concern . Disclosure Requirements on substances of concern aim at providing users with an understanding of actual or potential impacts related to such substances, also taking account of possible restrictions on their use and/or distribution and commercialisation.

Interaction with other ESRS

7.

The topic of pollution is closely connected to other environmental sub-topics such as climate change, water and marine resources , biodiversity and circular economy . Thus, to provide a comprehensive overview of what could be material to pollution, relevant Disclosure Requirements are covered in other environmental Standards as follows: (a) ESRS E1 Climate change which addresses the following seven greenhouse gases connected to air pollution: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3). (b) ESRS E3 Water and marine resources which addresses water consumption, in particular in areas at water risk , water recycling and storage. This also includes the responsible management of marine resources, including the nature and quantity of marine resources-related commodities (such as gravels, deep-sea minerals, seafood) used by the undertaking. This Standard covers the negative impacts, in terms of pollution of water and marine resources, including microplastics, generated by such activities. (c) ESRS E4 Biodiversity and ecosystems which addresses ecosystems and species. Pollution as a direct impact driver of biodiversity loss is addressed by this Standard. (d) ESRS E5 Resource use and circular economy which addresses, in particular, the transition away from extraction of non-renewable resources and the implementation of practices that prevent waste generation, including pollution generated by waste.

8.

The undertaking’s pollution -related impacts may affect people and communities. Material negative impacts on affected communities from pollution-related impacts attributable to the undertaking are covered in ESRS S3 Affected communities.

9.

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

Disclosure Requirements

ESRS 2 General disclosures

10.

The requirements of this section should be read in conjunction with and reported alongside the disclosures required by ESRS 2 chapter 4 Impact, risk and opportunity management.

Impact, risk and opportunity management

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

11.

The undertaking shall describe the process to identify material impacts, risks and opportunities and shall provide information on: (a) whether the undertaking has screened its site locations and business activities in order to identify its actual and potential pollution -related impacts, risks and opportunities in its own operations and upstream and downstream value chain , and if so, the methodologies, assumptions and tools used in the screening; (b) whether and how the undertaking has conducted consultations, in particular with affected communities.

Disclosure Requirement E2-1 – Policies related to pollution

12.

The undertaking shall describe its policies adopted to manage its material impacts, risks and opportunities related to pollution prevention and control.

13.

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 material pollution-related impacts, risks and opportunities.

14.

The disclosure required by paragraph 12 shall contain the information on the policies the undertaking has in place to manage its material impacts, risks and opportunities related to pollution in accordance with ESRS 2 MDR-P Policies adopted to manage material sustainability matters.

15.

The undertaking shall indicate, with regard to its own operations and its upstream and donwstream value chain , whether and how its policies address the following areas where material: (a) mitigating negative impacts related to pollution of air, water and soil including prevention and control; (b) substituting and minimising the use of substances of concern , and phasing out substances of very high concern , in particular for non-essential societal use and in consumer products; and (c) avoiding incidents and emergency situations, and if and when they occur, controlling and limiting their impact on people and the environment.

Disclosure Requirement E2-2 – Actions and resources related to pollution

16.

The undertaking shall disclose its pollution-related actions and the resources allocated to their implementation.

17.

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

18.

The description of the pollution-related action plans and resources shall contain the information prescribed in ESRS 2 MDR-A Actions and resources in relation to material sustainability matters.

19.

In addition to ESRS 2 MDR-A, the undertaking may specify to which layer in the following mitigation hierarchy an action and resources can be allocated: (a) avoid pollution including any phase out of materials or compounds that have a negative impact (prevention of pollution at source); (b) reduce pollution, including: any phase-out of materials or compounds; meeting enforcement requirements such as Best Available Techniques (BAT) requirements; or meeting the Do No Significant Harm criteria for pollution prevention and control according to the EU Taxonomy Regulation and its Delegated Acts (minimisation of pollution); and (c) restore, regenerate and transform ecosystems where pollution has occurred (control of the impacts both from regular activities and incidents ).

Metrics and targets

Disclosure Requirement E2-3 – Targets related to pollution

20.

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

21.

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

22.

The description of targets shall contain the information requirements defined in ESRS 2 MDR-T Tracking effectiveness of policies and actions through targets.

23.

The disclosure required by paragraph 20 shall indicate whether and how its targets relate to the prevention and control of: (a) air pollutants and respective specific loads ; (b) emissions to water and respective specific loads; (c) pollution to soil and respective specific loads; and (d) substances of concern and substances of very high concern .

24.

In addition to ESRS 2 MDR-T, the undertaking may specify whether ecological thresholds (e.g., the biosphere integrity , stratospheric ozone-depletion, atmospheric aerosol loading, soil depletion, ocean acidification) and entity-specific allocations were taken into consideration when setting targets. If so, the undertaking may specify: (a) the ecological thresholds identified, and the methodology used to identify such thresholds; (b) whether or not the thresholds are entity-specific and if so, how they were determined; and (c) how responsibility for respecting identified ecological thresholds is allocated in the undertaking.

25.

The undertaking shall specify as part of the contextual information, whether the targets that it has set and presented are mandatory (required by legislation) or voluntary.

Disclosure Requirement E2-4 – Pollution of air, water and soil

26.

The undertaking shall disclose the pollutants that it emits through its own operations, as well as the microplastics it generates or uses.

27.

The objective of this Disclosure Requirement is to provide an understanding of the emissions that the undertaking generates to air, water and soil in its own operations, and of its generation and use of microplastics.

28.

The undertaking shall disclose the amounts of: (a) each pollutant listed in Annex II of Regulation (EC) No 166/2006 of the European Parliament and of the Council (64) (European Pollutant Release and Transfer Register “E-PRTR Regulation”)emitted to air, water and soil, with the exception of emissions of GHGs which are disclosed in accordance with ESRS E1 Climate Change (65); (b) microplastics generated or used by the undertaking.

29.

The amounts referred in paragraph 28 shall be consolidated amounts including the emissions from those facilities over which the undertaking has financial control and those over which it has operational control. The consolidation shall include only the emissions from facilities for which the applicable threshold value specified in Annex II of Regulation (EC) No 166/2006 is exceeded.

30.

The undertaking shall put its disclosure into context and describe: (a) the changes over time, (b) the measurement methodologies; and (c) the process(es) to collect data for pollution -related accounting and reporting, including the type of data needed and the information sources.

31.

When an inferior methodology compared to direct measurement of emissions is chosen to quantify emissions, the reasons for choosing this inferior methodology shall be outlined by the undertaking. If the undertaking uses estimates, it shall disclose the standard, sectoral study or sources which form the basis of its estimates, as well as the possible degree of uncertainty and the range of estimates reflecting the measurement uncertainty.

Disclosure Requirement E2-5 – Substances of concern and substances of very high concern

32.

The undertaking shall disclose information on the production, use, distribution, commercialisation and import/export of substances of concern and substances of very high concern, on their own, in mixtures or in articles.

33.

The objective of this Disclosure Requirement is to enable an understanding of the impact of the undertaking on health and the environment through substances of concern and through substances of very high concern on their own. It is also to enable an understanding of the undertaking’s material risks and opportunities , including exposure to those substances and risks arising from changes in regulations.

34.

The disclosure required by paragraph 32 shall include the total amounts of substances of concern that are generated or used during the production or that are procured, and the total amounts of substances of concern that leave its facilities as emissions, as products, or as part of products or services split into main hazard classes of substances of concern.

35.

The undertaking shall present separately the information for substances of very high concern.

Disclosure Requirement E2-6 – Anticipated financial effects from material pollution-related risks and opportunities

36.

The undertaking shall disclose the anticipated financial effects of material pollution-related risks and opportunities.

37.

The information required by paragraph 36 is in addition to the information on current financial effects on the undertaking’s, financial position, financial performance and cash flows for the reporting period required under ESRS 2 SBM-3 para 48 (d).

38.

The objective of this Disclosure Requirement is to provide an understanding of: (a) anticipated financial effects due to material risks arising from pollution -related impacts and dependencies and how 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. (b) anticipated financial effects due to material opportunities related to pollution prevention and control.

39.

The disclosure shall include: (a) a quantification of the anticipated financial effects in monetary terms before considering pollution-related actions, or where not possible without undue cost or effort, qualitative information. For financial effects arising from opportunities , a quantification is not required if it would result in disclosure that does not meet the qualitative characteristics of information (see ESRS 1 Appendix B Qualitative characteristics of information); (b) a description of the effects considered, the related impacts and the time horizons in which they are likely to materialise; and (c) the critical assumptions used to quantify the anticipated financial effects , as well as the sources and level of uncertainty of those assumptions.

40.

The information provided under paragraph 38(a) shall include: (a) the share of net revenue made with products and services that are or that contain substances of concern , and the share of net revenue made with products and services that are or that contain substances of very high concern ; (b) the operating and capital expenditures incurred in the reporting period in conjunction with major incidents and deposits ; (c) the provisions for environmental protection and remediation costs, e.g., for rehabilitating contaminated sites , recultivating landfills, removal of environmental contamination at existing production or storage sites and similar measures.

41.

The undertaking shall disclose any relevant contextual information including a description of material incidents and deposits whereby pollution had negative impacts on the environment and/or is expected to have negative effects on the undertaking’s financial cash flows, financial position and financial performance with short-, medium- and long-term time horizons.

ESRS E3

WATER AND MARINE RESOURCES

TABLE OF CONTENTS

Objective

Interaction with other ESRS

Disclosure requirements

–

ESRS 2 General disclosures

Impact, risk and opportunity management

—

Disclosure Requirement related to ESRS 2 IRO-1 – Description of the processes to identify and assess material water and marine resources-related impacts, risks and opportunities

—

Disclosure Requirement E3-1 – Policies related to water and marine resources

—

Disclosure Requirement E3-2 – Actions and resources related to water and marine resources

Metrics and targets

—

Disclosure Requirement E3-3 – Targets related to water and marine resources

—

Disclosure Requirement E3-4 – Water consumption

—

Disclosure Requirement E3-5 – Anticipated financial effects from water and marine resources-related impacts, risks and opportunities

Appendix A:

Application Requirements

–

ESRS 2 General disclosures

Impact, risk and opportunity management

—

Disclosure Requirement related to ESRS 2 IRO-1 – Description of the processes to identify and assess material water and marine resources-related impacts, risks and opportunities

—

Disclosure Requirement E3-1 – Policies related to water and marine resources

—

Disclosure Requirement E3-2 – Actions and resources related to water and marine resources policies

Metrics and targets

—

Disclosure Requirement E3-3 – Targets related to water and marine resources

—

Disclosure Requirement E3-4 – Water consumption

—

Disclosure Requirement E3-5 – Anticipated financial effects from water and marine resources-related risks and opportunities

Objective

1.

The objective of this Standard is to specify Disclosure Requirements which will enable users of the sustainability statement to understand: (a) how the undertaking affects water and marine resources , in terms of material positive and negative actual or potential impacts ; (b) any actions taken, and the result of such actions to prevent or mitigate material actual or potential negative impacts, to protect water and marine resources, also with reference to reduction of water consumption , and to address risks and opportunities ; (c) whether, how and to what extent the undertaking contributes to the European Green Deal’s ambitions for fresh air, clean water, healthy soil and biodiversity , as well as to the sustainability of the blue economy and fisheries sectors, taking account of the following: Directive 2000/60/EC of the European Parliament and of the Council (68) (EU Water Framework Directive), Directive 2008/56/EC of the European Parliament and of the Council (69) (EU Marine Strategy Framework Directive), Directive 2014/89/EU of the European Parliament and of the Council (70) (EU Maritime Spatial Planning Directive), the Sustainable Development Goals (in particular SDG 6 Clean water and sanitation and 14 Life below water), and respect of global environmental limits (e.g. biosphere integrity , ocean acidification, freshwater use, and biogeochemical flows planetary boundaries ); (d) the plans and capacity of the undertaking to adapt its strategy and business model in line with the promotion of sustainable water use based on long-term protection of available water resources; protection of aquatic ecosystems and restoration of freshwater and marine habitats ; (e) the nature, type and extent of the undertaking’s material risks and opportunities arising from the undertaking’s impacts and dependencies on water and marine resources , and how the undertaking manages them; and (f) the financial effects on the undertaking over the short-, medium- and long-term of material risks and opportunities arising from the undertaking’s impacts and dependencies on water and marine resources.

2.

This Standard sets out Disclosure Requirements related to water and marine resources . With regard to “water”, this standard covers surface water and groundwater . It includes disclosure requirements on water consumption in the undertaking’s activities, products and services, as well as related information on water withdrawals and water discharges .

3.

With regard to “ marine resources ”, this standard covers the extraction and use of such resources, and associated economic activities.

Interaction with other ESRS

4.

The topic of water and marine resources is closely connected to other environmental sub- topics such as climate change, pollution , biodiversity and circular economy. Thus, to provide a comprehensive overview of what could be material to water and marine resources, relevant Disclosure Requirements are covered in other environmental ESRS as follows: (a) ESRS E1 Climate change, which addresses, in particular, acute and chronic physical risks which arise from water and ocean-related hazards caused or exacerbated by climate change, including increasing water temperature, changing precipitation patterns and types (rain, hail, snow/ice), precipitation or hydrological variability, ocean acidification, saline intrusion, sea level rise, drought, high water stress, heavy precipitation, flood and glacial lake outbursts; (b) ESRS E2 Pollution, which addresses, in particular, the emissions to water, which includes emissions to oceans, and the use and generation of microplastics; (c) ESRS E4 Biodiversity and ecosystems, which addresses, in particular, the conservation and sustainable use of and impact on freshwater aquatic ecosystems as well as the oceans and seas; and (d) ESRS E5 Resource use and circular economy which addresses in particular waste management including plastic, and the transition towards the extraction of non-renewable resources of wastewater ; reduced use of plastic; and the recycling of wastewater.

5.

The undertaking’s impacts on water and marine resources affect people and communities. Material negative impacts on affected communities from water and marine resources -related impacts attributable to the undertaking are covered in ESRS S3 Affected communities.

6.

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

Disclosure requirements

ESRS 2 General disclosures

7.

The requirements of this section should be read in conjunction with and reported alongside the disclosures required by ESRS 2 chapter 4 Impact, risk and opportunity management.

Impact, risk and opportunity management

Disclosure Requirement related to ESRS 2 IRO-1 – Description of the processes to identify and assess material water and marine resources-related impacts, risks and opportunities

8.

The undertaking shall describe the process to identify material impacts, risks and opportunities and shall provide information on: (a) whether and how the undertaking it has screened its assets and activities in order to identify its actual and potential water and marine resources -related impacts, risks and opportunities in its own operations and its upstream and downstream value chain , and if so the methodologies, assumptions and tools used in the screening; (b) whether and how it has conducted consultations, in particular, with affected communities (71).

Disclosure Requirement E3-1 – Policies related to water and marine resources

9.

The undertaking shall describe its policies adopted to manage its material impacts, risks and opportunities related to water and marine resources (72).

10.

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 water and marine resources -related impacts, risks and opportunities .

11.

The disclosure required by paragraph 9 shall contain the information on the policies the undertaking has in place to manage its material impacts, risks and opportunities related to water and marine resources in accordance with ESRS 2 MDR-P Policies adopted to manage material sustainability matters.

12.

The undertaking shall indicate whether and how its policies address the following matters where material: (a) water management including: i. the use and sourcing of water and marine resources in its own operations; ii. water treatment as a step towards more sustainable sourcing of water; and iii. the prevention and abatement of water pollution resulting from its activities. (b) product and service design in view of addressing water-related issues and the preservation of marine resources; and (c) commitment to reduce material water consumption in areas at water risk in its own operations and along the upstream and downstream value chain. 13. If at least one of the sites of the undertaking is located in an area of high-water stress and it is not covered by a policy , the undertaking shall state this to be the case and provide reasons for not having adopted such a policy. The undertaking may disclose a timeframe in which it aims to adopt such a policy. (73) 14. The undertaking shall specify whether it has adopted policies or practices related to sustainable oceans and seas (74).

Disclosure Requirement E3-2 – Actions and resources related to water and marine resources

15.

The undertaking shall disclose its water and marine resources-related actions and the resources allocated to their implementation.

16.

The objective of this Disclosure Requirement is to enable an understanding of the key actions taken and planned to achieve the water and marine resources -related policy objectives and targets .

17.

The description of the actions and resources shall follow the principles defined in ESRS 2 MDR-A Actions and resources in relation to material sustainability matters. In addition to ESRS 2 MDR-A, the undertaking may specify to which layer in the mitigation hierarchy an action and

18.

Resources can be allocated to: (a) avoid the use of water and marine resources ; (b) reduce the use of water and marine resources such as through efficiency measures; (c) reclaiming and reuse of water; or (d) restoration and regeneration of aquatic ecosystem and water bodies.

19.

The undertaking shall specify actions and resources in relation to areas at water risk , including areas of high-water stress .

Metrics and targets

Disclosure Requirement E3-3 – Targets related to water and marine resources

20.

The undertaking shall disclose the water and marine resources-related targets it has set.

21.

The objective of this Disclosure Requirement is to enable an understanding of the targets the undertaking has adopted to support its water and marine resources-related policies and address its material water and marine resources-related impacts, risks and opportunities.

22.

The description of the targets shall contain the information requirements defined in ESRS 2 MDR-T Tracking effectiveness of policies and actions through targets.

23.

The disclosure required by paragraph 20 shall indicate whether and how its targets relate to: (a) the management of material impacts, risks and opportunities related to areas at water risk , including improvement of the water quality; (b) the responsible management of marine resources impacts, risks and opportunities including the nature and quantity of marine resources-related commodities (such as gravels, deep-sea minerals, seafood) used by the undertaking; and (c) the reduction of water consumption , including an explanation of how those targets relate to areas at water risk, including areas of high water-stress.

24.

In addition to ESRS 2 MDR-T, the undertaking may specify whether ecological thresholds and entity-specific allocations were taken into consideration when setting targets . If so, the undertaking may specify: (a) the ecological thresholds identified, and the methodology used to identify such thresholds; (b) whether or not the thresholds are entity-specific and if so, how they were determined; and (c) how responsibility for respecting identified ecological thresholds is allocated in the undertaking.

25.

The undertaking shall specify as part of the contextual information, whether the targets it has set and presented are mandatory (required by legislation) or voluntary.

Disclosure Requirement E3-4 – Water consumption

26.

The undertaking shall disclose information on its water consumption performance related to its material impacts, risks and opportunities.

27.

The objective of this Disclosure Requirement is to provide an understanding of the undertaking’s water consumption and any progress by the undertaking in relation to its targets.

28.

The disclosure required by paragraph 26 relates to own operations and shall include: (a) total water consumption in m3; (b) total water consumption in m3 in areas at water risk, including areas of high-water stress ; (c) total water recycled and reused in m3; (75) (d) total water stored and changes in storage in m3; and (e) any contextual information necessary regarding points (a) to (d), including the water basins’ water quality and quantity, how the data have been compiled, such as any standards, methodologies, and assumptions used, including whether the information is calculated, estimated, modelled, or sourced from direct measurements, and the approach taken for this, such as the use of any sector-specific factors.

29.

The undertaking shall provide information on its water intensity : total water consumption in its own operations in m3 per million EUR net revenue (76).

Disclosure Requirement E3-5 – Anticipated financial effects from material water and marine resources-related risks and opportunities

30.

The undertaking shall disclose the anticipated financial effects of material water and marine resources-related risks and opportunities.

31.

The information required by paragraph 30 is in addition to the information on current financial effects on the entity’s financial position, financial performance and cash flows for the reporting period required under ESRS 2 SBM-3 para 48 (d).

32.

The objective of this Disclosure Requirement is to provide an understanding of: (a) anticipated financial effects due to material risks arising from water and marine resources -related impacts and dependencies and 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; and (b) anticipated financial effects due to material opportunities related to water and marine resources.

33.

The disclosure shall include: (a) a quantification of the anticipated financial effects in monetary terms before considering water and marine resources-related actions or where not possible without undue cost or effort, qualitative information. For financial effects arising from opportunities, a quantification is not required if it would result in disclosure that does not meet the qualitative characteristics of information (see ESRS 1 Appendix B Qualitative characteristics of information); (b) a description of the effects considered, the impacts and dependencies to which they relate, and the time horizons in which they are likely to materialise; and (c) the critical assumptions used to quantify the anticipated financial effects, as well as the sources and level of uncertainty of those assumptions.

ESRS E4

BIODIVERSITY AND ECOSYSTEMS

TABLE OF CONTENTS

Objective

Interaction with other ESRS

Disclosure Requirements

–

ESRS 2 General disclosures

Strategy

—

Disclosure Requirement E4-1 – Transition plan and consideration of biodiversity and ecosystems in strategy and business model

—

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

Impact, risk and opportunity management

—

Disclosure Requirement related to ESRS 2 IRO-1 Description of processes to identify and assess material biodiversity and ecosystem-related impacts, risks and opportunities

—

Disclosure Requirement E4-2 – Policies related to biodiversity and ecosystems

—

Disclosure Requirement E4-3 – Actions and resources related to biodiversity and ecosystems

Metrics and targets

—

Disclosure Requirement E4-4 – Targets related to biodiversity and ecosystems

—

Disclosure Requirement E4-5 – Impact metrics related to biodiversity and ecosystems change

—

Disclosure Requirement E4-6 – Anticipated financial effects from biodiversity and ecosystem-related risks and opportunities

Appendix A:

Application Requirements

–

ESRS 2 General disclosures

Impact, risk and opportunity management

—

Disclosure Requirement E4-1 – Transition plan and consideration of biodiversity and ecosystems in strategy and business model

—

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

—

Disclosure Requirement E4-2 – Policies related to biodiversity and ecosystems

—

Disclosure Requirement E4-3 – Actions and resources related to biodiversity and ecosystems

Metrics and targets

—

Disclosure Requirement E4-4 – Targets related to biodiversity and ecosystems

—

Disclosure Requirement E4-5 – Impact metrics related to biodiversity and ecosystems change

—

Disclosure Requirement E4-6 – Anticipated financial effects from biodiversity and ecosystem-related risks and opportunities

Objective

1.

