LegalizeCommission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive 2013/34/EU of the European Parliament and of the Council as regards sustainability reporting standards
Disclosure Requirements E1-6 – Gross Scopes 1, 2, 3 and Total GHG emissions
AR 39.When preparing the information for reporting GHG emissions as required by paragraph 44, the undertaking shall:
(a) consider the principles, requirements and guidance provided by the GHG Protocol Corporate Standard (version 2004). The undertaking may consider Commission Recommendation (EU) 2021/2279 (51) or the requirements stipulated by EN ISO 14064-1:2018. If the undertaking already applies the GHG accounting methodology of ISO 14064- 1: 2018, it shall nevertheless comply with the requirements of this standard (e.g., regarding reporting boundaries and the disclosure of market-based Scope 2 GHG emissions);
(b) disclose the methodologies, significant assumptions and emissions factors used to calculate or measure GHG emissions accompanied by the reasons why they were chosen, and provide a reference or link to any calculation tools used;
(c) include emissions of CO2, CH4, N2O, HFCs, PFCs, SF6, and NF3. Additional GHG may be considered when significant; and
(d) use the most recent Global Warming Potential (GWP) values published by the IPCC based on a 100-year time horizon to calculate CO2eq emissions of non-CO2 gases.
AR 40.When preparing the information for reporting GHG emissions from its associates, joint ventures, unconsolidated subsidiaries (investment entities) and contractual arrangements as required by paragraph 50, the undertaking shall consolidate 100% of the GHG emissions of the entities it operationally controls. In practice, this happens when the undertakings holds the license - or permit - to operate the assets from these associates, joint ventures, unconsolidated subsidiaries (investment entities) and contractual arrangements. When the undertaking has a contractually defined part-time operational control, it shall consolidate 100% the GHG emitted during the time of its operational control.
AR 41.In line with ESRS 1 chapter 3.7, the undertaking shall disaggregate information on its GHG emissions as appropriate. For example, the undertaking may disaggregate its Scope 1, 2, 3, or total GHG emissions by country, operating segments, economic activity, subsidiary, GHG category (CO2, CH4, N2O, HFCs, PFCs, SF6, NF3, and other GHG considered by the undertaking) or source type (stationary combustion, mobile combustion, process emissions and fugitive emissions).
AR 42.An undertaking might have a different reporting period from some or all of the entities in its value chain. In such circumstances, the undertaking is permitted to measure its GHG emissions in accordance with paragraph 44 using information for reporting periods that are different from its own reporting period if that information is obtained from entities in its value chain with reporting periods that are different from the undertaking’s reporting period, on the condition that:
(a) the undertaking uses the most recent data available from those entities in its value chain to measure and disclose its greenhouse gas emissions;
(b) the length of the reporting periods is the same; and
(c) the undertaking discloses the effects of significant events and changes in circumstances (relevant to its GHG emissions) that occur between the reporting dates of the entities in its value chain and the date of the undertaking’s general purpose financial statements.
AR 43.When preparing the information on gross Scope 1 GHG *emissions* required under paragraph 48 (a), the undertaking shall:
(a) calculate or measure GHG emissions from stationary combustion, mobile combustion, process emissions and fugitive emissions; and use suitable activity data that include the non-renewable fuel consumption;
(b) use suitable and consistent emission factors;
(c) disclose biogenic emissions of CO2 from the combustion or bio-degradation of biomass separately from the Scope 1 GHG emissions, but include emissions of other types of GHG (in particular CH4 and N2O);
(d) not include any removals, or any purchased, sold or transferred carbon credits or GHG allowances in the calculation of Scope 1 GHG emissions; and
(e) for activities reporting under the EU ETS, report on Scope 1 emissions following the EU ETS methodology. The EU ETS methodology may also be applied to activities in geographies and sectors that are not covered by the EU ETS.