The objective of this Standard is to specify Disclosure Requirements which will enable users of the sustainability statement to understand: (a) how the undertaking affects biodiversity and ecosystems , in terms of material positive and negative, actual and potential impacts, including the extent to which it contributes to the drivers of biodiversity and ecosystem loss and degradation; (b) any actions taken, and the result of such actions, to prevent or mitigate material negative actual or potential impacts and to protect and restore biodiversity and ecosystems, and to address risks and opportunities; and (c) the plans and capacity of the undertaking to adapt its strategy and business model in line with: i. respecting planetary boundaries related to biosphere integrity and land-system change ; ii. the vision of the Kunming-Montreal Global Biodiversity Framework and its relevant goals and targets ; iii. relevant aspects of the EU Biodiversity Strategy for 2030 (77); iv. Directive 2009/147/EC of the European Parliament and of the Council and Council Directive 92/43/EEC (EU Birds and Habitats Directives) (78); and v. Directive 2008/56/EC of the European Parliament and of the Council (Marine Strategy Framework Directive (79) ; (d) the nature, type and extent of the undertaking’s material risks, dependencies and opportunities related to biodiversity and ecosystems, and how the undertaking manages them; and (e) the financial effects on the undertaking over the short-, medium- and long-term of material risks and opportunities arising from the undertaking’s impacts and dependencies on biodiversity and ecosystems.

2.

This Standard sets out Disclosure Requirements related to the undertaking’s relationship to terrestrial, freshwater and marine habitats, ecosystems and populations of related fauna and flora species, including diversity within species, between species and of ecosystems and their interrelation with indigenous peoples and other affected communities.

3.

The terms “ biodiversity ” and “ biological diversity ” refer to the variability among living organisms from all sources including, inter alia, terrestrial, freshwater , marine and other aquatic ecosystems and the ecological complexes of which they are part.

Interaction with other ESRS

4.

‘ Biodiversity and ecosystems ’ are closely connected to other environmental matters. The main direct drivers of biodiversity and ecosystems change are climate change, pollution , land-use change, freshwater -use change and sea-use change, direct exploitation of organisms and invasive alien species. These drivers are covered in this standard, except for climate change (covered by ESRS E1) and pollution (covered by ESRS E2).

5.

To obtain a comprehensive understanding of material impacts and dependencies on biodiversity and ecosystems , the Disclosure Requirements of other environmental ESRS should be read and interpreted in conjunction with the specific disclosure requirements of this Standard. The relevant disclosure requirements covered in other environmental ESRS are: (a) ESRS E1 Climate change, which addresses in particular GHG emissions and energy resources (energy consumption); (b) ESRS E2 Pollution, which addresses pollution to air, water and soil ; (c) ESRS E3 Water and marine resources which addresses in particular water resources (water consumption) and marine resources ; (d) ESRS E5 Resource use and circular economy addresses in particular the transition away from extraction of non-renewable resources and the implementation of practices that prevent waste generation, including pollution generated by waste.

6.

The undertaking’s impacts on biodiversity and ecosystems affect people and communities. When reporting on material negative impacts on affected communities from biodiversity and ecosystem change under ESRS E4, the undertaking shall consider the requirements of ESRS S3 Affected communities.

7.

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

Disclosure Requirements

ESRS 2 General disclosures

8.

The requirements of this section shall be read in conjunction with the disclosures required by ESRS 2 Chapter 2 Governance, Chapter 3 Strategy and Chapter 4 Impact, risk and opportunity management.

9.

The resulting disclosures shall be presented alongside the disclosures required by ESRS 2, except for ESRS 2 SBM-3, for which the undertaking has an option to present the disclosures alongside the topical disclosures.

10.

In addition to the requirements in ESRS 2, this Standard also includes the topic specific Disclosure Requirement E4-1 Transition plan and consideration of biodiversity and ecosystems in strategy and business model.

Strategy

Disclosure Requirement E4-1 – Transition plan and consideration of biodiversity and ecosystems in strategy and business model

11.

The undertaking shall disclose how its biodiversity and ecosystem impacts, dependencies, risks and opportunities originate from and trigger adaptation of its strategy and business model.

12.

The objective of this Disclosure Requirement is to enable an understanding of the resilience of the undertaking’s strategy and business model in relation to biodiversity and ecosystems , and of the compatibility of the undertaking’s strategy and business model with regard to relevant local, national and global public policy targets related to biodiversity and ecosystems.

13.

The undertaking shall describe the resilience of its strategy and business model in relation to biodiversity and ecosystems . The description shall include: (a) an assessment of the resilience of the current business model and strategy to biodiversity and ecosystems-related physical, transition and systemic risks; (b) the scope of the resilience analysis in relation to the undertaking’s own operations and its upstream and downstream value chain and in relation to the risks considered in that analysis; (c) the key assumptions made; (d) the time horizons used; (e) the results of the resilience analysis; and (f) the involvement of stakeholders, including, where appropriate, holders of indigenous and local knowledge.

14.

If information specified in this disclosure requirement is disclosed by the undertaking as part of the information required under ESRS 2 SBM-3, the undertaking may refer to the information it has disclosed under ESRS 2 SBM-3.

15.

The undertaking may disclose its transition plan to improve and, ultimately, achieve alignment of its business model and strategy with the vision of the Kunming-Montreal Global Biodiversity Framework and its relevant goals and targets, the EU Biodiversity Strategy for 2030, and with respecting planetary boundaries related to biosphere integrity and land-system change .

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

16.

The undertaking shall disclose: (a) a list of material sites in its own operations, including sites under its operational control, based on the results of paragraph 17(a). The undertaking shall disclose these locations by: i. specifying the activities negatively affecting biodiversity sensitive areas  (80); ii. providing a breakdown of sites according to the impacts and dependencies identified, and to the ecological status of the areas (with reference to the specific ecosystem baseline level) where they are located; and iii. specifying the biodiversity-sensitive areas impacted, for users to be able to determine the location and the responsible competent authority with regards to the activities specified in paragraph 16(a) i. (b) whether it has identified material negative impacts with regards to land degradation , desertification or soil sealing  (81); and (c) whether it has operations that affect threatened species  (82).

Impact, risk and opportunity management

Disclosure Requirement related to ESRS 2 IRO-1 Description of processes to identify and assess material biodiversity and ecosystem-related impacts, risks, dependencies and opportunities

17.

The undertaking shall describe its process to identify material impacts, risks, dependencies and opportunities. The description of the process shall include whether and how the undertaking: (a) identified and assessed actual and potential impacts on biodiversity and ecosystems at own site locations and in the upstream and downstream value chain, including assessment criteria applied; (b) identified and assessed dependencies on biodiversity and ecosystems and their services at own site locations and in the upstream and downstream value chain, including assessment criteria applied, and, if this assessment includes ecosystem services that are disrupted or likely to be; (c) identified and assessed transition and physical risks and opportunities related to biodiversity and ecosystems, including assessment criteria applied based on its impacts and dependencies; (d) considered systemic risks ; (e) conducted consultations with affected communities on sustainability assessments of shared biological resources and ecosystems and, in particular: i. when a site, a raw material production or sourcing is likely to negatively impact biodiversity and ecosystems, the identification of the specific sites, raw materials production or sourcing with negative or potentially negative impacts on affected communities; ii. when affected communities are likely to be impacted, the undertaking, shall disclose how these communities were involved in the materiality assessment; and iii. with respect to impacts on ecosystem services of relevance to affected communities in its own operations, the undertaking shall indicate how negative impacts may be avoided. If these impacts are unavoidable, the undertaking may indicate its plans to minimise them and implement mitigation measures that aim to maintain the value and functionality of priority services.

18.

The undertaking may disclose whether and how it has used biodiversity and ecosystems scenario analysis to inform the identification and assessment of material risks and opportunities over short-, medium- and long-term time horizons. If the undertaking has used such scenario analysis, it may disclose the following information: (a) why the considered scenarios were selected; (b) how the considered scenarios are updated according to evolving conditions and emerging trends; and (c) whether the scenarios are informed by expectations published by authoritative intergovernmental bodies, such as the Convention for Biological Diversity and, where relevant, by scientific consensus, such as that expressed by the Intergovernmental Science-policy Platform on Biodiversity and Ecosystem Services (IPBES).

19.

The undertaking shall specifically disclose: (a) whether or not it has sites located in or near biodiversity-sensitive areas and whether activities related to these sites negatively affect these areas by leading to the deterioration of natural habitats and the habitats of species and to the disturbance of the species for which a protected area has been designated; and (b) whether it has been concluded that it is necessary to implement biodiversity mitigation measures, such as those identified in: Directive 2009/147/EC of the European Parliament and of the Council on the conservation of wild birds; Council Directive 92/43/EEC on the conservation of natural habitats and of wild fauna and flora; an Environmental Impact Assessment (EIA) as defined in Article 1(2), point (g), of Directive 2011/92/EU of the European Parliament and of the Council (83) on the assessment of the effects of certain public and private projects on the environment; and for activities located in third countries, in accordance with equivalent national provisions or international standards, such as the International Finance Corporation (IFC) Performance Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources.

Disclosure Requirement E4-2 – Policies related to biodiversity and ecosystems

20.

The undertaking shall describe its adopted policies to manage its material impacts, risks, dependencies, and opportunities related to biodiversity and ecosystems.

21.

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 biodiversity and ecosystem - related impacts , dependencies , risks and opportunities .

22.

The disclosure required by paragraph 20 shall contain the information on the policies the undertaking has in place to manage its material impacts, risks, dependencies and opportunities related to biodiversity and ecosystems in accordance with ESRS 2 MDR-P Policies adopted to manage material sustainability matters).

23.

In addition to the provisions of ESRS 2 MDR-P the undertaking shall describe whether and how its biodiversity and ecosystems -related policies : (a) relate to the matters specified in ESRS E4 AR 4; (b) relate to its material biodiversity and ecosystems-related impacts; (c) relate to material dependencies and material physical and transition risks and opportunities; (d) support traceability of products, components and raw materials with material actual or potential impacts on biodiversity and ecosystems along the value chain ; (e) address production, sourcing or consumption from ecosystems that are managed to maintain or enhance conditions for biodiversity, as demonstrated by regular monitoring and reporting of biodiversity status and gains or losses; and (f) address social consequences of biodiversity and ecosystems-related impacts.

24.

The undertaking shall specifically disclose whether it has adopted: (a) biodiversity and ecosystem protection policy covering operational sites owned, leased, or managed in or near a biodiversity sensitive area; (b) sustainable land / agriculture practices or policies (84); (c) sustainable oceans / seas practices or policies (85); and (d) policies to address deforestation  (86).

Disclosure Requirement E4-3 – Actions and resources related to biodiversity and ecosystems

25.

The undertaking shall disclose its biodiversity and ecosystems-related actions and the resources allocated to their implementation.

26.

The objective of this Disclosure Requirement is to enable an understanding of the key actions taken and planned that significantly contribute to the achievement of biodiversity and ecosystems -related policy objectives and targets .

27.

The description of key actions and resources shall follow the mandatory content defined in ESRS 2 MDR-A Actions and resources in relation to material sustainability matters.

28.

In addition, the undertaking : (a) may disclose how it has applied the mitigation hierarchy with regard to its actions (avoidance, minimisation, restoration/rehabilitation, and compensation or offsets); (b) shall disclose whether it used biodiversity offsets in its action plans. If the actions contain biodiversity offsets, the undertaking shall include the following information: i. the aim of the offset and key performance indicators used; ii. the financing effects (direct and indirect costs) of biodiversity offsets in monetary terms; and; iii. a description of offsets including area, type, the quality criteria applied and the standards that the biodiversity offsets comply with; (c) shall describe whether and how it has incorporated local and indigenous knowledge and nature- based solutions into biodiversity and ecosystems -related actions.

Metrics and targets

Disclosure Requirement E4-4 – Targets related to biodiversity and ecosystems

29.

The undertaking shall disclose the biodiversity and ecosystem-related targets it has set.

30.

The objective of this Disclosure Requirement is to allow an understanding of the targets the undertaking has adopted to support its biodiversity and ecosystems policies and address its material related impacts , dependencies , risks and opportunities .

31.

The description of the targets shall follow the mandatory content defined in ESRS 2 MDR-T Tracking effectiveness of policies and actions through targets.

32.

The disclosure required by paragraph 29 shall include the following information: (a) whether ecological thresholds and allocations of impacts to the undertaking were applied when setting targets. If so, the undertaking shall specify: i. the ecological thresholds identified and the methodology used to identify such thresholds; ii. whether or not the thresholds are entity-specific and if so, how they were determined; and iii. how responsibility for respecting identified ecological thresholds is allocated in the undertaking; (b) whether the targets are informed by, and/or aligned with the Kunming-Montreal Global Biodiversity Framework, relevant aspects of the EU Biodiversity Strategy for 2030 and other biodiversity and ecosystem -related national policies and legislation; (c) how the targets relate to the biodiversity and ecosystem impacts, dependencies, risks and opportunities identified by the undertaking in relation to its own operations and its upstream and downstream value chain; (d) the geographical scope of the targets, if relevant; (e) whether or not the undertaking used biodiversity offsets in setting its targets; and (f) to which of the layers of the mitigation hierarchy the target can be allocated (i.e., avoidance, minimisation, restoration and rehabilitation, compensation or offsets).

Disclosure Requirement E4-5 – Impact metrics related to biodiversity and ecosystems change

33.

The undertaking shall report metrics related to its material impacts on biodiversity and ecosystems.

34.

The objective of this Disclosure Requirement is to enable an understanding of the performance of the undertaking against impacts identified as material in the materiality assessment on biodiversity and ecosystems change.

35.

If the undertaking identified sites located in or near biodiversity-sensitive areas that it is negatively affecting (see paragraph 19(a)), the undertaking shall disclose the number and area (in hectares) of sites owned, leased or managed in or near these protected areas or key biodiversity areas.

36.

If the undertaking has identified material impacts with regards to land-use change, or impacts on the extent and condition of ecosystems , it may also disclose their land-use based on a Life Cycle Assessment.

37.

For datapoints specified in paragraphs 38 to 41, the undertaking shall consider its own operations.

38.

If the undertaking has concluded that it directly contributes to the impact drivers of land-use change , freshwater -use change and/or sea-use change, it shall report relevant metrics. The undertaking may disclose metrics that measure: (a) the conversion over time (e.g. 1 or 5 years) of land cover (e.g. deforestation or mining); (b) changes over time (e.g. 1 or 5 years) in the management of the ecosystem (e.g., through the intensification of agricultural management, or the application of better management practices or forestry harvesting); (c) changes in the spatial configuration of the landscape (e.g. fragmentation of habitats, changes in ecosystem connectivity); (d) changes in ecosystem structural connectivity (e.g. habitat permeability based on physical features and arrangements of habitat patches); and (e) the functional connectivity (e.g. how well genes or individuals move through land, freshwater and seascape).

39.

If the undertaking concluded that it directly contributes to the accidental or voluntary introduction of invasive alien species, the undertaking may disclose the metrics it uses to manage pathways of introduction and spread of invasive alien species and the risks posed by invasive alien species.

40.

If the undertaking identified material impacts related to the state of species, the undertaking may report metrics it considers relevant. The undertaking may: (a) refer to relevant disclosure requirements in ESRS E1, ESRS E2, ESRS E3, and ESRS E5; (b) consider population size, range within specific ecosystems as well as extinction risk. These aspects provide insight on the health of a single species’ population and its relative resilience to human induced and naturally occurring change; (c) disclose metrics that measure changes in the number of individuals of a species within a specific area; (d) disclose metrics on species at extinction risk (87) that measure: i. the threat status of species and how activities/pressures may affect the threat status; or ii. changes in the relevant habitat for a threatened species as a proxy for the undertaking’s impact on the local population’s extinction risk.

41.

If the undertaking identified material impacts related to ecosystems, it may disclose: (a) with regard to ecosystems extent, metrics that measure area coverage of a particular ecosystem without necessarily considering the quality of the area being assessed, such as habitat cover. For example, forest cover is a measure of the extent of a particular ecosystem type, without factoring in the condition of the ecosystem (e.g., provides the area without describing the species diversity within the forest). (b) with regard to ecosystems condition: i. metrics that measure the quality of ecosystems relative to a pre-determined reference state; ii. metrics that measure multiple species within an ecosystem rather than the number of individuals within a single species within an ecosystem (for example: scientifically established species richness and abundance indicators that measure the development of (native) species composition within an ecosystem against the reference state at the beginning of the first reporting period as well as the targeted state outlined in the Kunming-Montreal Global Biodiversity Framework, or an aggregation of species’ conservation status if relevant); or iii. metrics that reflect structural components of condition such as habitat connectivity (i.e., how linked habitats are to each other).

Disclosure Requirement E4-6 – Anticipated financial effects from material biodiversity and ecosystem-related risks and opportunities

42.

The undertaking shall disclose its anticipated financial effects of material biodiversity- and ecosystem-related risks and opportunities.

43.

The information required by paragraph 42 is in addition to the information on current financial effects on the entity’s financial position, financial performance and cash flows for the reporting period required under ESRS 2 SBM-3 para 48 (d).

44.

The objective of this Disclosure Requirement is to provide an understanding of: (a) anticipated financial effects due to material risks arising from biodiversity- and ecosystem-related impacts and dependencies and 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; and (b) anticipated financial effects due to material opportunities related to biodiversity- and ecosystem.

45.

The disclosure shall include: (a) a quantification of the anticipated financial effects in monetary terms before considering biodiversity and ecosystems -related actions or where not possible without undue cost or effort, qualitative information. For financial effects arising from material opportunities, a quantification is not required if it would result in disclosure that does not meet the qualitative characteristics of information (see ESRS 1 Appendix B Qualitative characteristics of information). The quantification of the anticipated financial effects in monetary terms may be a single amount or a range; (b) a description of the effects considered, the impacts and dependencies to which they relate and the time horizons in which they are likely to materialise; and (c) the critical assumptions used to quantify the anticipated financial effects as well as the sources and the level of uncertainty of those assumptions.

ESRS E5

RESOUCE USE AND CIRCULAR ECONOMY

TABLE OF CONTENTS

Objective

Interactions with other ESRS

Disclosure Requirements

–

ESRS 2 General disclosures

Impact, risk and opportunity management

—

Disclosure Requirement related to ESRS 2 IRO-1 – Description of the processes to identify and assess material resource use and circular economy-related impacts, risks and opportunities

—

Disclosure Requirement E5-1 – Policies related to resource use and circular economy

—

Disclosure Requirement E5-2 – Actions and resources related to resource use and circular economy

Metrics and targets

—

Disclosure Requirement E5-3 – Targets related to resource use and circular economy

—

Disclosure Requirement E5-4 – Resource inflows

—

Disclosure Requirement E5-5 – Resource outflows

—

Disclosure Requirement E5-6 – Anticipated financial effects from resource use and circular economy-related impacts, risks and opportunities

Appendix A:

Application Requirements

–

ESRS 2 General disclosures

Impact, risk and opportunity management

—

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

—

Disclosure Requirement E5-1 – Policies related to resource use and circular economy

—

Disclosure Requirement E5-2 – Actions and resources in relation to resource use and circular economy

Metrics and targets

—

Disclosure Requirement E5-3 - Targets related to resource use and circular economy

—

Disclosure Requirement E5-4 - Resource inflows

—

Disclosure Requirement E5-5 - Resource outflows

—

Disclosure Requirement E5-6 – Anticipated financial effects from resource use and circular economy-related risks and opportunities

Objective

1.

The objective of this Standard is to specify Disclosure Requirements which will enable users of the sustainability statement to understand: (a) how the undertaking affects resource use, including resource efficiency, avoiding the depletion of resources and the sustainable sourcing and use of renewable resources (referred to in this Standard as “resource use and circular economy”) in terms of material positive and negative actual or potential impacts ; (b) any actions taken, and the result of such actions, to prevent or mitigate actual or potential negative impacts arising from resource use, including its measures to help decoupling its economic growth from the use of materials, and to address risks and opportunities; (c) the plans and capacity of the undertaking to adapt its strategy and business model in line with circular economy principles including but not limited to minimising waste , maintaining the value of products, materials and other resources at their highest value and enhancing their efficient use in production and consumption; (d) the nature, type and extent of the undertaking’s material risks and opportunities related to the undertaking’s impacts and dependencies , arising from resource use and circular economy, and how the undertaking manages them; and (e) the financial effects on the undertaking over the short-, medium- and long-term of material risks and opportunities arising from the undertaking’s impacts and dependencies on resource use and circular economy.

2.

This Standard sets out Disclosure Requirements related to “resource use” and “circular economy” and in particular on: (a) resource inflows including the circularity of material resource inflows, considering renewable and non-renewable resources; and (b) resource outflows including information on products and materials; and (c) waste .

3.

Circular economy means an economic system in which the value of products, materials and other resources in the economy is maintained for as long as possible, enhancing their efficient use in production and consumption, thereby reducing the environmental impact of their use, minimising waste and the release of hazardous substances at all stages of their life cycle, including through the application of the waste hierarchy . The goal is to maximise and maintain the value of the technical and biological resources, products and materials by creating a system that allows for durability , optimal use or re-use, refurbishment, remanufacturing, recycling and nutrient cycling.

4.

This Standard builds on relevant EU legislative frameworks and policies including the EU Circular Economy Action Plan, Directive 2008/98/EC of the European Parliament and of the Council (90) (Waste Framework Directive) and the EU industrial strategy.

5.

To evaluate the transition from business as usual, meaning an economy in which finite resources are extracted to make products that are used and then thrown away (“take-make-waste”), to a circular economic system, this Standard relies on the identification of the physical flows of resources, materials and products used and generated by the undertaking through Disclosure Requirement E5-4 Resource inflows and Disclosure Requirement E5-5 Resource outflows.

Interactions with other ESRS

6.

Resource use is a major driver of other environmental impacts such as climate change, pollution , water and marine resources and biodiversity. A circular economy is a system that tends towards sustainable use of resources in extraction, processing, production, consumption and management of waste . Such system brings multiple environmental benefits, in particular, the reduction of material and energy consumption and emissions into the air (greenhouse gas emissions or other pollution), the limitation of water withdrawals and discharges and the regeneration of nature limiting the impact on biodiversity.

7.

To provide a comprehensive overview of which other environmental matters could be material to resource use and circular economy, relevant disclosure requirements are covered in other environmental ESRS as follows: (a) ESRS E1 Climate change, which addresses, in particular, GHG emissions and energy resources (energy consumption); (b) ESRS E2 Pollution, which addresses, in particular, emissions to water, air and soil as well as substances of concern ; (c) ESRS E3 Water and marine resources, which addresses, in particular, water resource (water consumption) and marine resources; and (d) ESRS E4 Biodiversity and ecosystems, which addresses, in particular, ecosystems, species and raw materials.

8.

The undertaking’s impacts related to resource use and circular economy, in particular impacts related to waste , can affect people and communities. Material negative impacts on affected communities from resource use and circular economy attributable to the undertaking are covered in ESRS S3 Affected communities. The efficient and circular use of resources also benefits competitiveness and economic wellbeing

9.

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

Disclosure Requirements

ESRS 2 General disclosures

10.

The requirements of this section should be read in conjunction with and reported alongside the disclosures required by ESRS 2 chapter 4 Impact, risk and opportunity management.

Impact, risk and opportunity management

Disclosure Requirement related to ESRS 2 IRO-1 – Description of the processes to identify and assess material resource use and circular economy-related impacts, risks and opportunities

11.

The undertaking shall describe the process to identify material impacts, risks and opportunities related to resource use and circular economy, in particular regarding resource inflows , resource outflows and waste , and shall provide information on: (a) whether the undertaking has screened its assets and activities in order to identify its actual and potential impacts, risks and opportunities in its own operations and its upstream and downstream value chain, and if so, the methodologies, assumptions and tools used in the screening; (b) whether and how the undertaking has conducted consultations, in particular, with affected communities.

Disclosure Requirement E5-1 – Policies related to resource use and circular economy

12.

The undertaking shall describe its policies adopted to manage its material impacts, risks and opportunities related to resource use and circular economy.

13.

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 impacts, risks and opportunities related to resource use and circular economy .

14.

The disclosure required by paragraph 12 shall contain the information on the policies the undertaking has in place to manage its material impacts, risks and opportunities related to resource use and circular economy in accordance with ESRS 2 MDR-P Policies adopted to manage material sustainability matters.

15.

In the summary, the undertaking shall indicate whether and how its policies address the following matters where material: (a) transitioning away from use of virgin resources, including relative increases in use of secondary (recycled) resources; (b) sustainable sourcing and use of renewable resources.

16.

Policies shall address material impacts, risks and opportunities in its own operations and along its upstream and downstream value chain.

Disclosure Requirement E5-2 – Actions and resources related to resource use and circular economy

17.

The undertaking shall disclose its resource use and circular economy actions and the resources allocated to their implementation.

18.

The objective of this Disclosure Requirement is to enable an understanding of the key actions taken and planned to achieve the resource use and circular economy-related policy objectives and targets .

19.

The description of the resource use and circular economy-related actions and resources allocated shall follow the principles defined in ESRS 2 MDR-A Actions and resources in relation to material sustainability matters.

20.

In addition to ESRS 2 MDR-A, the undertaking may specify whether and how an action and resources cover: (a) higher levels of resource efficiency in use of technical and biological materials and water, particularly in relation to critical raw materials and rare earths as listed in the Raw Materials Information System; (b) higher rates of use of secondary raw materials (recyclates); (c) application of circular design, leading to increased product durability and optimisation of use, and higher rates of: Reuse, Repair, Refurbishing, Remanufacture, Repurposing and Recycling. (d) application of circular business practices such as (i) value retention actions (maintenance, repair, refurbishing, remanufacturing, component harvesting, upgrading and reverse logistics, closed loop systems, second-hand retailing), (ii) value maximisation actions (product-service systems, collaborative and sharing economy business models), (iii) end-of-life actions ( recycling , upcycling, extended producer responsibility), and (iv) systems efficiency actions (industrial symbiosis); (e) actions taken to prevent waste generation in the undertaking’s upstream and downstream value chain; and (f) optimistation of waste management in line with the waste hierarchy .

Metrics and targets

Disclosure Requirement E5-3 – Targets related to resource use and circular economy

21.

The undertaking shall disclose the resource use and circular economy-related targets it has set.

22.

The objective of this Disclosure Requirement is to enable an understanding of the targets the undertaking has adopted to support its resource use and circular economy policy and to address its material impacts, risks and opportunities.

23.

The description of the targets shall contain the information requirements defined in ESRS 2 MDR-T Tracking effectiveness of policies and actions through targets.

24.

The disclosure required by paragraph 21 shall indicate whether and how the undertaking’s targets relate to resource inflows and resource outflows , including waste and products and materials, and, more specifically to: (a) the increase of circular product design (including for instance design for durability , dismantling, reparability, recyclability etc); (b) the increase of circular material use rate ; (c) the minimisation of primary raw material; (d) sustainable sourcing and use (in line with the cascading principle) of renewable resources; (e) the waste management , including preparation for proper treatment; and (f) other matters related to resource use or circular economy.

25.

The undertaking shall specify to which layer of the waste hierarchy the target relates.

26.

In addition to ESRS 2 MDR-T, the undertaking may specify whether ecological thresholds and entity-specific allocations were taken into consideration when setting targets . If so, the undertaking may specify: (a) the ecological thresholds identified, and the methodology used to identify such thresholds; (b) whether or not the thresholds are entity-specific and if so, how they were determined; and (c) how responsibility for respecting identified ecological thresholds is allocated in the undertaking.

27.

The undertaking shall specify as part of the contextual information, whether the targets it has set and presented are mandatory (required by legislation) or voluntary.

Disclosure Requirement E5-4 – Resource inflows

28.

The undertaking shall disclose information on its resource inflows related to its material impacts, risks and opportunities.

29.

The objective of this Disclosure Requirement is to enable an understanding of the resource use in the undertaking’s own operations and its upstream value chain.

30.

The disclosure required by paragraph 28 shall include a description of its resource inflows where material: products (including packaging ) and materials (specifying critical raw materials and rare earths), water and property, plant and equipment used in the undertaking’s own operations and along its upstream value chain.

31.

When an undertaking assesses that resource inflows is a material sustainability matter, it shall disclose the following information about the materials used to manufacture the undertaking’s products and services during the reporting period, in tonnes or kilogrammes: (a) the overall total weight of products and technical and biological materials used during the reporting period; (b) the percentage of biological materials (and biofuels used for non-energy purposes) used to manufacture the undertaking’s products and services (including packaging ) that is sustainably sourced, with the information on the certification scheme used and on the application of the cascading principle; and (c) the weight in both absolute value and percentage, of secondary reused or recycled components, secondary intermediary products and secondary materials used to manufacture the undertaking’s products and services (including packaging).

32.

The undertaking shall provide information on the methodologies used to calculate the data. It shall specify whether the data is sourced from direct measurement or estimations, and disclose the key assumptions used.

Disclosure Requirement E5-5 – Resource outflows

33.

The undertaking shall disclose information on its resource outflows, including waste, related to its material impacts, risks and opportunities.

34.

The objective of this Disclosure Requirement is to provide an understanding of: (a) how the undertaking contributes to the circular economy by i) designing products and materials in line with circular economy principles and ii) increasing or maximising the extent to which products, materials and waste processing are recirculated in practice after first use; and (b) the undertaking’s waste reduction and waste management strategy, the extent to which the undertaking knows how its pre-consumer waste is managed in its own activities.

Products and materials

35.

The undertaking shall provide a description of the key products and materials that come out of the undertaking’s production process and that are designed along circular principles, including durability , reusability, repairability, disassembly, remanufacturing, refurbishment, recycling , recirculation by the biological cycle, or optimisation of the use of the product or material through other circular business models.

36.

Undertakings for which outflows are material shall disclose: (a) The expected durability of the products placed on the market by the undertaking, in relation to the industry average for each product group; (b) The reparability products, using an established rating system, where possible; (c) The rates of recyclable content in products and their packaging .

Waste

37.

The undertaking shall disclose the following information on its total amount of waste from its own operations, in tonnes or kilogrammes: (a) the total amount of waste generated ; (b) the total amount by weight diverted from disposal, with a breakdown between hazardous waste and non-hazardous waste and a breakdown by the following recovery operation types: i. preparation for reuse; ii. recycling ; and iii. other recovery operations. (c) the amount by weight directed to disposal by waste treatment type and the total amount summing all three types, with a breakdown between hazardous waste and non-hazardous waste. The waste treatment types to be disclosed are: i. incineration ; ii. landfill; and iii. other disposal operations; (d) the total amount and percentage of non-recycled waste (91).

38.

When disclosing the composition of the waste , the undertaking shall specify: (a) the waste streams relevant to its sector or activities (e.g. tailings for the undertaking in the mining sector, electronic waste for the undertaking in the consumer electronics sector, or food waste for the undertaking in the agriculture or in the hospitality sector); and; (b) the materials that are present in the waste (e.g. biomass, metals, non-metallic minerals, plastics, textiles, critical raw materials and rare earths).

39.

The undertaking shall also disclose the total amount of hazardous waste and radioactive waste generated by the undertaking, where radioactive waste is defined in Article 3(7) of Council Directive 2011/70/Euratom (92).

40.

The undertaking shall provide contextual information on the methodologies used to calculate the data and in particular the criteria and assumptions used to determine and classify products designed along circular principles under paragraph 35. It shall specify whether the data is sourced from direct measurement or estimations; and disclose the key assumptions used.

Disclosure Requirement E5-6 – Anticipated financial effects from material resource use and circular economy-related risks and opportunities

41.

The undertaking shall disclose the anticipated financial effects of material risks and opportunities arising from resource use and circular economy-related impacts.

42.

The information required by paragraph 41 is in addition the information on current financial effects on the entity’s financial position, financial performance and cash flows for the reporting period required under ESRS 2 SBM-3 para 48 (d). The objective of this Disclosure Requirement is to provide an understanding of: (a) anticipated financial effects due to material risks arising from material resource use and circular economy -related impacts and dependencies and how these risks have or could reasonably be expected to have) a material influence on the undertaking’s financial position, financial performance performance, and cash flows over the short-, medium- and long-term; and (b) anticipated financial effects due to material opportunities related to resource use and circular economy.

43.

The disclosure shall include: (a) a quantification of the anticipated financial effects in monetary terms before considering resource use and circular economy-related actions, or where not possible without undue cost or effort, qualitative information. For financial effects arising from material opportunities, a quantification is not required if it would result in disclosure that does not meet the qualitative characteristics of information (see ESRS 1 Appendix B Qualitative characteristics of information); (b) a description of the effects considered, the impacts and dependencies to which they relate and the time horizons in which they are likely to materialise; (c) the critical assumptions used to quantify the anticipated financial effects , as well as the sources and level of uncertainty of those assumptions.

ESRS S1

OWN WORKFORCE

TABLE OF CONTENTS

Objective

Interaction with other ESRS

Disclosure requirements

–

ESRS 2 General disclosures

Strategy

—

Disclosure Requirement related to ESRS 2 SBM-2 – Interests and views of stakeholders

—

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

Impacts, risks and opportunities management

—

Disclosure Requirement S1-1 – Policies related to own workforce

—

Disclosure Requirement S1-2 – Processes for engaging with own workers and workers’ representatives about impacts

—

Disclosure Requirement S1-3 – Processes to remediate negative impacts and channels for own workers to raise concerns

—

Disclosure Requirement S1-4 – Taking action on material impacts on own workforce, and approaches to mitigating material risks and pursuing material opportunities related to own workforce, and effectiveness of those actions

Metrics and targets

—

Disclosure Requirement S1-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities

—

Disclosure Requirement S1-6 – Characteristics of the undertaking’s employees

—

Disclosure Requirement S1-7 – Characteristics of non-employee workers in the undertaking’s own workforce

—

Disclosure Requirement S1-8 – Collective bargaining coverage and social dialogue

—

Disclosure Requirement S1-9 – Diversity metrics

—

Disclosure Requirement S1-10 – Adequate wages

—

Disclosure Requirement S1-11 – Social protection

—

Disclosure Requirement S1-12– Persons with disabilities

—

Disclosure Requirement S1-13 – Training and skills development metrics

—

Disclosure Requirement S1-14 – Health and safety metrics

—

Disclosure Requirement S1-15 – Work-life balance metrics

—

Disclosure Requirement S1-16 – Compensation metrics (pay gap and total compensation)

—

Disclosure Requirement S1-17 – Incidents, complaints and severe human rights impacts

Appendix A:

Application Requirements

–

Objective

–

ESRS 2 General Disclosures

Strategy

—

Disclosure Requirement related to ESRS 2 SBM-2 – Interests and views of stakeholders

—

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

Impacts, risks and opportunities management

—

Disclosure Requirement S1-1 – Policies related to own workforce

—

Disclosure Requirement S1-2 – Processes for engaging with own workers and workers' representatives about impacts

—

Disclosure Requirement S1- 3 – Processes to remediate negative impacts and channels for own workers to raise concerns

—

Disclosure Requirement S1-4 – Taking action on material impacts and approaches to mitigating material risks and pursuing material opportunities related to own workforce, and effectiveness of those actions and approaches

Metrics and targets

—

Disclosure Requirement S1-5 – Targets related to managing material impacts, advancing positive impacts, as well as to risks and opportunities

—

Disclosure Requirement S1-6 – Characteristics of the Undertaking’s Employees

—

Disclosure Requirement S1-7 – Characteristics of non-employee workers in the undertaking’s own workforce

—

Disclosure Requirement S1-8 – Collective bargaining coverage and social dialogue

—

Disclosure Requirement S1-9 – Diversity metrics

—

Disclosure Requirement S1-10 – Adequate Wages

—

Disclosure Requirement S1-11 – Social protection

—

Disclosure Requirement S1-12 – Persons with disabilities

—

Disclosure Requirement S1-13 – Training and Skills Development metrics

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Disclosure Requirement S1-14 – Health and safety metrics

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Disclosure Requirement S1-15 – Work-life balance

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Disclosure Requirement S1-16 – Remuneration metrics (pay gap and total remuneration)

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Disclosure Requirement S1-17 – Incidents, complaints and severe human rights impacts

Appendix A.1:

Application Requirements for ESRS 2 related disclosures

Appendix A.2:

Application Requirements for ESRS S1-1 Policies related to own workforce

Appendix A.3:

Application Requirements for ESRS S1–4 Taking action on material impacts on own workforce, and approaches to mitigating material risks and pursuing material opportunities related to own workforce, and effectiveness of those actions

Appendix A.4:

Application Requirements for ESRS S1–5 Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities

Objective

1.

The objective of this Standard is to specify disclosure requirements which will enable users of the sustainability statement to understand the undertaking’s material impacts on its own workforce , as well as related material risks and opportunities , including: (a) how the undertaking affects its own workforce, in terms of material positive and negative actual or potential impacts; (b) any actions taken, and the result of such actions, to prevent, mitigate or remediate actual or potential negative impacts, and to address risks and opportunities; (c) the nature, type and extent of the undertaking’s material risks and opportunities related to its impacts and dependencies on its own workforce, and how the undertaking manages them; and (d) the financial effects on the undertaking over the short-, medium- and long-term of material risks and opportunities arising from the undertaking’s impacts and dependencies on its own workforce.

2.

In order to meet the objective, this Standard also requires an explanation of the general approach the undertaking takes to identify and manage any material actual and potential impacts on its own workforce in relation to the following social, including human rights, factors or matters: (a) working conditions, including: i. secure employment; ii. working time; iii. adequate wages ; iv. social dialogue ; v. freedom of association, the existence of works councils and the information, consultation and participation rights of workers; vi. collective bargaining , including the rate of the undertaking’s workforce covered by collective agreements; vii. work-life balance; and viii. health and safety. (b) equal treatment and opportunities for all, including: i. gender equality and equal pay for work of equal value; ii. training and skills development; iii. employment and inclusion of persons with disabilities ; iv. measures against violence and harassment in the workplace; and v. diversity. (c) other work-related rights, including those that relate to: i. child labour; ii. forced labour ; iii. adequate housing; and iv. privacy.

3.

This Standard also requires an explanation of how such impacts , as well as the undertaking’s dependencies on its own workforce , can create material risks or opportunities for the undertaking. For example, on the matter of equal opportunities, discrimination in hiring and promotion against women can reduce the undertaking’s access to qualified labour and harm its reputation. Conversely, policies to increase the representation of women in the workforce and in upper levels of management can have positive effects, such as increasing the pool of qualified labour and improving the undertaking’s reputation.

4.

This Standard covers an undertaking’s own workforce , which is understood to include both people who are in an employment relationship with the undertaking (“ employees ”) and non-employees who are either people with contracts with the undertaking to supply labour (“self-employed people”) or people provided by undertakings primarily engaged in “employment activities” (NACE Code N78). See Application Requirement 3 for examples of who falls under own workforce. The information required to be disclosed with regard to non-employees shall not affect their status pursuant to applicable labour law.

5.

This Standard does not cover workers in the undertaking’s upstream or downstream value chain ; these categories of workers are covered in ESRS S2 Workers in the value chain.

6.

The Standard requires undertakings to describe their own workforce , including key characteristics of the employees and non-employees that are part of it. This description provides users with an understanding of the structure of the undertaking’s own workforce and helps to contextualise information provided through other disclosures.

7.

The objective of the Standard is also to enable users to understand the extent to which the undertaking aligns or complies with international and European human rights instruments and conventions, including the International Bill of Human Rights, the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work and ILO fundamental conventions, the UN Convention on Persons with Disabilities, the European Convention of Human Rights, the revised European Social Charter, the Charter of Fundamental Rights of the European Union, the EU policy priorities as set out by the European Pillar of Social Rights, and Union legislation, including the EU labour law acquis.

Interaction with other ESRS

8.

This Standard shall be read in conjunction with ESRS 1 General principles and ESRS 2 General requirements.

9.

This Standard shall be read in conjunction with ESRS S2 Workers in the value chain, ESRS S3 Affected communities and ESRS S4 Consumers and end-users.

10.

The reporting under this Standard shall be consistent, coherent and where relevant clearly linked with reporting on the undertaking’s own workforce under ESRS S2, in order to ensure effective reporting.

Disclosure requirements

ESRS 2 General disclosures

11.

The requirements of this section should be read in conjunction with the disclosures required by ESRS 2 on Strategy (SBM). The resulting disclosures shall be presented alongside the disclosures required by ESRS 2, except for ESRS 2 SBM-3, for which the undertaking has an option to present the disclosures alongside the topical disclosure.

Strategy

Disclosure Requirement related to ESRS 2 SBM-2 – Interests and views of stakeholders

12.

When responding to ESRS 2 SBM-2, the undertaking shall disclose how the interests, views, and rights of people in its own workforce, including respect for their human rights, inform its strategy and business model. The undertaking’s own workforce is a key group of affected stakeholders .

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

13.

When responding to ESRS 2 SBM-3 paragraph 48, the undertaking shall disclose: (a) whether and how actual and potential impacts on its own workforce as identified in ESRS 2 IRO-1 Description of the processes to identify and assess material impacts, risks and opportunities: (i) originate from or are connected to the undertaking’s strategy and business models , and (ii) inform and contribute to adapting the undertaking’s strategy and business model; and (b) the relationship between its material risks and opportunities arising from impacts and dependencies on own workforce and its strategy and business model.

14.

When fulfilling the requirements of paragraph 48, the undertaking shall disclose whether all people in its own workforce who could be materially impacted by the undertaking are included in the scope of its disclosure under ESRS 2. These material impacts shall include impacts that are connected with the undertaking’s own operations and its value chain, including through its products or services, as well as through its business relationships. In addition, the undertaking shall provide the following information: (a) a brief description of the types of employees and non-employees in its own workforce subject to material impacts by its operations, and specify whether they are employees , self- employed people, or people provided by third party undertakings primarily engaged in employment activities; (b) in the case of material negative impacts, whether they are either (i) widespread or systemic in contexts where the undertaking operates (for example, child labour or forced labour or compulsory labour in specific countries or regions outside the EU), or (ii) related to individual incidents (for example, an industrial accident or an oil spill); (c) in the case of material positive impacts, a brief description of the activities that result in the positive impacts, the types of employees and non-employees in its own workforce that are positively affected or could be positively affected; the undertaking may also disclose whether the positive impacts occur in specific countries or regions; (d) any material risks and opportunities for the undertaking arising from impacts and dependencies on its own workforce; (e) any material impacts on its own workforce that may arise from transition plans for reducing negative impacts on the environment and achieving greener and climate- neutral operations, including information on the impacts on own workforce caused by the undertaking’s plans and actions to reduce carbon emissions in line with international agreements. Impacts, risks and opportunities include restructuring and employment loss as well as opportunities arising from job creation and reskilling or upskilling; (f) operations at significant risk of incidents of forced labour or compulsory labour (94) either in terms of: i. type of operation (such as manufacturing plant); or ii. countries or geographic areas with operations considered at risk; (g) operations at significant risk of incidents of child labour  (95) either in terms of: i. type of operation (such as manufacturing plant); or ii. countries or geographic areas with operations considered at risk.

15.

In describing the main types of people in its own workforce who are or could be negatively affected, based on the materiality assessment set out in ESRS 2 IRO 1, the undertaking shall disclose whether and how it has developed an understanding of how people with particular characteristics, those working in particular contexts, or those undertaking particular activities may be at greater risk of harm.

16.

The undertaking shall disclose which, if any, of its material risks and opportunities arising from impacts and dependencies on people in its own workforce relate to specific groups of people (for example, particular age groups, or people working in a particular factory or country) rather than to all of its own workforce (for example, a general pay cut, or training offered to all people in its own workforce).

Impacts, risks and opportunities management

Disclosure Requirement S1-1 – Policies related to own workforce

17.

The undertaking shall describe its policies adopted to manage its material impacts on its own workforce, as well as associated material risks and opportunities.

18.

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 material impacts on the undertaking’s own workforce specifically, as well as policies that cover material impacts, risks and opportunities related to its own workforce.

19.

The disclosure required by paragraph 17 shall contain the information on the undertaking’s policies to manage its material impacts, risks and opportunities related to its own workforce in accordance with ESRS 2 MDR-P Policies adopted to manage material sustainability matters. In addition, the undertaking shall specify if such policies cover specific groups within its own workforce or all of its own workforce.

20.

The undertaking shall describe its human rights policy commitments (96) that are relevant to its own workforce , including those processes and mechanisms to monitor compliance with the UN Guiding Principles on Business and Human Rights, ILO Declaration on Fundamental Principles and Rights at Work and the OECD Guidelines for Multinational Enterprises (97). In its disclosure it shall focus on those matters that are material in relation to, as well as its general approach to: (a) respect for the human rights, including labour rights, of people in its own workforce; (b) engagement with people in its own workforce; and (c) measures to provide and/or enable remedy for human rights impacts.

21.