AR 44.When preparing the information on the percentage of Scope 1 GHG emissions from regulated emission trading schemes required under paragraph 48 (b), the undertaking shall:
(a) consider GHG emissions from the installations it operates that are subject to regulated Emission Trading Schemes (ETS), including the EU-ETS, national ETS and non-EU ETS, if applicable;
(b) only include emissions of CO2, CH4, N2O, HFCs, PFCs, SF6, and NF3;
(c) ensure the same accounting period for gross Scope 1 GHG emissions and GHG emissions regulated under the ETS; and
(d) calculate the share by using the following formula: GHG Emissions in (t CO2eq) from EU ETS installations + national ETS installations + nonEU ETS installations Scope 1 GHG emissions (t CO2eq)
AR 45.When preparing the information on gross Scope 2 GHG emissions required under paragraph 49, the undertaking shall:
(a) consider the principles and requirements of the GHG Protocol Scope 2 Guidance (version 2015, in particular the Scope 2 quality criteria in chapter 7.1 relating to contractual instruments); it may also consider Commission Recommendation (EU) 2021/2279 or the relevant requirements for the quantification of indirect GHG emissions from imported energy in EN ISO 14064-1:2018;
(b) include purchased or acquired electricity, steam, heat, and cooling consumed by the undertaking;
(c) avoid double counting of GHG emissions reported under Scope 1 or 3;
(d) apply the location-based and market-based methods to calculate Scope 2 GHG emissions and provide information on the share and types of contractual instruments. Location-based method quantifies Scope 2 GHG emissions based on average energy generation emission factors for defined locations, including local, subnational, or national boundaries (GHG Protocol, ‘Scope 2 Guidance’, Glossary, 2015). Market-based method quantifies Scope 2 GHG emissions based on GHG emissions emitted by the generators from which the reporting entity contractually purchases electricity bundled with instruments, or unbundled instruments on their own (GHG Protocol, ‘Scope 2 Guidance’, Glossary, 2015); in this case, the undertaking may disclose the share of market-based scope 2 GHG emissions linked to purchased electricity bundled with instruments such as Guarantee of Origins or Renewable Energy Certificates. The undertaking shall provide information about the share and types of contractual instruments used for the sale and purchase of energy bundled with attributes about the energy generation or for unbundled energy attribute claims.
(e) disclose biogenic emissions of CO2 carbon from the combustion or biodegradation of biomass separately from the Scope 2 GHG emissions but include emissions of other types of GHG (in particular CH4 and N2O). In case the emission factors applied do not separate the percentage of biomass or biogenic CO2, the undertaking shall disclose this. In case GHG emissions other than CO2 (particularly CH4 and N2O) are not available for, or excluded from, location-based grid average emissions factors or with the market-based method information, the undertaking shall disclose this.
(f) not include any removals, or any purchased, sold or transferred carbon credits or GHG allowances in the calculation of Scope 2 GHG emissions.
AR 46.When preparing the information on gross Scope 3 GHG emissions required under paragraph 51, the undertaking shall:
(a) consider the principles and provisions of the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (Version 2011); and it may consider Commission Recommendation (EU) 2021/2279 or the relevant requirements for the quantification of indirect GHG emissions from EN ISO 14064-1:2018;
(b) if it is a financial institution, consider the GHG Accounting and Reporting Standard for the Financial Industry from the Partnership for Carbon Accounting Financial (PCAF), specifically part A ‘Financed Emissions’ (version December 2022);
(c) screen its total Scope 3 GHG emissions based on the 15 Scope 3 categories identified by the GHG Protocol Corporate Standard and GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (Version 2011) using appropriate estimates. Alternatively, it may screen its indirect GHG emissions based on the categories provided by EN ISO 14064-1:2018 clause 5.2.4 (excluding indirect GHG emissions from imported energy);
(d) identify and disclose its significant Scope 3 categories based on the magnitude of their estimated GHG emissions and other criteria provided by GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (Version 2011, p. 61 and 65-68) or EN ISO 14064-1:2018 Annex H.3.2, such as financial spend, influence, related transition risks and opportunities or stakeholder views;
(e) calculate or estimate GHG emissions in significant Scope 3 categories using suitable emissions factors;
(f) update Scope 3 GHG emissions in each significant category every year on the basis of current activity data; update the full Scope 3 GHG inventory at least every 3 years or on the occurrence of a significant event or a significant change in circumstances (a significant event or significant change in circumstances can, for example, relate to changes in the undertaking’s activities or structure, changes in the activities or structure of its upstream and downstream value chain(s), a change in calculation methodology or in the discovery of errors);”);
(g) disclose the extent to which the undertaking’s Scope 3 GHG emissions are measured using inputs from specific activities within the entity’s upstream and downstream value chain, and disclose the percentage of emissions calculated using primary data obtained from suppliers or other value chain partners.