The undertaking shall disclose whether and how its policies with regard to its own workforce are aligned with relevant internationally recognised instruments, including the UN Guiding Principles on Business and Human Rights (98).

22.

The undertaking shall state whether its policies in relation to its own workforce explicitly address trafficking in human beings (99), forced labour or compulsory labour and child labour.

23.

The undertaking shall state whether it has a workplace accident prevention policy or management system (100).

24.

The undertaking shall disclose: (a) whether it has specific policies aimed at the elimination of discrimination , including harassment , promoting equal opportunities and other ways to advance diversity and inclusion; (b) whether the following grounds for discrimination are specifically covered in the policy : racial and ethnic origin, colour, sex, sexual orientation, gender identity, disability, age, religion, political opinion, national extraction or social origin, or other forms of discrimination covered by Union regulation and national law; (c) whether the undertaking has specific policy commitments related to inclusion or positive action for people from groups at particular risk of vulnerability in its own workforce and, if so, what these commitments are; and (d) whether and how these policies are implemented through specific procedures to ensure discrimination is prevented, mitigated and acted upon once detected, as well as to advance diversity and inclusion in general.

Disclosure Requirement S1-2 – Processes for engaging with own workforce and workers’ representatives about impacts

25.

The undertaking shall disclose its general processes for engaging with people in its own workforce and workers' representatives about actual and potential impacts on its own workforce.

26.

The objective of this Disclosure Requirement is to enable an understanding of how the undertaking engages, as part of its ongoing due diligence process, with people in its own workforce and workers' representatives about material, actual and potential, positive and/or negative impacts that do or are likely to affect them, and whether and how perspectives of its own workforces are taken into account in the decision-making processes of the undertaking.

27.

The undertaking shall disclose whether and how the perspectives of its own workforce inform its decisions or activities aimed at managing the actual and potential impacts on its own workforce. This shall include, where relevant, an explanation of: (a) whether engagement occurs directly with the undertaking’s own workforce or workers' representatives; (b) the stage(s) at which engagement occurs, the type of engagement and frequency of the engagement; (c) the function and the most senior role within the undertaking that has operational responsibility for ensuring that this engagement happens and that the results inform the undertaking’s approach; (d) where applicable, a Global Framework Agreement or other agreements that the undertaking has with workers' representatives related to the respect of human rights of its own workforce , including an explanation of how the agreement enables the undertaking to gain insight into the perspectives of its own workforce; and (e) where applicable, how the undertaking assesses the effectiveness of its engagement with its own workforce, including, where relevant, any agreements or outcomes that result.

28.

Where applicable, the undertaking shall disclose the steps it takes to gain insight into the perspectives of people in its own workforce who may be particularly vulnerable to impacts and/or marginalised (for example, women, migrants, people with disabilities).

29.

If the undertaking cannot disclose the above required information because it has not adopted a general process to engage with its own workforce , it shall disclose this to be the case. It may disclose a timeframe in which it aims to have such a process in place.

Disclosure Requirement S1-3 – Processes to remediate negative impacts and channels for own workforce to raise concerns

30.

The undertaking shall describe the processes it has in place to provide for or cooperate in the remediation of negative impacts on people in its own workforce that the undertaking is connected with, as well as channels available to its own workforce to raise concerns and have them addressed.

31.

The objective of this Disclosure Requirement is to enable an understanding of the formal means by which the undertaking’s own workforce can make their concerns and needs known directly to the undertaking and/or through which the undertaking supports the availability of such channels (for example, grievance mechanisms ) in the workplace, and how follow up is carried out with the people concerned regarding the issues raised and the effectiveness of these channels.

32.

The undertaking shall describe the processes in place to cover the matters defined within paragraph 2 of the Objective section by disclosing the following information: (a) its general approach to and processes for providing or contributing to remedy where it has caused or contributed to a material negative impact on people in its own workforce , including whether and how the undertaking assesses that the remedy provided is effective; (b) any specific channels it has in place for its own workforce to raise their concerns or needs directly with the undertaking and have them addressed, including whether these are established by the undertaking itself and/or through participation in third-party mechanisms; (c) whether or not the undertaking has a grievance /complaints handling mechanism related to employee matters (101); and (d) the processes through which the undertaking supports the availability of such channels in the workplace of its own workforce; and (e) how it tracks and monitors issues raised and addressed, and, how it ensures the effectiveness of the channels, including through the involvement of stakeholders who are intended users .

33.

The undertaking shall disclose whether and how it assesses that people in its own workforce are aware of, and trust, these structures or processes as a way to raise their concerns or needs and have them addressed. In addition, the undertaking shall disclose whether it has policies in place regarding the protection of individuals that use them, including workers’ representatives, against retaliation. If such information has been disclosed in accordance with ESRS G1-1, the undertaking may refer to that information.

34.

If the undertaking cannot disclose the above required information because it has not adopted a channel for raising concerns and/or does not support the availability of such a channel in the workplace for its own workforce, it shall disclose this to be the case. It may disclose a timeframe in which it aims to have such a channel in place.

Disclosure Requirement S1-4 – Taking action on material impacts on own workforce, and approaches to managing material risks and pursuing material opportunities related to own workforce, and effectiveness of those actions

35.

The undertaking shall disclose how it takes action to address material negative and positive impacts, and to manage material risks and pursue material opportunities related to its own workforce, and the effectiveness of those actions.

36.

The objective of this Disclosure Requirement is twofold. Firstly, it is to enable an understanding of any actions and initiatives through which the undertaking seeks to: (a) to prevent, mitigate and remediate negative material impacts on its own workforce ; and/or (b) to achieve positive material impacts for its own workforce. Secondly, it is to enable an understanding of the ways in which the undertaking is addressing the material risks and pursuing the material opportunities related to its own workforce.

37.

The undertaking shall provide a summarised description of the action plans and resources to manage its material impacts, risks , and opportunities related to its own workforce in accordance with ESRS 2 MDR-A Actions and resources in relation to material sustainability matters.

38.

In relation to the material impacts related to its own workforce , the undertaking shall describe: (a) actions taken, planned or underway to prevent or mitigate material negative impacts on its own workforce; (b) whether and how it has taken action to provide or enable remedy in relation to an actual material impact; (c) any additional actions or initiatives it has in place with the primary purpose of delivering positive impacts for its own workforce; and (d) how it tracks and assesses the effectiveness of these actions and initiatives in delivering outcomes for its own workforce.

39.

In relation to paragraph 36, the undertaking shall describe the processes through which it identifies what action is needed and appropriate in response to a particular actual or potential negative impact on its own workforce .

40.

In relation to material risks and opportunities , the undertaking shall describe: (a) what action is planned or underway to mitigate material risks for the undertaking arising from its impacts and dependencies on its own workforce and how it tracks effectiveness in practice; and (b) what action is planned or underway to pursue material opportunities for the undertaking in relation to its own workforce.

41.

The undertaking shall disclose whether and how it ensures that its own practices do not cause or contribute to material negative impacts on own workforce , including, where relevant, its practices in relation to procurement, sales and data use. This may include disclosing what approach is taken when tensions arise between the prevention or mitigation of material negative impacts and other business pressures.

42.

When disclosing the information required under paragraph 40, the undertaking shall consider ESRS 2 MDR-T Tracking effectiveness of policies and actions through targets if it evaluates the effectiveness of an action by setting a target.

43.

The undertaking shall disclose what resources are allocated to the management of its material impacts, with information that allows users to gain an understanding of how the material impacts are managed.

Metrics and targets

Disclosure Requirement S1-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities

44.

The undertaking shall disclose the time-bound and outcome-oriented targets it may have set related to: (a) reducing negative impacts on its own workforce; and/or (b) advancing positive impacts on its own workforce; and/or (c) managing material risks and opportunities related to its own workforce.

45.

The objective of this Disclosure Requirement is to enable an understanding of the extent to which the undertaking is using outcome-oriented targets to drive and measure its progress in addressing its material negative impacts and/or advancing positive impacts on its own workforce , and/or in managing material risks and opportunities related to its own workforce.

46.

The summarised description of the targets set to manage its material impacts, risks and opportunities related to the undertaking’s own workforce shall contain the information requirements defined in ESRS 2 MDR-T.

47.

The undertaking shall disclose the process for setting the targets , including whether and how the undertaking engaged directly with its own workforce or workers’ representatives in: (a) setting any such targets; (b) tracking the undertaking’s performance against them; and (c) identifying any lessons or improvements as a result of the undertaking’s performance.

Disclosure Requirement S1-6 – Characteristics of the undertaking’s employees

48.

The undertaking shall describe key characteristics of employees in its own workforce.

49.

The objective of this Disclosure Requirement is to provide insight into the undertaking’s approach to employment, including the scope and nature of impacts arising from its employment practices, to provide contextual information that aids an understanding of the information reported in other disclosures, and to serve as the basis for calculation for quantitative metrics to be disclosed under other disclosure requirements in this Standard.

50.

In addition to the information required by paragraph 40(a)iii of ESRS 2 General Disclosures, the undertaking shall disclose: (a) the total number of employees by head count, and breakdowns by gender and by country for countries in which the undertaking has 50 or more employees representing at least 10% of its total number of employees; (b) the total number by head count or full time equivalent (FTE) of: i. permanent employees, and breakdown by gender; ii. temporary employees, and breakdown by gender; and iii. non-guaranteed hours employees, and breakdown by gender. (c) the total number of employees who have left the undertaking during the reporting period and the rate of employee turnover in the reporting period. (d) a description of the methodologies and assumptions used to compile the data, including whether the numbers are reported: i. in head count or full-time equivalent (FTE) (including an explanation of how FTE is defined); and ii. at the end of the reporting period, as an average across the reporting period, or using another methodology. (e) where applicable, a provision of contextual information necessary to understand the data (for example, to understand fluctuations in number of employees during the reporting period); and (f) a cross-reference of the information reported under (a) above to the most representative number in the financial statements.

51.

For the information specified in point (b) of paragraph 50, the undertaking may in addition disclose the breakdown by region.

52.

The undertaking may disclose by head count or full time equivalent (FTE) the following information: (a) full-time employees , and breakdowns by gender and by region; and (b) part-time employees, and breakdowns by gender and by region.

Disclosure Requirement S1-7 – Characteristics of non-employees in the undertaking’s own workforce

53.

The undertaking shall describe key characteristics of non-employees in its own workforce.

54.

The objective of this Disclosure Requirement is to provide insight into the undertaking’s approach to employment, including the scope and nature of impacts arising from its employment practices, to provide contextual information that aids the understanding of the information reported in other disclosures, and to serve as the basis for calculation for quantitative metrics to be disclosed under other disclosure requirements in this Standard. It also allows an understanding of how much the undertaking relies on non-employees as part of its workforce.

55.

The disclosure required by paragraph 53 shall include: (a) a disclosure of the total number of non-employees in the undertaking’s own workforce , i.e., either people with contracts with the undertaking to supply labour (“self-employed people”) or people provided by undertakings primarily engaged in “employment activities” (NACE Code N78). (b) an explanation of the methodologies and assumptions used to compile the data, including whether the number of non-employees is reported: i. in headcount or full-time equivalent (FTE) (including a definition of how FTE is defined); and ii. at the end of the reporting period, as an average across the reporting period, or using another methodology. (c) where applicable, a provision of contextual information necessary to understand the data (for example, significant fluctuations in the number of non-employees in the undertaking’s own workforce during the reporting period and between the current and the previous reporting period).

56.

For the information specified in point (a) of paragraph 55, the undertaking may disclose the most common types of non-employees (for example, self-employed people, people provided by undertakings primarily engaged in employment activities, and other types relevant to the undertaking), their relationship with the undertaking, and the type of work that they perform.

57.

Where data is not available, the undertaking shall estimate the number and state that it has done so. When the undertaking performs estimates, it shall describe the basis of preparation of this estimation.

Disclosure Requirement S1-8 – Collective bargaining coverage and social dialogue

58.

The undertaking shall disclose information on the extent to which the working conditions and terms of employment of its employees are determined or influenced by collective bargaining agreements and on the extent to which its employees are represented in social dialogue in the European Economic Area (EEA) at the establishment and European level.

59.

The objective of this Disclosure Requirement is to enable an understanding of the coverage of collective bargaining agreements and social dialogue for the undertaking’s own employees .

60.

The undertaking shall disclose: (a) the percentage of its total employees covered by collective bargaining agreements; (b) in the EEA, whether it has one or more collective bargaining agreements and, if so, the overall percentage of its employees covered by such agreement(s) for each country in which it has significant employment, defined as at least 50 employees by head count representing at least 10% of its total number of employees; and (c) outside the EEA, the percentage of its own employees covered by collective bargaining agreements by region.

61.

For employees not covered by collective bargaining agreements, the undertaking may disclose whether it determines their working conditions and terms of employment based on collective bargaining agreements that cover its other employees or based on collective bargaining agreements from other undertakings.

62.

The undertaking may disclose the extent to which the working conditions and terms of employment of non-employees in its own workforce are determined or influenced by collective bargaining agreements, including an estimate of the coverage rate.

63.

The undertaking shall disclose the following information in relation to social dialogue : (a) the global percentage of employees covered by workers’ representatives, reported at the country level for each EEA country in which the undertaking has significant employment; and (b) the existence of any agreement with its employees for representation by a European Works Council (EWC), a Societas Europaea (SE) Works Council, or a Societas Cooperativa Europaea (SCE) Works Council.

Disclosure Requirement S1-9 – Diversity metrics

64.

The undertaking shall disclose the gender distribution at top management and the age distribution amongst its employees.

65.

The objective of this Disclosure Requirement is to enable an understanding of gender diversity at top management level and the age distribution of its employees .

66.

The undertaking shall disclose: (a) the gender distribution in number and percentage at top management level; and (b) the distribution of employees by age group: under 30 years old; 30-50 years old; over 50 years old.

Disclosure Requirement S1-10 – Adequate wages

67.

The undertaking shall disclose whether or not its employees are paid an adequate wage, and if they are not all paid an adequate wage, the countries and percentage of employees concerned.

68.

The objective of this Disclosure Requirement is to enable an understanding of whether or not all the undertaking’s employees are paid an adequate wage , in line with applicable benchmarks.

69.

The undertaking shall disclose whether all its employees are paid an adequate wage , in line with applicable benchmarks. If so, stating this will be sufficient to fulfil this disclosure requirement and no further information is needed.

70.

If not all its employees are paid an adequate wage in line with applicable benchmarks, the undertaking shall disclose the countries where employees earn below the applicable adequate wage benchmark and the percentage of employees that earn below the applicable adequate wage benchmark for each of these countries.

71.

The undertaking may also disclose the information specified in this disclosure requirement with regard to non-employees in its workforce.

Disclosure Requirement S1-11 – Social protection

72.

The undertaking shall disclose whether its employees are covered by social protection against loss of income due to major life events, and, if not, the countries where this is not the case.

73.

The objective of this Disclosure Requirement is to enable an understanding of whether the undertaking’s employees are covered by social protection against loss of income due to major life events, and, if not, the countries where this is not the case.

74.

The undertaking shall disclose whether all its employees are covered by social protection , through public programs or through benefits offered by the undertaking, against loss of income due to any of the following major life events: (a) sickness; (b) unemployment starting from when the own worker is working for the undertaking; (c) employment injury and acquired disability; (d) parental leave; and (e) retirement. If so, stating this is sufficient to fulfil this disclosure requirement and no further information is needed.

75.

If not all of its employees are covered by social protection in accordance with paragraph 72, the undertaking shall in addition disclose the countries where employees do not have social protection with regard to one or more of the types of events listed in paragraph 72 and for each of those countries the types of employees who do not have social protection with regard to each applicable major life event.

76.

The undertaking may also disclose the information specified in this disclosure requirement with regard to non-employees in its workforce.

Disclosure Requirement S1-12– Persons with disabilities

77.

The undertaking shall disclose the percentage of its own employees with disabilities.

78.

The objective of this Disclosure Requirement is to enable an understanding of the extent to which persons with disabilities are included among the undertaking’s employees .

79.

The undertaking shall disclose the percentage of persons with disabilities amongst its employees subject to legal restrictions on the collection of data.

80.

The undertaking may disclose the percentage of employees with disabilities with a breakdown by gender.

Disclosure Requirement S1-13 – Training and skills development metrics

81.

The undertaking shall disclose the extent to which training and skills development is provided to its employees.

82.

The objective of this Disclosure Requirement is to enable an understanding of the training and skills development -related activities that have been offered to employees , within the context of continuous professional growth, to upgrade employees’ skills and facilitate continued employability.

83.

The disclosure required by paragraph 81 shall include: (a) the percentage of employees that participated in regular performance and career development reviews; such information shall be broken down by gender; (b) the average number of training hours per employee and by gender.

84.

The undertaking may disclose breakdowns by employee category for the percentage of employees that participated in regular performance and career development and for the average number of training hours per employee.

85.

The undertaking may also disclose the information specified in this disclosure requirement with regard to non-employees in its workforce.

Disclosure Requirement S1-14 – Health and safety metrics

86.

The undertaking shall disclose information on the extent to which its own workforce is covered by its health and safety management system and the number of incidents associated with work-related injuries, ill health and fatalities of its own workforce. In addition, it shall disclose the number of fatalities as a result of work-related injuries and work-related ill health of other workers working on the undertaking’s sites.

87.

The objective of this Disclosure Requirement is to allow an understanding of the coverage, quality and performance of the health and safety management system established to prevent work-related injuries .

88.

The disclosure required by paragraph 86 shall include the following information, where applicable broken down between employees and non-employees in the undertaking’s own workforce : (a) the percentage of people in its own workforce who are covered by the undertaking’s health and safety management system based on legal requirements and/or recognised standards or guidelines; (b) the number of fatalities (102) as a result of work-related injuries and work-related ill health ; (c) the number and rate of recordable work-related accidents; (d) with regard to the undertaking’s employees, the number of cases of recordable work-related ill health , subject to legal restrictions on the collection of data; and (e) with regard to the undertaking’s employees, the number of days lost to work-related injuries and fatalities from work-related accidents, work-related ill health and fatalities from ill health (103). The information for (b) shall also be reported for other workers working on the undertaking’s sites , such as value chain workers if they are working on the undertaking’s sites.

89.

The undertaking may also disclose the information specified in points (d) and (e) of paragraph 88 with regard to non-employees .

90.

In addition, the undertaking may include the following additional information on the health and safety coverage: the percentage of its own workers covered by a health and safety management system which is based on legal requirements and/or recognised standards or guidelines and which has been internally audited and/or audited or certified by an external party.

Disclosure Requirement S1-15 – Work-life balance metrics

91.

The undertaking shall disclose the extent to which employees are entitled to and make use of family-related leave.

92.

The objective of this Disclosure Requirement is to provide an understanding of the entitlement and actual practices amongst the employees to take family-related leave in a gender equitable manner, as it is one of the dimensions of work-life balance .

93.

The disclosure required by paragraph 91 shall include: (a) the percentage of employees entitled to take family-related leave; and (b) the percentage of entitled employees that took family-related leave, and a breakdown by gender.

94.

If all of the undertaking’s employees are entitled to family-related leave through social policy and/or collective bargaining agreements, it is sufficient to disclose this in order to meet the requirement of paragraph 93a.

Disclosure Requirement S1-16 – Remuneration metrics (pay gap and total remuneration)

95.

The undertaking shall disclose the percentage gap in pay between its female and male employees and the ratio between the remuneration of its highest paid individual and the median remuneration for its employees.

96.

The objective of this Disclosure Requirement is twofold: to allow an understanding of the extent of any gap in the pay between women and men amongst the undertaking’s employees ; and to provide insight into the level of remuneration inequality inside the undertaking and whether wide pay disparities exist.

97.

The disclosure required by paragraph 95 shall include: (a) the gender pay gap, defined as the difference of average pay levels between female and male employees, expressed as percentage of the average pay level of male employees (104); (b) the annual total remuneration ratio of the highest paid individual to the median annual total remuneration for all employees (excluding the highest-paid individual) (105); and (c) where applicable, any contextual information necessary to understand the data and how the data has been compiled and other changes to the underlying data that are to be considered.

98.

The undertaking may disclose a breakdown of the gender pay gap as defined in paragraph 97(a) by employee category and/or by country/segment. The undertaking may also disclose the gender pay gap between employees by categories of employees broken down by ordinary basic salary and complementary or variable components.

99.

In relation to paragraph 97 (b), the undertaking may report this figure adjusted for purchasing power differences between countries, in which case it shall report the methodology used for the calculation.

Disclosure Requirement S1-17 – Incidents, complaints and severe human rights impacts

100.

The undertaking shall disclose the number of work-related incidents and/or complaints and severe human rights impacts within its own workforce, and any related material fines, sanctions or compensation for the reporting period.

101.

The objective of this Disclosure Requirement is to allow an understanding of the extent to which work-related incidents and severe cases of human rights impacts are affecting its own workforce .

102.

The disclosure required by paragraph 100 shall include, subject to the relevant privacy regulations, work-related incidents of discrimination on the grounds of gender, racial or ethnic origin, nationality, religion or belief, disability, age, sexual orientation, or other relevant forms of discrimination involving internal and/or external stakeholders across operations in the reporting period. This includes incidents of harassment as a specific form of discrimination.

103.

The undertaking shall disclose: (a) the total number of incidents of discrimination , including harassment , reported in the reporting period (106); (b) the number of complaints filed through channels for people in the undertaking’s own workforce to raise concerns (including grievance mechanisms) and, where applicable, to the National Contact Points for OECD Multinational Enterprises related to the matters defined in paragraph 2 of this Standard, excluding those already reported in (a) above; (c) the total amount of fines, penalties, and compensation for damages as a result of the incidents and complaints disclosed above, and a reconciliation of such monetary amounts disclosed with the most relevant amount presented in the financial statements; and (d) where applicable, contextual information necessary to understand the data and how such data has been compiled.

104.

The undertaking shall disclose the following information regarding identified cases of severe human rights incidents (e.g., forced labour , human trafficking or child labour ): (a) the number of severe human rights incidents connected to the undertaking’s workforce in the reporting period, including an indication of how many of these are cases of non-respect of the UN Guiding Principles on Business and Human Rights, ILO Declaration on Fundamental Principles and Rights at Work or OECD Guidelines for Multinational Enterprises. If no such incidents have occurred, the undertaking shall state this (107); and (b) the total amount of fines, penalties and compensation for damages for the incidents described in (a) above, and a reconciliation of the monetary amounts disclosed in the most relevant amount in the financial statements.

ESRS S2

WORKERS IN THE VALUE CHAIN

TABLE OF CONTENTS

Objective

Interaction with other ESRS

Disclosure Requirements

–

ESRS 2 General disclosures

Strategy

—

Disclosure Requirement related to ESRS 2 SBM-2 Interests and views of stakeholde

—

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

Impact, risk and opportunity management

—

Disclosure Requirement S2-1 – Policies related to value chain workers

—

Disclosure Requirement S2-2 – Processes for engaging with value chain workers about impacts

—

Disclosure Requirement S2-3 – Processes to remediate negative impacts and channels for value chain workers to raise concerns

—

Disclosure Requirement S2-4 – Taking action on material impacts on value chain workers, and approaches to managing material risks and pursuing material opportunities related to value chain workers, and effectiveness of those action

Metrics and targets

—

Disclosure Requirement S2-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities

Appendix A:

Application Requirements

–

Objective

–

ESRS 2 General disclosures

Strategy

—

Disclosure Requirement related to ESRS 2 SBM-2 - Interests and views of stakeholders

—

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

Impact, risk and opportunity management

—

Disclosure Requirement S2-1 – Policies related to value chain workers

—

Disclosure Requirement S2-2 – Processes for engaging with value chain workers about impacts

—

Disclosure Requirement S2-3 – Processes to remediate negative impacts and channels for value chain workers to raise concerns

—

Disclosure Requirement S2-4 – Taking Action on material impacts, and approaches to mitigating material risks and pursuing material opportunities related to value chain workers, and effectiveness of those actions and approaches

Metrics and targets

—

Disclosure Requirement S2-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities

Objective

1.

The objective of this Standard is to specify disclosure requirements which will enable users of the sustainability statement to understand material impacts on value chain workers connected with the undertaking’s own operations and value chain, including through its products or services, as well as through its business relationships, and its related material risks and opportunities, including: (a) how the undertaking affects workers in its value chain, in terms of material positive and negative actual or potential impacts; (b) any actions taken, and the result of such actions, to prevent, mitigate or remediate actual or potential negative impacts, and to address risks and opportunities; (c) the nature, type and extent of the undertaking’s material risks and opportunities, including those related to its impacts and dependencies on workers in the value chain, and how the undertaking manages them; and (d) the financial effects on the undertaking over the short-, medium- and long-term of material risks and opportunities, including those arising from the undertaking’s impacts and dependencies on workers in the value chain.

2.

In order to meet the objective, this Standard requires an explanation of the general approach the undertaking takes to identify and manage any material actual and potential impacts on value chain workers in relation to: (a) working conditions (for example, secure employment, working time, adequate wage , social dialogue , freedom of association, including the existence of work councils, collective bargaining , work-life balance and health and safety); (b) equal treatment and opportunities for all (for example, gender equality and equal pay for work of equal value, training and skills development, the employment and inclusion of persons with disabilities , measures against violence and harassment in the workplace, and diversity); (c) other work-related rights (for example, child labour , forced labour , adequate housing, water and sanitation and privacy).

3.

This Standard also requires an explanation of how such impacts, as well as the undertaking’s dependencies on value chain workers , can create material risks or opportunities for the undertaking. For example, negative impacts on value chain workers may disrupt the undertaking’s operations (through customers refusing to buy its products or state agencies impounding its goods) and harm its reputation. Conversely, respect for workers’ rights and active support programmes (for example through financial literacy initiatives) can bring business opportunities, such as more reliable supply or widening of the future consumer base.

4.

This Standard covers all workers in the undertaking’s upstream and downstream value chain who are or can be materially impacted by the undertaking, including impacts that are connected with the undertaking’s own operations and value chain, including through its products or services, as well as through its business relationships. This includes all workers who are not included in the scope of “own workforce ” (“own workforce” includes employees , individual contractors, i.e., self- employed workers, and workers provided by third party undertakings primarily engaged in ‘employment activities’). Own workforce is covered in ESRS S1 Own workforce. See AR 3 for examples of what is included in the scope of this Standard.

Interaction with other ESRS

5.

This Standard applies when material impacts on and/or material risks and opportunities related to value chain workers have been identified through the materiality assessment process laid out in ESRS 2 General disclosures.

6.

This Standard shall be read in conjunction with ESRS 1 General requirements, and ESRS 2, as well as the ESRS S1, ESRS S3 Affected communities and ESRS S4 Consumers and end-users.

7.

The reporting under this Standard shall be consistent, coherent and where relevant clearly linked with reporting on the undertaking’s own workforce under ESRS S1, in order to ensure effective reporting.

Disclosure Requirements

ESRS 2 General disclosures

8.

The requirements of this section should be read in conjunction with the disclosures required by ESRS 2 on Strategy (SBM). The resulting disclosures shall be presented alongside the disclosures required by ESRS 2, except for SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model, for which the undertaking has an option to present the disclosures alongside the topical disclosure.

Strategy

Disclosure Requirement related to ESRS 2 SBM-2 Interests and views of stakeholders

9.

When responding to ESRS 2 SBM-2 paragraph 43, the undertaking shall disclose how the interests, views, and rights of its value chain workers could be materially impacted by the undertaking, including respect for their human rights, inform its strategy and business model. Value chain workers are a key group of affected stakeholders .

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

10.

When responding to ESRS 2 SBM-3 paragraph 48, the undertaking shall disclose: (a) whether and how actual and potential impacts on value chain workers , as identified in ESRS 2 IRO-1 Description of the processes to identify and assess material impacts, risks and opportunities: (i) originate from or are connected to the undertaking’s strategy and business models, and (ii) inform and contribute to adapting the undertaking’s strategy and business model; and (b) the relationship between on the one hand its material risks and opportunities arising from impacts and dependencies on value chain workers, and on the other hand its strategy and business model.

11.

When fulfilling the requirements of paragraph ESRS 2 SBM-3 paragraph 48, the undertaking shall disclose whether all value chain workers who are likely to be materially impacted by the undertaking, including impacts that are connected with the undertaking’s own operations and value chain, including through its products or services , as well as through its business relationships, are included in the scope of its disclosure under ESRS 2. In addition, the undertaking shall provide the following information: (a) a brief description of the types of value chain workers who could be materially impacted by the undertaking, including impacts that connected with the undertaking’s own operations and value chain, including through its products or services, as well as through its business relationships, and specify whether they are: i. workers working on the undertaking site but who are not part of own workforce , i.e., who are not self-employed workers or workers provided by third party undertakings primarily engaged in employment activities (covered through ESRS S1); ii. workers working for entities in the undertaking’s upstream value chain (e.g., those involved in the extraction of metals or minerals or harvesting of commodities, in refining, manufacturing or other forms of processing); iii. workers working for entities in the undertaking’s downstream value chain (e.g., those involved in the activities of logistics or distribution providers, franchisees, retailers); iv. workers working in the operations of a joint venture or special purpose vehicle involving the reporting undertaking; v. workers who (within the prior categories or additionally) are particularly vulnerable to negative impacts whether due to their inherent characteristics or to the particular context, such as trade unionists, migrant workers, home workers, women or young workers. (b) any geographies, at country level or other levels, or commodities for which there is a significant risk of child labour , or of forced labour or compulsory labour, among workers in the undertaking’s value chain (111); (c) in the case of material negative impacts, whether they are either (i) widespread or systemic in contexts where the undertaking operates or has sourcing or other business relationships (e.g., child labour or forced labour in particular commodity supply chains in specific countries or regions), or (ii) related to individual incidents (e.g., an industrial accident or an oil spill) or to specific business relationships. This includes consideration of impacts on value chain workers that may arise from the transition to greener and climate-neutral operations. Potential impacts include impacts associated with innovation and restructuring, closure of mines, increased mining of minerals needed for the transition to a sustainable economy, and solar panel production; (d) in the case of material positive impacts, a brief description of the activities that result in the positive impacts (e.g., updated purchasing practices, capacity-building to supply chain workers), including providing opportunities for the workforce such as job creation and upskilling in the context of a ‘just transition’, and the types of value chain workers that are positively affected or could be positively affected; the undertaking may also disclose whether the positive impacts occur in specific countries or regions; and (e) any material risks and opportunities for the undertaking arising from impacts and dependencies on value chain workers.

12.

In describing the main types of value chain workers who are or could be negatively affected, based on the materiality assessment set out in ESRS 2 IRO-1, the undertaking shall disclose whether and how it has developed an understanding of how workers with particular characteristics, those working in particular contexts, or those undertaking particular activities may be at greater risk of harm.

13.

The undertaking shall disclose which, if any, of its material risks and opportunities arising from impacts and dependencies on its value chain workers relate to specific groups of value chain workers (for example, particular age groups, workers in a particular factory or country) rather than to all of the value chain workers.

Impact, risk and opportunity management

Disclosure Requirement S2-1 – Policies related to value chain workers

14.

The undertaking shall describe its policies adopted to manage its material impacts on value chain workers, as well as associated material risks and opportunities.

15.

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 material impacts on value chain workers specifically, as well as policies that cover material risks or opportunities related to value chain workers.

16.

The disclosure required by paragraph 14 shall contain the information on the undertaking’s policies to manage its material impacts, risks and opportunities related to value chain workers in accordance with ESRS 2 MDR-P Policies adopted to manage material sustainability matters. In addition, the undertaking shall specify whether such policies cover specific groups of value chain workers or all value chain workers.

17.

The undertaking shall describe its human rights policy commitments (112) that are relevant to value chain workers , including those processes and mechanisms to monitor compliance with the UN Guiding Principles on Business and Human Rights, ILO Declaration on Fundamental Principles and Rights at Work or OECD Guidelines for Multinational Enterprises (113). In its disclosure, it shall focus on those matters that are material in relation to, as well as the general approach to: (a) respect for the human rights, including labour rights, of workers; (b) engagement with value chain workers; and (c) measures to provide and/or enable remedy for human rights impacts.

18.

The undertaking shall state whether its policies in relation to value chain workers explicitly address trafficking in human beings (114), forced labour or compulsory labour and child labour. It shall also state whether the undertaking has a supplier code of conduct (115).

19.

The undertaking shall disclose whether and how its policies with regard to value chain workers are aligned with internationally recognised instruments relevant to value chain workers, including the United Nations (UN) Guiding Principles on Business and Human Rights (116). The undertaking shall also disclose the extent to which cases of non-respect of the UN Guiding Principles on Business and Human Rights, ILO Declaration on Fundamental Principles and Rights at Work or OECD Guidelines for Multinational Enterprises that involve value chain workers have been reported in its upstream and downstream value chain and, if applicable, an indication of the nature of such cases (117).

Disclosure Requirement S2-2 – Processes for engaging with value chain workers about impacts

20.

The undertaking shall disclose its general processes for engaging with value chain workers and their representatives about actual and potential impacts on them.

21.

The objective of this Disclosure Requirement is to enable an understanding of whether and how the undertaking engages, as part of its ongoing due diligence process, with value chain workers and their legitimate representatives, or with credible proxies , about material actual and potential positive and/or negative impacts that do or are likely to affect them, and whether and how perspectives of value chain workers are taken into account in the decision-making processes of the undertaking.

22.

The undertaking shall disclose whether and how the perspectives of value chain workers inform its decisions or activities aimed at managing the actual and potential impacts on value chain workers. This shall include, where relevant, an explanation of: (a) whether engagement occurs with value chain workers or their legitimate representatives directly, or with credible proxies that have insight into their situation; (b) the stage(s) at which engagement occurs, the type of engagement, and the frequency of the engagement; (c) the function and the most senior role within the undertaking that has operational responsibility for ensuring that this engagement happens, and that the results inform the undertaking’s approach; (d) where applicable, Global Framework Agreements or for agreements that the undertaking has with global union federations related to respect of human rights of workers in the value chain, including their right to bargain collectively, and including an explanation of how the agreement enables the undertaking to gain insight into those workers’ perspectives; and (e) where applicable, how the undertaking assesses the effectiveness of its engagement with workers in the value chain, including, where relevant, any agreements or outcomes that result.

23.

Where applicable, the undertaking shall disclose the steps it takes to gain insight into the perspectives of workers that may be particularly vulnerable to impacts and/or marginalised (for example, women workers, migrant workers, workers with disabilities).

24.

If the undertaking cannot disclose the above required information because it has not adopted a general process to engage with workers in the value chain, it shall disclose this to be the case. It may disclose a timeframe in which it aims to have such a process in place.

Disclosure Requirement S2-3 – Processes to remediate negative impacts and channels for value chain workers to raise concerns

25.

The undertaking shall describe the processes it has in place to provide for or cooperate in the remediation of negative impacts on value chain workers that the undertaking is connected with, as well as channels available to value chain workers to raise concerns and have them addressed.

26.

The objective of this Disclosure Requirement is to enable an understanding of the formal means by which value chain workers can make their concerns and needs known directly to the undertaking and/or through which the undertaking supports the availability of such channels (for example, grievance mechanisms ) in the workplace of value chain workers, how follow up is carried out with these workers regarding the issues raised, and the effectiveness of these channels.

27.

The undertaking shall describe: (a) its general approach to and processes for providing or contributing to remedy where it has caused or contributed to a material negative impact on value chain workers , including whether and how the undertaking assesses that the remedy provided is effective; (b) any specific channels it has in place for value chain workers to raise their concerns or needs directly with the undertaking and have them addressed, including whether these are established by the undertaking itself and/or whether they are third-party mechanisms; (c) the processes through which it supports or requires the availability of such channels in the workplace of value chain workers; and (d) how it tracks and monitors issues raised and addressed, and how it ensures the effectiveness of the channels, including through involvement of stakeholders who are the intended users .

28.

The undertaking shall disclose whether and how it assesses that value chain workers are aware of and trust these structures or processes as a way to raise their concerns or needs and have them addressed. In addition, the undertaking shall disclose whether it has policies in place regarding the protection of individuals that use them against retaliation. If such information has been disclosed in accordance with ESRS G1-1, the undertaking may refer to that information.

29.

If the undertaking cannot disclose the above required information because it has not adopted a channel for raising concerns and/or does not support the availability of such a channel in the workplace of value chain workers, it shall disclose this to be the case. It may disclose a timeframe in which it aims to have such a channel or processes in place.

Disclosure Requirement S2-4 – Taking action on material impacts on value chain workers, and approaches to managing material risks and pursuing material opportunities related to value chain workers, and effectiveness of those actions

30.

The undertaking shall disclose how it takes action to address material impacts on value chain workers, and to manage material risks and pursue material opportunities related to value chain workers and the effectiveness of those actions.

31.

The objective of this Disclosure Requirement is twofold. Firstly, it is to enable an understanding of any actions or initiatives through which the undertaking seeks to: (a) prevent, mitigate and remediate the negative material impacts on value chain workers ; and/or (b) achieve positive material impacts for value chain workers. Secondly, it is to enable an understanding of the ways in which the undertaking is addressing the material risks and pursuing the material opportunities related to workers in the value chain . The undertaking shall provide a summarised description of the action plans and resources to manage its material impacts, risks, and opportunities related to value chain workers as per ESRS 2 MDR-A Actions and resources in relation to material sustainability matters.

32.

In relation to material impacts , the undertaking shall describe: (a) actions taken, planned or underway to prevent or mitigate material negative impacts on value chain workers ; (b) whether and how it has taken action to provide or enable remedy in relation to an actual material impact; (c) any additional actions or initiatives it has in place with the primary purpose of delivering positive impacts for value chain workers; and (d) how it tracks and assesses the effectiveness of such actions and initiatives in delivering intended outcomes for value chain workers.

33.

In relation to paragraph 30, the undertaking shall describe: (a) the processes through which it identifies what action is needed and appropriate in response to a particular actual or potential negative impact on value chain workers ; (b) its approach to taking action in relation to specific material negative impacts on value chain workers, including any action in relation to its own purchasing or other internal practices, as well as capacity- building or other forms of engagement with entities in the value chain, or forms of collaborative action with industry peers or other relevant parties; and (c) how it ensures that processes to provide or enable remedy in the event of material negative impacts are available and effective in their implementation and outcomes.

34.

In relation to material risks and opportunities, the undertaking shall describe: (a) what action is planned or underway to mitigate material risks for the undertaking arising from its impacts and dependencies on value chain workers and how it tracks effectiveness in practice; and (b) what action is planned or underway to pursue material opportunities for the undertaking in relation to value chain workers.

35.

The undertaking shall disclose whether and how it takes action to avoid causing or contributing to material negative impacts on value chain workers through its own practices, including, where relevant, in relation to procurement, sales and data use. This may include disclosing what approach is taken when tensions arise between the prevention or mitigation of material negative impacts and other business pressures.

36.

The undertaking shall also disclose whether severe human rights issues and incidents connected to its upstream and downstream value chain have been reported and, if applicable, disclose these (118).

37.

When disclosing the information required under paragraph 32 (c), the undertaking shall consider ESRS 2 (see ESRS 2 MDR-T Tracking effectiveness of policies and actions through targets ) if it evaluates the effectiveness of an action by setting a target.

38.

The undertaking shall disclose what resources are allocated to the management of its material impacts, with information that enables users to gain an understanding of how the material impacts are managed.

Metrics and targets

Disclosure Requirement S2-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities

39.

The undertaking shall disclose the time-bound and outcome-oriented targets it may have set related to: (a) reducing negative impacts on value chain workers; and/or (b) advancing positive impacts on value chain workers; and/or (c) managing material risks and opportunities related to value chain workers.

40.

The objective of this Disclosure Requirement is to enable an understanding of the extent to which the undertaking is using time-bound and outcome-oriented targets to drive and measure its progress in addressing material negative impacts, and/or advancing positive impacts on value chain workers, and/or in managing material risks and opportunities related to value chain workers.

41.

The summarised description of the targets to manage its material impacts, risks and opportunities related to value chain workers shall contain the information requirements defined in ESRS 2 MDR-T.

42.

The undertaking shall disclose the process for setting the targets , including whether and how the undertaking engaged directly with workers in the value chain, their legitimate representatives, or with credible proxies that have insight into their situation in: (a) setting any such targets; (b) tracking the undertaking’s performance against them; and (c) identifying any lessons or improvements as a result of the undertaking’s performance.

ESRS S3

AFFECTED COMMUNITIES

TABLE OF CONTENTS

Objective

Interaction with other ESRS

Disclosure Requirements

–

ESRS 2 General disclosures

Strategy

—

Disclosure Requirement related to ESRS 2 SBM-2 – Interests and views of stakeholders

—

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

Impact, risk and opportunity management

—

Disclosure Requirement S3-1 – Policies related to affected communities

—

Disclosure Requirement S3-2 – Processes for engaging with affected communities about impacts

—

Disclosure Requirement S3-3 – Processes to remediate negative impacts and channels for affected communities to raise concerns

—

Disclosure Requirement S3-4 – Taking action on material impacts on affected communities, and approaches to managing material risks and pursuing material opportunities related to affected communities, and effectiveness of those actions

Metrics and targets

—

Disclosure Requirement S3-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunitie

Appendix A:

Application Requirements

–

Objective

–

ESRS 2 General Disclosures

Strategy

—

Disclosure Requirement related to ESRS 2 SBM-2 – Interests and views of stakeholders

—

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

Impact, risk and opportunity management

—

Disclosure Requirement S3-1 – Policies related to affected communities

—

Disclosure Requirement S3-2 – Processes for engaging with affected communities about impacts

—

Disclosure Requirement S3-3 – Processes to remediate negative impacts and channels for affected communities to raise concerns

—

Disclosure Requirement S3-4 – Taking action on material impacts, and approaches to mitigating material risks and pursuing material opportunities related to affected communities, and effectiveness of those actions and approaches

Metrics and targets

—

Disclosure Requirement S3-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities

Objective

1.

The objective of this Standard is to specify disclosure requirements which will enable users of the sustainability statement to understand material impacts on affected communities connected with the undertaking’s own operations and value chain, including through its products or services, as well as through its business relationships , and its related material risks and opportunities, including: (a) how the undertaking affects communities, in areas where impacts are most likely to be present and severe, in terms of material positive and negative actual or potential impacts; (b) any actions taken, and the result of such actions, to prevent, mitigate or remediate actual or potential negative impacts, and to address risks and opportunities; (c) the nature, type and extent of the undertaking’s material risks and opportunities related to its impacts and dependencies on affected communities , and how the undertaking manages them; and (d) the financial effects on the undertaking over the short-, medium- and long-term of material risks and opportunities arising from the undertaking’s impacts and dependencies on affected communities.

2.

In order to meet the objective, this Standard requires an explanation of the general approach the undertaking takes to identify and manage any material actual and potential impacts on affected communities in relation to: (a) communities’ economic, social and cultural rights (for example, adequate housing, adequate food, water and sanitation, land-related and security-related impacts); (b) communities’ civil and political rights (for example, freedom of expression, freedom of assembly, impacts on human rights defenders); and (c) particular rights of indigenous peoples (for example, free, prior and informed consent, self-determination, cultural rights).

3.

This Standard also requires an explanation of how such impacts, as well as the undertaking’s dependencies on affected communities, can create material risks or opportunities for the undertaking. For example, negative relationships with affected communities may disrupt the undertaking’s own operations or harm its reputation, while constructive relationships can bring business benefits, such as stable and conflict-free operations and a greater ease of recruiting locally.

Interaction with other ESRS

4.

This standard applies when material impacts on and/or material risks and opportunities related to affected communities have been identified through the materiality assessment process laid out in ESRS 2 General disclosures.

5.

This Standard shall be read in conjunction with ESRS 1 General requirements, and ESRS 2, as well as the ESRS S1 Own workforce, ESRS S2 Workers in the value chain and ESRS S4 Consumers and end-users.

Disclosure Requirements

ESRS 2 General disclosures

6.

The requirements of this section should be read in conjunction with the disclosures required by ESRS 2 on Strategy (SBM). The resulting disclosures shall be presented alongside the disclosures required by ESRS 2, except for SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model, for which the undertaking has an option to present the disclosures alongside the topical disclosure.

Strategy

Disclosure Requirement related to ESRS 2 SBM-2 – Interests and views of stakeholders

7.

When responding to ESRS 2 SBM-2, paragraph 43, the undertaking shall disclose how the views, interests, and rights of affected communities , including respect for their human rights (and their rights as indigenous peoples , where applicable), inform its strategy and business model. Affected communities are a key group of affected stakeholders .

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

8.

When responding to ESRS 2 SBM-3 paragraph 48, the undertaking shall disclose: (a) whether and how actual and potential impacts on affected communities as identified in ESRS 2 IRO-1 Description of the processes to identify and assess material impacts, risks and opportunities: (i) originate from or are connected to the undertaking’s strategy and business models, and (ii) inform and contribute to adapting the undertaking’s strategy and business model; and (b) the relationship between its material risks and opportunities arising from impacts and dependencies on affected communities and its strategy and business model.

9.

When fulfilling the requirements of paragraph 48, the undertaking shall disclose whether all affected communities who are likely to be materially impacted by the undertaking, including impacts that are connected with the undertaking’s own operations and value chain , including through its products or services, as well as through its business relationships , are included in the scope of its disclosure under ESRS 2. In addition, the undertaking shall provide the following information: (a) a brief description of the types of communities subject to material impacts by its own operations or through its upstream and downstream value chain, and specify whether they are: i. communities living or working around the undertaking’s operating sites , factories, facilities or other physical operations, or more remote communities affected by activities at those sites (for example by downstream water pollution ); ii. communities along the undertaking’s value chain (for example, those affected by the operations of suppliers ’ facilities or by the activities of logistics or distribution providers); iii. communities at one or both endpoints of the value chain (for example, at the point of extraction of metals or minerals or harvesting of commodities, or communities around waste or recycling sites); iv. communities of indigenous peoples . (b) in the case of material negative impacts, whether they are either (i) widespread or systemic in contexts where the undertaking operates or has sourcing or other business relationships (for example, marginalised populations suffering impacts on their health and quality of life in a highly industrialised area), or (ii) related to individual incidents in the undertaking’s own operations (e.g., a toxic waste spill affecting a community’s access to clean drinking water) or in a specific business relationship (e.g., a peaceful protest by communities against business operations that was met with a violent response from the undertaking’s security services). This includes consideration of impacts on affected communities that may arise from the transition to greener and climate- neutral operations. Potential impacts include impacts associated with innovation and restructuring, closure of mines, increased mining of minerals needed for the transition to a sustainable economy and solar panel production; (c) in the case of material positive impacts, a brief description of the activities that result in the positive impacts (for example, capacity-building to support more and new forms of local livelihoods) and the types of communities that are positively affected or could be positively affected; the undertaking may also disclose whether the positive impacts occur in specific countries or regions; and (d) any material risks and opportunities for the business arising from impacts and dependencies on affected communities.

10.

In describing the main types of communities who are or could be negatively affected, based on the materiality assessment set out in Disclosure Requirement ESRS 2 IRO-1, the undertaking shall disclose whether and how it has developed an understanding of how affected communities with particular characteristics or those living in particular contexts, or those undertaking particular activities may be at greater risk of harm.

11.

The undertaking shall disclose which, if any, of its material risks and opportunities arising from impacts and dependencies on affected communities relate to specific groups of affected communities rather than to all affected communities.

Impact, risk and opportunity management

Disclosure Requirement S3-1 – Policies related to affected communities

12.

The undertaking shall describe its policies adopted to manage its material impacts on affected communities, as well as associated material risks and opportunities.

13.

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 material impacts on affected communities specifically, as well as policies that cover material risks or opportunities related to affected communities.

14.

The disclosure required by paragraph 12 shall contain the information on the undertaking’s policies to manage its material impacts, risks and opportunities related to affected communities in accordance with ESRS 2 MDR-P Policies adopted to manage material sustainability matters. In addition, the undertaking shall specify if such policies cover specific affected communities or all affected communities.

15.

The undertaking shall disclose any particular policy provisions for preventing and addressing impacts on indigenous peoples .

16.

The undertaking shall describe its human rights policy commitments (119) that are relevant to affected communities, including those processes and mechanisms to monitor compliance with the UN Guiding Principles on Business and Human Rights, ILO Declaration on Fundamental Principles and Rights at Work or OECD Guidelines for Multinational Enterprises. In its disclosure it shall focus on those matters that are material in relation to (120), as well as its general approach to: (a) respect for the human rights of communities, and indigenous peoples specifically; (b) engagement with affected communities; and (c) measures to provide and/or enable remedy for human rights impacts.

17.

The undertaking shall disclose whether and how its policies with regard to affected communities are aligned with internationally recognised standards relevant to communities and indigenous peoples specifically, including the United Nations (UN) Guiding Principles on Business and Human Rights. The undertaking shall also disclose the extent to which cases of non-respect of the UN Guiding Principles on Business and Human Rights, ILO Declaration on Fundamental Principles and Rights at Work or OECD Guidelines for Multinational Enterprises that involve affected communities have been reported in its own operations or in its upstream and downstream value chain and, if applicable, an indication of the nature of such cases (121).

18.

The policy may take the form of a stand-alone policy regarding communities or be included in a broader document such as a code of ethics or a general sustainability policy that has already been disclosed by the undertaking as part of another ESRS. In those cases, the undertaking shall provide an accurate cross-reference to identify the aspects of the policy that satisfy the requirements of this Disclosure Requirement.

Disclosure Requirement S3-2 – Processes for engaging with affected communities about impacts

19.

The undertaking shall disclose its general processes for engaging with affected communities and their representatives about actual and potential impacts on them.

20.

The objective of this Disclosure Requirement is to enable an understanding of whether and how the undertaking engages, as part of its ongoing due diligence process, with affected communities, their legitimate representatives, or with credible proxies , about material actual and potential positive and/or negative impacts that do or are likely to affect them, and whether and how perspectives of affected communities are taken into account in the decision-making processes of the undertaking.

21.

The undertaking shall disclose whether and how the perspectives of affected communities inform its decisions or activities aimed at managing actual and potential impacts on communities. This shall include, where relevant, an explanation of: (a) whether engagement occurs with affected communities or their legitimate representatives directly, or with credible proxies that have insight into their situation; (b) the stage(s) at which engagement occurs, the type of engagement, and the frequency of the engagement; (c) the function and the most senior role within the undertaking that has operational responsibility for ensuring this engagement happens, and that the results inform the undertaking’s approach; (d) where applicable, how the undertaking assesses the effectiveness of its engagement with affected communities, including, where relevant, any agreements or outcomes that result.

22.

Where applicable, the undertaking shall disclose the steps it takes to gain insight into the perspectives of affected communities that may be particularly vulnerable to impacts and/or marginalised, and into the perspective of specific groups within the affected communities, such as women and girls.

23.

Where affected communities are indigenous peoples , the undertaking shall also disclose how it takes into account and ensures respect of their particular rights in its stakeholder engagement approach, including their right to free, prior and informed consent with regard to: (i) their cultural, intellectual, religious and spiritual property; (ii) activities affecting their lands and territories; and (iii) legislative or administrative measures that affect them. In particular, where engagement occurs with indigenous peoples, the undertaking shall also disclose whether and how indigenous peoples have been consulted on the mode and parameters of the engagement (for example, in designing the agenda, nature, and timeliness of the engagement).

24.

If the undertaking cannot disclose the above required information because it has not adopted a general process to engage with affected communities, it shall disclose this to be the case. It may disclose a timeframe in which it aims to have such a process in place.

Disclosure Requirement S3-3 – Processes to remediate negative impacts and channels for affected communities to raise concerns

25.

The undertaking shall describe the processes it has in place to provide for or cooperate in the remediation of negative impacts on affected communities that the undertaking is connected with, as well as channels available to affected communities to raise concerns and have them addressed.

26.

The objective of this Disclosure Requirement is to enable an understanding of the formal means by which affected communities can make their concerns and needs known directly to the undertaking, and/or through which the undertaking supports the availability of such channels (for example, grievance mechanisms ) by its business relationships, how follow up is performed with these communities regarding the issues raised, and the effectiveness of these channels.

27.

The undertaking shall describe: (a) its general approach to and processes for providing or contributing to remedy where it has identified that it has caused or contributed to a material negative impact on affected communities, including whether and how the undertaking assesses that the remedy provided is effective; (b) any specific channels it has in place for affected communities to raise their concerns or needs directly with the undertaking and have them addressed, including whether these are established by the undertaking itself and/or through participation in third-party mechanisms; (c) its processes through which the undertaking supports the availability of such channels by its business relationships; and (d) how it tracks and monitors issues raised and addressed, and how it ensures the effectiveness of the channels, including through involvement of stakeholders who are the intended users of those channels.

28.

The undertaking shall disclose whether and how it assesses that affected communities are aware of and trust these structures or processes as a way to raise their concerns or needs and have them addressed. In addition, the undertaking shall disclose whether it has policies in place regarding the protection of individuals that use them against retaliation. If such information has been disclosed in accordance with ESRS G1-1, the undertaking may refer to that information.

29.

If the undertaking cannot disclose the above required information because it has not adopted a channel for raising concerns and/or does not support the availability of such a channel by its business relationships, it shall disclose this to be the case. It may disclose a timeframe in which it aims to have such a channel or processes in place.

Disclosure Requirement S3-4 – Taking action on material impacts on affected communities, and approaches to managing material risks and pursuing material opportunities related to affected communities, and effectiveness of those actions

30.

The undertaking shall disclose how it takes action to address material impacts on affected communities, and to manage material risks and pursue material opportunities related to affected communities and the effectiveness of those actions.

31.

The objective of this Disclosure Requirement is twofold. Firstly, it is to provide an understanding of any actions and initiatives through which the undertaking seeks to: (a) prevent, mitigate and remediate the negative material impacts on affected communities; and/or (b) achieve positive material impacts for affected communities. Secondly, it is to enable an understanding of the ways in which the undertaking is addressing the material risks and pursuing the material opportunities related to affected communities. The undertaking shall provide a summarised description of the action plans and resources to manage its material impacts, risks, and opportunities related to affected communities as per ESRS 2 MDR-A Actions and resources in relation to material sustainability matters.

32.

In relation to material impacts, the undertaking shall describe: (a) actions taken, planned or underway to prevent or mitigate material negative impacts on affected communities; (b) whether and how it has taken action to provide or enable remedy in relation to an actual material impact; (c) any additional actions or initiatives it has in place with the primary purpose of delivering positive impacts for affected communities; and (d) how it tracks and assesses the effectiveness of these actions and intiatives in delivering intended outcomes for affected communities.

33.

In relation to paragraph 29, the undertaking shall describe: (a) the processes through which it identifies what action is needed and appropriate in response to a particular actual or potential negative impact on affected communities; (b) its approach to taking action in relation to specific material negative impacts on communities, including any action in relation to its own practices regarding land acquisition, planning and construction, operation or closure practices, as well as whether wider industry or collaborative action with other relevant parties will be required; and (c) how it ensures that processes to provide or enable remedy in the event of material negative impacts are available and effective in their implementation and outcomes.

34.

In relation to material risks and opportunities, the undertaking shall describe: (a) what action is planned or underway to mitigate material risks for the undertaking arising from its impacts and dependencies on affected communities and how it tracks effectiveness in practice; and (b) what action is planned or underway to pursue material opportunities for the undertaking in relation to affected communities.

35.

The undertaking shall disclose whether and how it takes action to avoid causing or contributing to material negative impacts on affected communities through its own practices, including, where relevant, in relation to planning, land acquisition and exploitation, finance, extraction or production of raw materials, use of natural resources, and management of environmental impacts. This may include disclosing what approach is taken when tensions arise between the prevention or mitigation of material negative impacts and other business pressures.

36.

The undertaking shall also disclose whether severe human rights issues and incidents connected to affected communities have been reported and, if applicable, disclose these (122).

37.

When disclosing the information required under paragraph 31 (c), the undertaking shall consider ESRS 2 MDR-T Tracking effectiveness of policies and actions through targets if it evaluates the effectiveness of an action by setting a target.

38.

The undertaking shall disclose what resources are allocated to the management of its material impacts, with information that enables users to gain an understanding of how the material impacts are managed.

Metrics and targets

Disclosure Requirement S3-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities

39.

The undertaking shall disclose the time-bound and outcome-oriented targets it may have set related to: (a) reducing negative impacts on affected communities; and/or (b) advancing positive impacts on affected communities; and/or (c) managing material risks and opportunities related to affected communities.

40.

The objective of this Disclosure Requirement is to enable an understanding of the extent to which the undertaking is using time-bound and outcome-oriented targets to drive and measure its progress in addressing material negative impacts, and/or advancing positive impacts on affected communities, and/or in managing material risks and opportunities related to affected communities.

41.

The summarised description of the targets to manage its material impacts, risks and opportunities related to affected communities shall contain the information requirements defined in ESRS 2 MDR-T.

42.

The undertaking shall disclose the process for setting the targets , including whether and how the undertaking engaged directly with affected communities, their legitimate representatives, or with credible proxies that have insight into their situation in: (a) setting any such targets; (b) tracking the undertaking’s performance against them; and (c) identifying, any, lessons or improvements as a result of the undertaking’s performance.

ESRS S4

CONSUMERS AND END-USERS

TABLE OF CONTENTS

Objective

Interaction with other ESRS

Disclosure Requirements

–

ESRS 2 General Disclosures

Strategy

—

Disclosure Requirement related to ESRS 2 SBM-2 – Interests and views of stakeholders

—

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

Impact, risk and opportunity management

—

Disclosure Requirement S4-1 – Policies related to consumers and end-users

—

Disclosure Requirement S4-2 – Processes for engaging with consumers and end-users about impacts

—

Disclosure Requirement S4-3 – Processes to remediate negative impacts and channels for consumers and end-users to raise concerns

—

Disclosure Requirement S4-4 – Taking action on material impacts on consumers and end-users, and approaches to managing material risks and pursuing material opportunities related to consumers and end-users, and effectiveness of those actions

Metrics and targets

—

Disclosure Requirement S4-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities

Appendix A:

Application Requirements

–

Objective

–

ESRS 2 General disclosures

Strategy

—

Disclosure Requirement related to ESRS 2 SBM-2 – Interests and views of stakeholders

—

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

Impact, risk and opportunity management

—

Disclosure Requirement S4-1 – Policies related to consumers and end-users

—

Disclosure Requirement S4-2 – Processes for engaging with consumers and end-users about impacts

—

Disclosure Requirement S4-3 – Processes to remediate negative impacts and channels for consumers and end-users to raise concerns

—

Disclosure Requirement S4-4 – Taking action on material impacts, and approaches to mitigating material risks and pursuing material opportunities related to consumers and end-users and effectiveness of those actions and approaches

Metrics and targets

—

Disclosure Requirement S4-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities

Objective

1.

The objective of this Standard is to specify disclosure requirements which will enable users of the sustainability statement to understand material impacts on consumers and end-users connected with the undertaking’s own operations and value chain , including through its products or services, as well as through its business relationships , and its related material risks and opportunities , including: (a) how the undertaking affects the consumers and/or end-users of its products and/or services (referred to in this Standard as “consumers and end-users”), in terms of material positive and negative actual or potential impacts; (b) any actions taken, and the result of such actions, to prevent, mitigate or remediate actual or potential negative impacts, and to address risks and opportunities; (c) the nature, type and extent of the undertaking’s material risks and opportunities related to its impacts and dependencies on consumers and end-users, and how the undertaking manages such risks and opportunities; and (d) the financial effects on the undertaking over the short-, medium- and long-term of material risks and opportunities arising from the undertaking’s impacts and dependencies on consumers and/or end-users.

2.

In order to meet the objective, this Standard requires an explanation of the general approach the undertaking takes to identify and manage any material actual and potential impacts on the consumers and/or end-users related to its products and/or services in relation to: (a) information-related impacts on consumers and/or end-users (for example, privacy, freedom of expression and access to (quality) information; (b) personal safety of consumers and/or end-users (for example, health and safety, security of a person and protection of children); (c) social inclusion of consumers and/or end-users (for example, non- discrimination , access to products and services and responsible marketing practices).

3.

This Standard also requires an explanation of how such impacts, as well as the undertaking’s dependencies on consumers and/or end-users, can create material risks or opportunities for the undertaking. For example, negative impacts on the reputation of the undertaking’s products and/or services can be detrimental to its business performance, while trust in products and/or services can bring business benefits, such as increased sales or widening of the future consumer base.

4.

The unlawful use or misuse of the undertaking’s products and services by consumers and end-users fall outside the scope of this standard.

Interaction with other ESRS

5.

This standard applies when material impacts on and/or material risks and opportunities related to consumers and/or end-users have been identified through the materiality assessment process laid out in ESRS 2 General disclosures.

6.

This Standard shall be read in conjunction with ESRS 1 General requirements, and ESRS 2, as well as ESRS S1 Own workforce, ESRS S2 Workers in the value chain and ESRS S3 Affected communities.

Disclosure Requirements

ESRS 2 General Disclosures

7.

The requirements of this section should be read in conjunction with the disclosures required by ESRS 2 on Strategy (SBM). The resulting disclosures shall be presented alongside the disclosures required by ESRS 2, except for SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model, for which the undertaking has an option to present the disclosures alongside the topical disclosure.

Strategy

Disclosure Requirement related to ESRS 2 SBM-2 – Interests and views of stakeholders

8.

When responding to ESRS 2 SBM-2, paragraph 43, the undertaking shall disclose how the interests, views and rights of its consumers and/or end-users, including respect for their human rights, inform its strategy and business model. Consumers and/or end-users are a key group of affected stakeholders .

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

9.

When responding to ESRS 2 SBM-3 paragraph 48, the undertaking shall disclose: (a) whether and how actual and potential impacts on consumers and/or end-users as identified in Disclosure Requirements ESRS 2 IRO-1 Description of the processes to identify and assess material impacts, risks and opportunities: (i) originate from or are connected to the undertaking’s strategy and business model , and (ii) inform and contribute to adapting the undertaking’s strategy and business model, and (b) the relationship between its material risks and opportunities arising from impacts and dependencies on consumers and/or end-users and its strategy and business model.

10.

When fulfilling the requirements of paragraph 48, the undertaking shall disclose whether all consumers and/or end-users who are likely to be materially impacted by the undertaking, including impacts connected with the undertaking’s own operations and value chain , including through its products or services, as well as through its business relationships , are included in the scope of its disclosure under ESRS 2. In addition, the undertaking shall disclose the following information: (a) a brief description of the types of consumers and/or end-users subject to material impacts by its own operations or through its value chain, and specify whether they are: i. consumers and/or end-users of products that are inherently harmful to people and/or increase risks for chronic disease; ii. consumers and/or end-users of services that potentially negatively impact their rights to privacy, to have their personal data protected, to freedom of expression and to non- discrimination ; iii. consumers and/or end-users who are dependent on accurate and accessible product- or service- related information, such as manuals and product labels, to avoid potentially damaging use of a product or service; iv. consumers and/or end-users who are particularly vulnerable to health or privacy impacts or impacts from marketing and sales strategies, such as children or financially vulnerable individuals; (b) in the case of material negative impacts, whether they are either (i) widespread or systemic in contexts where the undertaking sells or provides its products or services (for example, state surveillance that affects the privacy of service users), or (ii) related to individual incidents (for example, a defect linked to a particular product) or to specific business relationships (for example, a business partner uses marketing that inappropriately targets young consumers ); (c) in the case of material positive impacts, a brief description of the activities that result in the positive impacts (for example, product design that improves its accessibility for persons with disabilities) and the types of consumers and/or end-users that are positively affected or could be positively affected; the undertaking may also disclose whether the positive impacts occur in specific countries or regions; and (d) any material risks and opportunities for the business arising from impacts and dependencies on consumers and/or end-users.

11.

In describing the main types of consumers and/or end-users who are or could be negatively affected, based on the materiality assessment set out in ESRS 2 IRO-1, the undertaking shall disclose whether and how it has developed an understanding of how consumers and/or end-users with particular characteristics, or those using particular products or services, may be at greater risk of harm.

12.

The undertaking shall disclose which, if any, of its material risks and opportunities arising from impacts and dependencies on consumers and/or end-users, relate to specific groups of consumers and/or end-users (for example, particular age groups) rather than to all consumers and/or end-users.

Impact, risk and opportunity management

Disclosure Requirement S4-1 – Policies related to consumers and end-users

13.

The undertaking shall describe its policies adopted to manage its material impacts of its products and/or services on consumers and end-users, as well as associated material risks and opportunities.

14.

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 material impacts on consumers and/or end-users specifically, as well as policies that cover material risks or opportunities related to consumers and/or end-users.

15.

The disclosure required by paragraph 13 shall contain the information on the undertaking’s policies to manage its material impacts, risks and opportunities related to consumers and/or end-users in accordance with ESRS 2 MDR-P Policies adopted to manage material sustainability matters. In addition, the undertaking shall specify if such policies cover specific groups or all consumers and/or end-users.

16.

The undertaking shall describe its human rights policy commitments (123) that are relevant to consumers and/or end-users, including those processes and mechanisms to monitor compliance with the UN Guiding Principles on Business and Human Rights, ILO Declaration on Fundamental Principles and Rights at Work or OECD Guidelines for Multinational Enterprises. In its disclosure it shall focus on those matters that are material, as well as the general approach in relation to (124): (a) respect for the human rights of consumers and/or end-users; (b) engagement with consumers and/or end-users; and (c) measures to provide and/or enable remedy for human rights impacts.

17.

The undertaking shall disclose whether and how its policies with regard to consumers and/or end-users are aligned with internationally recognised instruments relevant to consumers and/or end-users, including United Nations (UN) Guiding Principles on Business and Human Rights. The undertaking shall also disclose the extent to which cases of non-respect of the UN Guiding Principles on Business and Human Rights, ILO Declaration on Fundamental Principles and Rights at Work or OECD Guidelines for Multinational Enterprises that involve consumers and/or end-users have been reported in its downstream value chain and, if applicable, an indication of the nature of such cases (125).

Disclosure Requirement S4-2 – Processes for engaging with consumers and end-users about impacts

18.

The undertaking shall disclose its general processes for engaging with consumers and end-users and their representatives about actual and potential impacts on them.

19.

The objective of this Disclosure Requirement is to enable an understanding of whether and how the undertaking engages, as part of its ongoing due diligence process, with consumers and/or end-users , their legitimate representatives, or with credible proxies , about material actual and potential positive and/or negative impacts that do or are likely to affect them, and whether and how perspectives of consumers and/or end-users are taken into account in the decision-making processes of the undertaking.

20.

The undertaking shall disclose whether and how the perspectives of consumers and/or end-users inform its decisions or activities aimed at managing actual and potential impacts on consumers and/or end-users. This shall include, where relevant, an explanation of: (a) whether engagement occurs with affected consumers and/or end-users or their legitimate representatives directly, or with credible proxies that have insight into their situation; (b) the stage(s) at which engagement occurs, the type of engagement, and the frequency of the engagement; (c) the function and the most senior role within the undertaking that has operational responsibility for ensuring this engagement happens and that the results inform the undertaking’s approach; and (d) where applicable, how the undertaking assesses the effectiveness of its engagement with consumers and/or end-users, and, where relevant, any agreements or outcomes that result from such engagement.

21.

Where applicable, the undertaking shall disclose the steps it takes to gain insight into the perspectives of consumers and/or end-users that may be particularly vulnerable to impacts and/or marginalised (for example, people with disabilities, children, etc.).

22.

If the undertaking cannot disclose the above required information because it has not adopted a general process to engage with consumers and/or end-users , it shall disclose this to be the case. It may disclose a timeframe in which it aims to have such a process in place.

Disclosure Requirement S4-3 – Processes to remediate negative impacts and channels for consumers and end-users to raise concerns

23.

The undertaking shall describe the processes it has in place to provide for or cooperate in the remediation of negative impacts on consumers and end-users that the undertaking is connected with, as well as channels available to consumers and end-users to raise concerns and have them addressed.

24.

The objective of this Disclosure Requirement is to enable an understanding of the formal means by which consumers and/or end-users can make their concerns and needs known directly to the undertaking, and/or through which the undertaking supports the availability of such channels (for example, grievance mechanisms ) by its business relationships, how follow up is performed with these consumers and/or end-users regarding the issues raised, and the effectiveness of these channels.

25.

The undertaking shall describe: (a) its general approach to and processes for providing or contributing to remedy where it has identified that it has caused or contributed to a material negative impact on consumers and/or end-users, including whether and how the undertaking assesses that the remedy provided is effective; (b) any specific channels it has in place for consumers and/or end-users to raise their concerns or needs directly with the undertaking and have them addressed, including whether these are established by the undertaking itself and/or through participation in third-party mechanisms; (c) the processes through which the undertaking supports or requires the availability of such channels by its business relationships; and (d) how it tracks and monitors issues raised and addressed, and how it ensures the effectiveness of the channels, including through involvement of stakeholders who are the intended users.

26.

The undertaking shall disclose whether and how it assesses that consumers and/or end-users are aware of and trust these structures or processes as a way to raise their concerns or needs and have them addressed. In addition, the undertaking shall disclose whether it has policies in place to protect individuals from retaliation when they use such structures or processes. If such information has been disclosed in accordance with ESRS G1-1, the undertaking may refer to that information.

27.

If the undertaking cannot disclose the above required information because it has not adopted a channel for raising concerns and/or does not support the availability of mechanisms by its business relationships, it shall disclose this to be the case. It may disclose a timeframe in which it aims to have such a channel or processes in place.

Disclosure Requirement S4-4 – Taking action on material impacts on consumers and end- users, and approaches to managing material risks and pursuing material opportunities related to consumers and end-users, and effectiveness of those actions

28.

The undertaking shall disclose how it takes action to address material impacts on consumers and end-users, and to manage material risks and pursue material opportunities related to consumers and end-users, and effectiveness of those actions.

29.

The objective of this Disclosure Requirement is twofold. Firstly, it is to provide an understanding of any actions and initiatives through which the undertaking seeks to: (a) prevent, mitigate and remediate the negative material impacts on consumers and/or end-users , and/or (b) achieve positive material impacts for consumers and/or end-users. Secondly, it is to enable an understanding of the ways in which the undertaking is addressing the material risks and pursuing the material opportunities related to consumers and/or end-users.

30.

The undertaking shall provide a summarised description of the action plans and resources to manage its material impacts, risks, and opportunities related to consumers and end-users as per ESRS 2 MDR-A Actions and resources in relation to material sustainability matters.

31.

In relation to material impacts, the undertaking shall describe: (a) actions taken, planned or underway to prevent, mitigate or remediate material negative impacts on consumers and/or end-users; (b) whether and how it has taken action to provide or enable remedy in relation to an actual material impact; (c) any additional actions or initiatives it has in place with the primary purpose of positively contributing to improved social outcomes for consumers and/or end-users; and (d) how it tracks and assesses the effectiveness of these actions and initiatives in delivering intended outcomes for consumers and/or end-users.

32.

In relation to paragraph 28, the undertaking shall describe: (a) the processes through which it identifies what action is needed and appropriate in response to a particular actual or potential negative impact on consumers and/or end-users; (b) its approaches to taking action in relation to specific material negative impacts on consumers and/or end-users, including any action in relation to its own practices regarding product design, marketing or sales, as well as whether wider industry or collaborative action with other relevant parties will be required; and (c) how it ensures that processes to provide or enable remedy in the event of material negative impacts are available and effective in their implementation and outcomes.

33.

In relation to material risks and opportunities, the undertaking shall describe: (a) what action is planned or underway to mitigate material risks for the undertaking arising from its impacts and dependencies on consumers and/or end-users and how it tracks effectiveness in practice; and (b) what action is planned or underway to pursue material opportunities for the undertaking in relation to consumers and/or end-users.

34.

The undertaking shall disclose whether and how it takes action to avoid causing or contributing to material negative impacts on consumers and/or end-users through its own practices, including, where relevant, in relation to marketing, sales and data use. This may include disclosing what approach is taken when tensions arise between the prevention or mitigation of material negative impacts and other business pressures.

35.

When preparing this disclosure, the undertaking shall consider whether severe human rights issues and incidents connected to its consumers and/or end-users have been reported and, if applicable, disclose these (126).

36.

Where the undertaking evaluates the effectiveness of an action by setting a target, in disclosing the information required under paragraph 32 (c), the undertaking shall consider ESRS 2 MDR-T Tracking effectiveness of policies and actions through targets.

37.

The undertaking shall disclose what resources are allocated to the management of its material impacts with information that enables users to gain an understanding of how the material impacts are managed.

Metrics and targets

Disclosure Requirement S4-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities

38.

The undertaking shall disclose the time-bound and outcome-oriented targets it may have set related to: (a) reducing negative impacts on consumers and/or end-users; and/or (b) advancing positive impacts on consumers and/or end-users; and/or (c) managing material risks and opportunities related to consumers and/or end-users.

39.

The objective of this Disclosure Requirement is to enable an understanding of the extent to which the undertaking is using time-bound and outcome-oriented targets to drive and measure progress in addressing material negative impacts, and/or advancing positive impacts on consumers and/or end-users , and/or in managing material risks and opportunities related to consumers and/or end-users .

40.

The summarised description of the targets to manage its material impacts, risks and opportunities related to consumers and/or end-users shall contain the information requirements defined in ESRS 2 MDR-T.

41.

The undertaking shall disclose the process for setting the targets , including whether and how the undertaking engaged directly with consumers and/or end-users , their legitimate representatives, or with credible proxies that have insight into their situation in: (a) setting any such targets; (b) tracking the undertaking’s performance against them; and (c) identifying, if any, lessons or improvements as a result of the undertaking’s performance.

ESRS G1

BUSINESS CONDUCT

TABLE OF CONTENTS

Objective

Interaction with other ESRS

Disclosure Requirements

–

ESRS 2 General disclosures

Governance

—

Disclosure Requirement related to ESRS 2 GOV-1 – The role of the administrative, supervisory and management bodies

Impact, risk and opportunity management

—

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

—

Disclosure Requirement G1-1– Corporate culture and bBusiness conduct policies and corporate culture

—

Disclosure Requirement G1-2 – Management of relationships with suppliers

—

Disclosure Requirement G1-3 – Prevention and detection of corruption and bribery

Metrics and targets

—

Disclosure Requirement G1-4 – Confirmed incidents of corruption or bribery

—

Disclosure Requirement G1-5 – Political influence and lobbying activities

—

Disclosure Requirement G1-6 – Payment practices

Appendix A:

Application Requirements

Impact, risk and opportunity management

—

Disclosure Requirement G1-1 – Corporate culture and business conduct policies

—

Disclosure Requirement G1-2 – Management of relationships with suppliers

—

Disclosure Requirement G1-3 – Prevention and detection of corruption and bribery

Metrics and targets

—

Disclosure Requirement G1-5 – Political influence and lobbying activities

—

Disclosure Requirement G1-6 – Payment practices

Objective

1.

The objective of this Standard is to specify disclosure requirements which will enable users of the undertaking’s sustainability statements to understand the undertaking’s strategy and approach, processes and procedures as well as its performance in respect of business conduct.

2.

This Standard focusses on the following matters, collectively referred to in this Standard as ‘business conduct or business conduct matters’: (a) business ethics and corporate culture , including anti- corruption and anti- bribery , the protection of whistleblowers, and animal welfare; (b) the management of relationships with suppliers , including payment practices, especially with regard to late payment to small and medium-sized undertakings. (c) activities and commitments of the undertaking related to exerting its political influence, including its lobbying activities ;

Interaction with other ESRS

3.

The content of this Standard on general disclosures as well as impact, risk and opportunity management and metrics and targets shall be read in conjunction respectively with ESRS 1 General principles and ESRS 2 General requirements.

Disclosure Requirements

ESRS 2 General disclosures

4.

The requirements of this section should be read in conjunction with and reported alongside the disclosures required by ESRS 2 on Governance (GOV), Strategy (SBM) and Management of impacts, risks and opportunities (IRO).

Governance

Disclosure Requirement related to ESRS 2 GOV-1 – The role of the administrative, management and supervisory bodies

5.

When disclosing information about the role of the administrative, management and supervisory bodies , the undertaking shall cover the following aspects: (a) the role of the administrative, management and supervisory bodies related to business conduct; and (b) the expertise of the administrative, management and supervisory bodies on business conduct matters.

Impact, risk and opportunity management

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

6.

When describing the process to identify material impacts, risks and opportunities in relation to business conduct matters, the undertaking shall disclose all relevant criteria used in the process, including location, activity, sector and the structure of the transaction.

Disclosure Requirement G1-1– Business conduct policies and corporate culture

7.

The undertaking shall disclose its policies with respect to business conduct matters and how it fosters its corporate culture.

8.

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 impacts, risks and opportunities related to business conduct matters. It also aims to provide an understanding of the undertaking’s approach to corporate culture .

9.

The disclosures required under paragraph 7 shall include how the undertaking establishes, develops, promotes and evaluates its corporate culture.

10.

The disclosures in paragraph 7 shall cover the following aspects related to the undertaking’s policies on business conduct matters: (a) a description of the mechanisms for identifying, reporting and investigating concerns about unlawful behaviour or behaviour in contradiction of its code of conduct or similar internal rules; and whether it accommodates reporting from internal and/or external stakeholders ; (b) where the undertaking has no policies on anti- corruption or anti- bribery consistent with the United Nations Convention against Corruption (127), it shall state this and whether it has plans to implement them and the timetable for implementation; (c) how the undertaking protects whistleblowers, including: i. details on the establishment of internal whistleblower reporting channels, including whether the undertaking provides for information and training to its own workers and information about the designation and training of staff receiving reports; and ii. measures to protect against retaliation its own workers who are whistleblowers in accordance with the applicable law transposing Directive (EU) 2019/1937 of the European Parliament and of the Council (128); (d) where the undertaking has no policies on the protection of whistle-blowers (129), it shall state this and whether it has plans to implement them and the timetable for implementation; (e) beyond the procedures to follow-up on reports by whistleblowers in accordance with the applicable law transposing Directive (EU) 2019/1937, whether the undertaking has procedures to investigate business conduct incidents , including incidents of corruption and bribery , promptly, independently and objectively; (f) where applicable, whether the undertaking has in place policies with respect to animal welfare; (g) the undertaking’s policy for training within the organisation on business conduct, including target audience, frequency and depth of coverage; and (h) the functions within the undertaking that are most at risk in respect of corruption and bribery .

11.

Undertakings that are subject to legal requirements under national law transposing Directive (EU) 2019/1937, or to equivalent legal requirements with regard to the protection of whistle-blowers, may comply with the disclosure specified in paragraph 10 (d) by stating that they are subject to those legal requirements.

Disclosure Requirement G1-2 – Management of relationships with suppliers

12.

The undertaking shall provide information about the management of its relationships with its suppliers and its impacts on its supply chain.

13.

The objective of this Disclosure Requirement is to provide an understanding of the undertaking’s management of its procurement process including fair behaviour with suppliers .

14.

The undertaking shall provide a description of its policy to prevent late payments, specifically to SMEs.

15.

The disclosure required under paragraph 12 shall include the following information: (a) the undertaking’s approach to its relationships with its suppliers , taking account of risks to the undertaking related to its supply chain and of impacts on sustainability matters ; and (b) whether and how it takes into account social and environmental criteria for the selection of its suppliers.

Disclosure Requirement G1-3 – Prevention and detection of corruption and bribery

16.

The undertaking shall provide information about its system to prevent and detect, investigate, and respond to allegations or incidents relating to corruption and bribery including the related training.

17.

The objective of this Disclosure Requirement is to provide transparency on the key procedures of the undertaking to prevent, detect, and address allegations about corruption and bribery . This includes the training provided to own workers and/or information provided internally or to suppliers .

18.

The disclosure required under paragraph 16 shall include the following information: (a) a description of the procedures in place to prevent, detect, and address allegations or incidents of corruption and bribery ; (b) whether the investigators or investigating committee are separate from the chain of management involved in the matter; and (c) the process, if any, to report outcomes to the administrative, management and supervisory bodies .

19.

Where the undertaking has no such procedures in place, it shall disclose this fact and, where applicable, its plans to adopt them.

20.

The disclosures required by paragraph 16 shall include information about how the undertaking communicates its policies to those for whom they are relevant to ensure that the policy is accessible and that they understand its implications.

21.

The disclosure required by paragraph 16 shall include information about the following with respect to training: (a) the nature, scope and depth of anti- corruption and anti- bribery training programmes offered or required by the undertaking; (b) the percentage of functions-at-risk covered by training programmes; and (c) the extent to which training is given to members of the administrative, management and supervisory bodies.

Metrics and targets

Disclosure Requirement G1-4 – Incidents of corruption or bribery

22.

The undertaking shall provide information on incidents of corruption or bribery during the reporting period.

23.

The objective of this Disclosure Requirement is to provide transparency on the incidents relating to corruption or bribery during the reporting period and the related outcomes.

24.

The undertaking shall disclose: (a) the number of convictions and the amount of fines for violation of anti-corruption and anti- bribery laws (130); and (b) any actions taken to address breaches in procedures and standards of anti-corruption and anti-bribery (131).

25.

The undertaking may disclose: (a) the total number and nature of confirmed incidents of corruption or bribery; (b) the number of confirmed incidents in which own workers were dismissed or disciplined for corruption or bribery-related incidents; (c) the number of confirmed incidents relating to contracts with business partners that were terminated or not renewed due to violations related to corruption or bribery; and (d) details of public legal cases regarding corruption or bribery brought against the undertaking and its own workers during the reporting period and the outcomes of such cases. This includes cases that were initiated in previous years where the outcome was only established in the current reporting period.

26.

The disclosures required shall include incidents involving actors in its value chain only where the undertaking or its employees are directly involved.

Disclosure Requirement G1-5 – Political influence and lobbying activities

27.

The undertaking shall provide information on the activities and commitments related to exerting its political influence, including its lobbying activities related to its material impacts, risks and opportunities.

28.

The objective of this Disclosure Requirement is to provide transparency on the undertaking’s activities and commitments related to exerting its political influence with political contributions, including the types and purpose of lobbying activities .

29.

The disclosure required by paragraph 27 shall include: (a) if applicable, the representative(s) responsible in the administrative, management and supervisory bodies for the oversight of these activities; (b) for financial or in-kind political contributions: i. the total monetary value of financial and in-kind political contributions made directly and indirectly by the undertaking aggregated by country or geographical area where relevant, as well as type of recipient/beneficiary; and ii. where appropriate, how the monetary value of in-kind contributions is estimated. (c) the main topics covered by its lobbying activities and the undertaking’s main positions on these in brief. This shall include explanations on how this interacts with its material impacts, risks and opportunities identified in its materiality assessment per ESRS 2; and (d) if the undertaking is registered in the EU Transparency Register or in an equivalent transparency register in a Member State, the name of any such register and its identification number in the register.

30.

The disclosure shall also include information about the appointment of any members of the administrative, management and supervisory bodies who held a comparable position in public administration (including regulators) in the 2 years preceding such appointment in the current reporting period.

Disclosure Requirement G1-6 – Payment practices

31.

The undertaking shall provide information on its payment practices, especially with respect to late payments to small and medium enterprises (SMEs).

32.

The objective of this Disclosure Requirement is to provide insights on the contractual payment terms and on its performance with regard to payment, especially as to how these impact SMEs and specifically with respect to late payments to SMEs.

33.

The disclosure under paragraph 31 shall include: (a) the average time the undertaking takes to pay an invoice from the date when the contractual or statutory term of payment starts to be calculated, in number of days; (b) a description of the undertaking’s standard payment terms in number of days by main category of suppliers and the percentage of its payments aligned with these standard terms; (c) the number of legal proceedings currently outstanding for late payments; and (d) complementary information necessary to provide sufficient context. If the undertaking has used representative sampling to calculate the information required under point (a), it shall state that fact and briefly describe the methodology used.

---

(1)  Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19).

(2)  Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting (OJ L 322, 16.12.2022, p. 15).

(3)  UN Guiding Principle 16 and its commentary; UN Interpretive Guide, Questions 21 and 25 as well as OECD Guidelines Chapter II on General Policies (paragraph A.10), and chapter IV on Human Rights (paragraph 4; and paragraph 44 of the Commentary); and OECD Due Diligence Guidance, Section II (1.1 and 1.2) and Annex, Questions 14 and 15.

(4)  UN Guiding Principle 18 and its Commentary, UN Guiding Principle 20, Commentary to UN Guiding Principles 21 and 29, and UN Guiding Principle 31(h) and its Commentary; and the UN Interpretive Guide, Questions 30, 33, 42 and 76 as well as OECD Guidelines Chapter II on General Policies (paragraph A.14 and paragraph 25 of the Commentary); and OECD Due Diligence Guidance, Section II (2.1.c, 2.3. 2.4.a, 3.1.b and 3.1.f) and Annex Questions 8- 11.

(5)  UN Guiding Principles 17, 18 and 24 and their Commentaries, and the Commentary to UN Guiding Principle 29; and the UN Interpretive Guide, Questions 9, 12-13, 27-28, 36-42, and 85-89 and OECD Guidelines Chapter II on General Policies (paragraphs A.10-11 and paragraph 14 of the Commentary), and Chapter IV on Human Rights (paragraphs 1-2 and paragraphs 41-43 of the Commentary); and OECD Due Diligence Guidance, Section II (2.1- 2.4) and Annex Questions 3-5, and 19-31).

(6)  UN Guiding Principles 19, 22 and 23 and their Commentaries; and the UN Interpretive Guide, Questions 11, 32, 46-47, 64-68 and 82-83 and OECD Guidelines Chapter II on General Policies (paragraphs A.12 and paragraphs 18-22 of the Commentary), and Chapter IV on Human Rights (paragraphs 3 and 42-43 of the Commentary); and OECD Due Diligence Guidance, Section II (3.1-3.2) and Annex Questions 32-40).

(7)  UN Guiding Principles 20 and 31(g) and their Commentaries; and the UN Interpretive Guide, Questions 49-53 and 80 and OECD Due Diligence Guidance, Section II (4.1 and 5.1) and Annex Questions 41-47.

(8)  Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 (OJ L 198, 22.6.2020, p. 13).

(9)  Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of certain rights of shareholders in listed companies (OJ L 184, 14.7.2007, p. 17).

(10)  Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC (OJ L 168, 30.6.2017, p. 12).

(11)  Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1).

(12)  Regulation (EC) No 1221/2009 of the European Parliament and of the Council of 25 November 2009 on the voluntary participation by organisations in a Community eco-management and audit scheme (EMAS), repealing Regulation (EC) No 761/2001 and Commission Decisions 2001/681/EC and 2006/193/EC (OJ L 342, 22.12.2009, p. 1).

(13)  This information supports the information needs of: financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts set out by indicator #13 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 of 6 April 2022 supplementing Regulation (EU) 2019/2088 of the European Parliament and of the Council with regard to disclosures rules on sustainable investments (“Board gender diversity”) and benchmark administrators to disclose ESG factors subject to Commission Delegated Regulation (EU) 2020/1816 of 17 July 2020 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council as set out by indicator “Weighted average ratio of female to male board members” in section 1 and 2 of Annex II.

(14)  This information supports the information needs of benchmark administrators to disclose ESG factors subject to Regulation (EU) 2020/1816 as set out by indicator “Weighted average percentage of board members who are independent” in section I of Annex II.

(15)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #10 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Lack of due diligence”).

(16)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts set out by indicator #4 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosures rules on sustainable investments (“Exposure to companies active in the fossil fuel sector”).

(17)  Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the Governance of the Energy Union and Climate Action, amending Regulations (EC) No 663/2009 and (EC) No 715/2009 of the European Parliament and of the Council, Directives 94/22/EC, 98/70/EC, 2009/31/EC, 2009/73/EC, 2010/31/EU, 2012/27/EU and 2013/30/EU of the European Parliament and of the Council, Council Directives 2009/119/EC and (EU) 2015/652 and repealing Regulation (EU) No 525/2013 of the European Parliament and of the Council (OJ L 328, 21.12.2018, p. 1).

(18)  Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by specifying the content and presentation of information to be disclosed by undertakings subject to Articles 19a or 29a of Directive 2013/34/EU concerning environmentally sustainable economic activities, and specifying the methodology to comply with that disclosure obligation (OJ L 443, 10.12.2021, p. 9).

(19)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts set out by indicator #9 in Table II of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosures rules on sustainable investments (“Investments in companies producing chemicals”).

(20)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts set out by indicator #14 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosures rules on sustainable investments (“Exposure to controversial weapons (anti-personnel mines, cluster munitions, chemical weapons and biological weapons)”).

(21)  This information supports the needs of benchmark administrators to disclose ESG factors subject to Regulation (EU) 2020/1818 as set out by paragraph b) of article 12.1.

(22)  Article 18, paragraph 1, sub-point (a) of Directive 2013/34/EU: “ the net turnover broken down by categories of activity and into geographical markets, in so far as those categories and markets differ substantially from one another, taking account of the manner in which the sale of products and the provision of services are organised.”

(23)  Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector (Sustainable Finance Disclosures Regulation) (OJ L 317, 9.12.2019, p. 1).

(24)  Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (Capital Requirements Regulation “CRR”) (OJ L 176, 27.6.2013, p. 1).

(25)  Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014 (OJ L 171, 29.6.2016, p. 1).

(26)  Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing the framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 2018/1999 (‘European Climate Law’) (OJ L 243, 9.7.2021, p. 1).

(27)  Commission Delegated Regulation (EU) 2020/1816 of 17 July 2020 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council as regards the explanation in the benchmark statement of how environmental, social and governance factors are reflected in each benchmark provided and published (OJ L 406, 3.12.2020, p. 1).

(28)  Commission Implementing Regulation (EU) 2022/2453 of 30 November 2022 amending the implementing technical standards laid down in Implementing Regulation (EU) 2021/637 as regards the disclosure of environmental, social and governance risks (OJ L 324,19.12.2022, p.1.).

(29)  Commission Delegated Regulation (EU) 2020/1818 of 17 July 2020 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council as regards minimum standards for EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks (OJ L 406, 3.12.2020, p. 17).

(30)  Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing the framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 2018/1999 (‘European Climate Law’) (OJ L 243, 9.7.2021, p. 1).

(31)  Commission Delegated Regulation (EU) 2020/1818 of 17 July 2020 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council as regards minimum standards for EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks (OJ L 406, 3.12.2020, p. 17).

(32)  Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector (Sustainable Finance Disclosures Regulation) (OJ L 317, 9.12.2019, p. 1).

(33)  Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 (OJ L 198, 22.6.2020, p. 13).

(34)  Commission Implementing Regulation (EU) 2022/2453 of 30 November 2022 amending the implementing technical standards laid down in Implementing Regulation (EU) 2021/637 as regards the disclosure of environmental, social and governance risks (OJ L 324,19.12.2022, p.1.).

(35)  This information is aligned with the Regulation (EU) 2021/1119 of the European Parliament and of the Council (EU Climate Law), Article 2 (1); and with Commission Delegated Regulation (EU) 2020/1818 (Climate Benchmark Regulation), Article 2.

(36)  Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to climate change mitigation or climate change adaptation and for determining whether that economic activity causes no significant harm to any of the other environmental objectives (OJ L 442, 9.12.2021, p. 1).

(37)  The CapEx amounts considered are related to the following NACE codes:

(a)	B.05 Mining of coal and lignite, B.06 Extraction of crude petroleum and natural gas (limited to crude petroleum), B.09.1 Support activities for petroleum and natural gas extraction (limited to crude petroleum),

(b)	C.19 Manufacture of coke and refined petroleum products,

(c)	D.35.1 - Electric power generation, transmission and distribution,

(d)	D.35.3 - Steam and air conditioning supply (limited to coal-fired and oil-fired power and/or heat generation),

(e)	G.46.71 - Wholesale of solid, liquid and gaseous fuels and related products (limited to solid and liquid fuels).

For gas-related activities, the NACE code definition addresses activities with direct GHG emissions that are higher than 270 gCO2/KWh.

(38)  This disclosure requirement is included consistent with the requirements in Commission Implementing Regulation (EU) 2022/2453 template I climate change transition risk; and is aligned with Commission Delegated Regulation (EU) 2020/1818 (Climate Benchmark Regulation), Articles 12.1 (d) to (g) and 12.2.

(39)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 (SFDR) because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #4 in Table II of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Investments in companies without carbon emission reduction initiatives”); and is aligned with the Commission Delegated Regulation (EU) 2020/1818 (Climate Benchmark Regulation), Article 6.

(40)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from a mandatory indicator related to principal adverse impacts as set out by indicator #5 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Share of non-renewable energy consumption and production”). The breakdown serves as a reference for an additional indicator related to principal adverse impacts as set out by indicator #5 in Table II of the same Annex (“Breakdown of energy consumption by type of non-renewable sources of energy”).

(41)  Compliant with the requirements in delegated acts for hydrogen from renewable sources: Commission Delegated Regulation of 10 February 2023 supplementing Directive (EU) 2018/2001 of the European Parliament and of the Council by establishing a Union methodology setting out detailed rules for the production of renewable liquid and gaseous transport fuels of non-biological origin; and Commission Delegated Regulation of 10 February 2023 supplementing Directive (EU) 2018/2001 of the European Parliament and of the Council by establishing a minimum threshold for greenhouse gas emissions savings of recycled carbon fuels and by specifying a methodology for assessing greenhouse gas emissions savings from renewable liquid and gaseous transport fuels of non-biological origin and from recycled carbon fuel.

(42)  High climate impact sectors are those listed in NACE Sections A to H and Section L (as defined in Commission Delegated Regulation (EU) 2022/1288).

(43)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from a mandatory indicator related to principal adverse impacts as set out by indicator #5 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Share of non-renewable energy consumption and production”).

(44)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from a mandatory indicator related to principal adverse impacts as set out by indicator #6 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Energy consumption intensity per high climate impact sector”).

(45)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from a mandatory indicator related to principal adverse impacts as set out by indicators #1 and #2 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“GHG emissions” and “Carbon footprint”). This information is aligned with Commission Delegated Regulation (EU) 2020/1818 (Climate Benchmark Regulation), Articles 5 (1), 6 and 8 (1).

(46)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from a mandatory indicator related to principal adverse impacts as set out by indicator #3 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“GHG intensity of investee companies”). This information is aligned with Commission Delegated Regulation (EU) 2020/1818 (Climate Benchmark Regulation), Article 8 (1).

(47)  This information is aligned with Regulation (EU) 2021/1119 of the European Parliament and of the Council (EU Climate Law), Article 2 (1).

(48)  This information is aligned with Commission Delegated Regulation (EU) 2020/1818 (Climate Benchmark Regulation).

(49)  This disclosure requirement is consistent with the requirements included in Commission Implementing Regulation (EU) 2022/2453 - Template 5: Banking book - Climate change physical risk: Exposures subject to physical risk.

(50)  This disclosure requirement is consistent with the requirements included in Commission Implementing Regulation (EU) 2022/2453 - Template 5: Banking book - Climate change physical risk: Exposures subject to physical risk.

(51)  This disclosure requirement is consistent with the requirements included in Commission Implementing Regulation (EU) 2022/2453- Template 2: Banking book - Climate change transition risk: Loans collateralised by immovable property - Energy efficiency of the collateral.

(52)  This information is aligned with Commission Delegated Regulation (EU) 2020/1818 (Climate Benchmark Regulation).

(53)  Article 12.1 of the Climate Benchmark Standards Regulation states that “ Administrators of EU Paris-aligned Benchmarks shall exclude the following companies:

a)	companies that derive 1% or more of their revenues from exploration, mining, extraction, distribution or refining of hard coal and lignite; or

b)	companies that derive 10% or more of their revenues from exploration, extraction, distribution or refining of oil fuels; or

c)	companies that derive 50% or more of their revenues from exploration, extraction, manufacturing or distribution of gaseous fuels; or

d)	companies that derive 50% or more of their revenues from electricity generation with a GHG intensity of more than 100 g CO2 e/KWh.”

Article 12.2 states that “ Administrators of EU Paris-aligned Benchmarks shall exclude from those benchmarks any companies that are found or estimated by them or by external data providers to significantly harm one or more of the environmental objectives referred to in Article 9 of Regulation (EU) 2020/852 of the European Parliament and of the Council, in accordance with the rules on estimations laid down in Article 13(2) of this Regulation.”.

(54)  This disclosure requirement is consistent with the requirements in Commission Implementing Regulation (EU) 2022/2453 - template 1 climate change transition risk.

(55)  Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC (OJ L 315, 14.11.2012, p. 1).

(56)  Compliant with the requirements in delegated acts for hydrogen from renewable sources: Commission delegated regulation of 10 February 2023 supplementing Directive (EU) 2018/2001 of the European Parliament and of the Council by establishing a Union methodology setting out detailed rules for the production of renewable liquid and gaseous transport fuels of non-biological origin; and Commission delegated regulation of 10 February 2023 supplementing Directive (EU) 2018/2001 of the European Parliament and of the Council by establishing a minimum threshold for greenhouse gas emissions savings of recycled carbon fuels and by specifying a methodology for assessing greenhouse gas emissions savings from renewable liquid and gaseous transport fuels of non-biological origin and from recycled carbon fuel.

(57)  Based on Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources.

(58)  Commission Recommendation (EU) 2021/2279 of 15 December 2021 on the use of the Environmental Footprint methods to measure and communicate the life cycle environmental performance of products and organisations (OJ L 471, 30.12.2021, p. 1).

(59)  This disclosure requirement is consistent with the requirements of Commission Implementing Regulation (EU) 2022/2453 - Template 5 exposures subjects to physical risk.

(60)  This disclosure requirement is consistent with the requirements of Commission Implementing Regulation (EU) 2022/2453 - Template 5 exposures subjects to physical risk.

(61)  Directive 2010/31/EU of the European Parliament and of the Council of 19 May 2010 on the energy performance of buildings (OJ L 153, 18.6.2010, p. 13).

(62)  This disclosure requirement is consistent with the requirements of Commission Implementing Regulation (EU) 2022/2453 - Template 2 immovable property, energy efficiency of the collateral.

(63)  The cost rate is the factor used to convert non-monetary impacts like tonnes, hectares, m3 etc. into monetary units. Cost rates should be based on monetary valuation studies, need to be science-based and the methods used to obtain them transparent. Guidance on these methods can be obtained, e.g., from the EU-LIFE-funded TRANSPARENT project.

(64)  Regulation (EC) No 166/2006 of the European Parliament and of the Council of 18 January 2006 concerning the establishment of a European Pollutant Release and Transfer Register and amending Council Directives 91/689/EEC and 96/61/EC (OJ L 033 4.2.2006, p. 1)

(65)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from: (a) an additional indicator related to principal adverse impacts as set out by indicator #2 in Table II of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Emissions of air pollutants”); (b) indicator #8 in Table I of Annex I (“Emissions to water); (c) indicator #1 in Table II of Annex I ( “Emissions of inorganic pollutants”); and (d) indicator #3 in Table II of Annex I (“Emissions of ozone- depleting substances”) .

(66)  According to Eurostat, the Degree of urbanisation (DEGURBA) is a classification that indicates the character of an area. Based on the share of local population living in urban clusters and in urban centres, it classifies Local Administrative Units (LAU or communes) into three types of area: i) Cities (densely populated areas), ii) Towns and suburbs (intermediate density areas), and iii) Rural areas (thinly populated areas).

(67)  Directive 2010/75/EU of the European Parliament and of the Council of 24 November 2010 on industrial emissions (integrated pollution prevention and control) (OJ L 334, 17.12.2010, p. 17).

(68)  Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing a framework for Community action in the field of water policy (Water Framework Directive) (OJ L 327, 22.12.2000, p. 1).

(69)  Directive 2008/56/EC of the European Parliament and of the Council of 17 June 2008 establishing a framework for community action in the field of marine environmental policy (Marine Strategy Framework Directive) (OJ L 164, 25.6.2008, p. 19).

(70)  Directive 2014/89/EU of the European Parliament and of the Council of 23 July 2014 establishing a framework for maritime spatial planning (OJ L 257, 28.8.2014, p. 135).

(71)  Source: IFC Performance Standard 6, 2012.

(72)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #7 in Table II of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Investments in companies without water management policies”).

(73)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #8 in Table II of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Exposure to areas of high water stress”).

(74)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #12 in Table II of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments ( “Investments in companies without sustainable oceans/seas practices”).

(75)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #6.2 in Table II of Annex I of Commission Delegated Regulation (EU) 2022/1288 regarding disclosure rules on sustainable investments (“Water usage and recycling”, 2. Weighted average percentage of water recycled and reused by investee companies).

(76)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #6.1 in Table II of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Water usage and recycling”, 1. Average amount of water consumed by the investee companies (in cubic meters) per million EUR of revenue of investee companies).

(77)  EU Biodiversity Strategy for 2030- Bringing nature back into our lives, COM/2020/380 final.

(78)  Directive 2009/147/EC of the European Parliament and of the Council of 30 November 2009 on the conservation of wild birds ( OJ L 20, 26.1.2010, p. 7) and Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora (OJ L 206, 22.7.1992, p. 7).

(79)  Directive 2008/56/EC of the European Parliament and of the Council of 17 June 2008 establishing a framework for community action in the field of marine environmental policy (Marine Strategy Framework Directive) ( OJ L 164, 25.6.2008, p. 19).

(80)  This information supports the information needs of financial markets participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #7 in Table 1 Annex 1 of the related Delegated Regulation with regard to disclosure rules on sustainable investments ( “Activities negatively affecting biodiversity-sensitive areas”).

(81)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impact as set out by indicator #10 in Table 2 of Annex 1 of the related Delegated Regulation with regard to disclosure rules on sustainable investments (“Land degradation, desertification, soil sealing”).

(82)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impact as set out by indicator #14 in Table 2 of Annex 1 of the related Delegated Regulation with regard to disclosure rules on sustainable investments (“Natural species and protected areas”).

(83)  Directive 2011/92/EU of the European Parliament and of the Council of 13 December 2011 on the assessment of the effects of certain public and private projects on the environment (OJ L 26, 28.1.2012, p. 1).

(84)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impact as set out by indicator #11 in Table II of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Investments in companies without sustainable land/agriculture practices”).

(85)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impact as set out by indicator #12 in Table II of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Investments in companies without sustainable oceans/seas practices”).

(86)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impact as set out by indicator #15 in Table II of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Deforestation”).

(87)  As indicated in the IUCN Red List of Threatened Species and the European Red List published by the European Commission.

(88)  The direct driver climate change is to be reported under ESRS E1 Climate Change and pollution under ESRS E2 Pollution.

(89)  As proposed by Commission Regulation (EU) 2018/ 2026 of 19 December 2018 amending Annex IV to Regulation (EC) No 1221/2009 of the European Parliament and of the Council on the voluntary participation by organisations in a Community eco-management and audit scheme (EMAS) (OJ L 325, 20.12.2018, p. 18).

(90)  Directive 2008/98/EC of the European Parliament and of the Council of 19 November 2008 on waste and repealing certain Directives (OJ L 312, 22.11.2008, p. 3).

(91)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #13 in Table II of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Non-recycled waste ratio”).

(92)  Council Directive 2011/70/Euratom of 19 July 2011 establishing a Community framework for the responsible and safe management of spent fuel and radioactive waste (OJ L 199, 2.8.2011, p. 48). This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from a mandatory indicator related to principal adverse impacts as set out by indicator #9 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Hazardous waste and radioactive waste ratio”).

(93)  As established by Directive 2009/125/EC.Directive 2009/125/EC of the European Parliament and of the Council of 21 October 2009 establishing a framework for the setting of ecodesign requirements for energy-related products (OJ L 285, 31.10.2009, p. 10).

(94)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from additional indicators related to principal adverse impacts as set out by indicator #13 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Operations and suppliers at significant risk of incidents of forced or compulsory labour”).

(95)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from additional indicators related to principal adverse impacts as set out by indicator #12 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Operations and suppliers at significant risk of incidents of child labour”).

(96)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #9 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Lack of a human rights policy”).

(97)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from a mandatory indicator related to principal adverse impacts as set out by indicator #11 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments.

(98)  This information supports the needs of benchmark administrators to disclose ESG factors subject to Regulation (EU) 2020/1816 as set out by indicator “Exposure of the benchmark portfolio to companies without due diligence policies on issues addressed by the fundamental International Labour Organisation Conventions 1 to 8” in section 1 and 2 of Annex II.

(99)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #11 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Lack of processes and measures for preventing trafficking in human beings”).

(100)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impact as set out by indicator #1 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Investments in companies without workplace accident prevention policies”).

(101)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #5 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Lack of grievance/complaints handling mechanisms related to employee matters).

(102)  This information supports the information needs of benchmark administrators to disclose ESG factors subject to Regulation (EU) 2020/1816 as set out by indicator “Weighted average ratio of accidents, injuries, fatalities” in section 1 and 2 of Annex II. This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #2 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Rate of accidents”) and benchmark administrators to disclose ESG factors subject to Regulation (EU) 2020/1816 as set out by indicator “Weighted average ratio of accidents, injuries, fatalities” in section 1 and 2 of Annex II.

(103)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #3 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Number of days lost to injuries, accidents, fatalities or illness”).

(104)  This information supports the information needs of: financial market participants subject to Regulation (EU) 2019/2088 because it is derived from a mandatory indicator related to principal adverse impacts as set out by indicator #12 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Unadjusted gender pay gap”); and benchmark administrators to disclose ESG factors subject to Regulation (EU) 2020/1816 as set out by indicator “Weighted average gender pay gap” in section 1 and 2 of Annex II.

(105)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #8 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Excessive CEO pay ratio”).

(106)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #7 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Incidents of discrimination”).

(107)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from a mandatory and additional indicator related to principal adverse impacts as set out by indicator #10 in Table I of Annex I and by indicator #14 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Violations of UNGC principles and OECD Guidelines for Multinational Enterprises” and “Number of identified cases of severe human rights issues and incidents”); and the information needs of benchmark administrators to disclose ESG factors subject to Regulation (EU) 2020/1816 as set out by indicator “Number of benchmark constituents subject to social violations (absolute number and relative divided by all benchmark constituents), as referred to in international treaties and conventions, United Nations principles and, where applicable, national law” in section 1 and 2 of Annex II.

(108)  Directive 2009/38/EC of the European Parliament and of the Council of 6 May 2009 on the establishment of a European Works Council or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees (OJ L 122, 16.5.2009, p. 28).

(109)  Directive 2002/14/EC of the European Parliament and of the Council of 11 March 2002 establishing a general framework for informing and consulting employees in the European Community - Joint declaration of the European Parliament, the Council and the Commission on employee representation (OJ L 80, 23.3.2002, p. 29).

(*1)   Gender as specified by the employees themselves.

(110)  Directive (EU) 2022/2041 of the European Parliament and of the Council of 19 October 2022 on adequate minimum wages in the European Union (OJ L 275, 25.10.2022, p. 33).

(111)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from additional indicators related to principal adverse impacts as set out by indicators number 12 and number 13 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Operations and suppliers at significant risk of incidents of child labour” and “Operations and suppliers at significant risk of incidents of forced or compulsory labour”).

(112)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #9 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Lack of a human rights policy”).

(113)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from a mandatory indicator related to principal adverse impacts as set out by indicator #11 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (’Lack of processes and compliance mechanisms to monitor compliance with UN Global Compact principles and OECD Guidelines for Multinational Enterprises’).

(114)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #11 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Lack of processes and measures for preventing trafficking in human beings”).

(115)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #4 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Lack of a supplier code of conduct”).

(116)  This information supports the needs of benchmark administrators to disclose ESG factors subject to Regulation (EU) 2020/1816 as set out by indicator “Exposure of the benchmark portfolio to companies without due diligence policies on issues addressed by the fundamental International Labour Organisation Conventions 1 to 8” in section 1 and 2 of Annex II.

(117)  This information supports the information needs of: financial market participants subject to Regulation (EU) 2019/2088 because it is derived from a mandatory indicator related to principal adverse impacts as set out by indicator #10 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments; and benchmark administrators to disclose ESG factors subject to Regulation (EU) 2020/1816 as set out by indicators “Number of benchmark constituents subject to social violations (absolute number and relative divided by all benchmark constituents), as referred to in international treaties and conventions, United Nations principles and, where applicable, national law” and “Exposure of the benchmark portfolio to companies without due diligence policies on issues addressed by the fundamental International Labour Organisation Conventions 1 to 8” in section 1 and 2 of Annex II.

(118)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #14 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Number of identified cases of severe human rights issues and incidents”).

(119)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #9 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Lack of a human rights policy”).

(120)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from a mandatory indicator related to principal adverse impacts as set out by indicator #11 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Lack of processes and compliance mechanisms to monitor compliance with UN Global Compact principles and OECD Guidelines for Multinational Enterprises”).

(121)  This information supports the information needs of: financial market participants subject to Regulation (EU) 2019/2088 because it is derived from a mandatory indicator related to principal adverse impacts as set out by indicator #10 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Violations of UN Global Compact principles and Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises”); and benchmark administrators to disclose ESG factors subject to Regulation (EU) 2020/1816 as set out by indicator “Number of benchmark constituents subject to social violations (absolute number and relative divided by all benchmark constituents), as referred to in international treaties and conventions, United Nations principles and, where applicable, national law” in section 1 and 2 of Annex II.

(122)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #14 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Number of identified cases of severe human rights issues and incidents”).

(123)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #9 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Lack of a human rights policy”).

(124)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from a mandatory indicator related to principal adverse impacts as set out by indicator #11 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments.

(125)  This information supports the information needs of: financial market participants subject to Regulation (EU) 2019/2088 because it is derived from a mandatory indicator related to principal adverse impacts as set out by indicator #10 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Violations of UN Global Compact principles and Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises”); and benchmark administrators to disclose ESG factors subject to Regulation (EU) 2020/1816 as set out by indicator “Number of benchmark constituents subject to social violations (absolute number and relative divided by all benchmark constituents), as referred to in international treaties and conventions, United Nations principles and, where applicable, national law” in section 1 and 2 of Annex II.

(126)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #14 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Number of identified cases of severe human rights issues and incidents”).

(127)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #15 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosures rules on sustainable investments (“Lack of anti-corruption and anti-bribery policies”).

(128)  Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law (OJ L 305, 26.11.2019, p. 17).

(129)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts as set out by indicator #6 in Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosures rules on sustainable investments (“Insufficient whistleblower protection”).

(130)  This information supports the information needs of: financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts set out in indicator #17 of Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosures rules on sustainable investments (“Number of convictions and amount of fines for violation of anti-corruption and anti-bribery laws”); and benchmark administrators to disclose ESG factors subject to Regulation (EU) 2020/1816 as set out by indicator “Numbers of convictions and amount of fines for violations of anti-corruption and anti-bribery laws” in section 1 and 2 of Annex II.

(131)  This information supports the information needs of financial market participants subject to Regulation (EU) 2019/2088 because it is derived from an additional indicator related to principal adverse impacts set out in in indicator #16 of Table III of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosures rules on sustainable investments (“Cases of insufficient action taken to address breaches of standards of anti-corruption and anti-bribery”).

(132)  Administrative, management and supervisory bodies.