(h) for each significant Scope 3 GHG category, disclose the reporting boundaries considered, the calculation methods for estimating the GHG emissions as well as if and which calculation tools were applied. The Scope 3 categories should be consistent with the GHGP and include: i. indirect Scope 3 GHG emissions from the consolidated accounting group (the parent and its subsidiaries), ii. indirect Scope 3 GHG emissions from associates, joint ventures, and unconsolidated subsidiaries for which the undertaking has the ability to control the operational activities and relationships (i.e., operational control), iii. Scope 1, 2 and 3 GHG emissions from associates, joint ventures, unconsolidated subsidiaries (investment entities) and joint arrangements for which the undertaking does not have operational control and when these entities are part of the undertaking’s upstream and dopwnstream value chain.
(i) disclose a list of Scope 3 GHG emissions categories included in and excluded from the inventory with a justification for excluded Scope 3 categories;
(j) disclose biogenic emissions of CO2 from the combustion or biodegradation of biomass that occur in its upstream and downstream value chain separately from the gross Scope 3 GHG emissions, and include emissions of other types of GHG (such as CH4 and N2O), and emissions of CO2 that occur in the life cycle of biomass other than from combustion or biodegradation (such as GHG emissions from processing or transporting biomass) in the calculation of Scope 3 GHG emissions;
(k) not include any removals, or any purchased, sold or transferred carbon credits or GHG allowances in the calculation of Scope 3 GHG emissions;
AR 47.When preparing the information on the total GHG emissions required under paragraph 52, the undertaking shall:
(a) apply the following formulas to calculate the total GHG emissions:
(b) disclose total GHG emissions with a distinction between emissions derived from the location-based and market-based methods applied while measuring the underlying Scope 2 GHG emissions.
AR 48.The undertaking shall disclose its total GHG emissions disaggregated by Scopes 1 and 2 and significant Scope 3 in accordance with the table below.
| Retrospective | Milestones and target years | |||||||
|---|---|---|---|---|---|---|---|---|
| Base year | Compa- rative | N | % N / N-1 | 2025 | 2030 | (2050) | Annual % target / Base year | |
| Scope 1 GHG emissions | ||||||||
| Gross Scope 1 GHG emissions (tCO2eq) | ||||||||
| Percentage of Scope 1 GHG emissions from regulated emission trading schemes (%) | ||||||||
| Scope 2 GHG emissions | ||||||||
| Gross location-based Scope 2 GHG emissions (tCO2eq) | ||||||||
| Gross market-based Scope 2 GHG emissions (tCO2eq) | ||||||||
| Significant scope 3 GHG emissions | ||||||||
| Total Gross indirect (Scope 3) GHG emissions (tCO2eq) | ||||||||
| 1 Purchased goods and services | ||||||||
| [Optional sub-category: Cloud computing and data centre services | ||||||||
| 2 Capital goods | ||||||||
| 3 Fuel and energy-related Activities (not included in Scope1 or Scope 2) | ||||||||
| 4 Upstream transportation and distribution | ||||||||
| 5 Waste generated in operations | ||||||||
| 6 Business travelng | ||||||||
| 7 Employee commuting | ||||||||
| 8 Upstream leased assets | ||||||||
| 9 Downstream transportation | ||||||||
| 10 Processing of sold products | ||||||||
| 11 Use of sold products | ||||||||
| 12 End-of-life treatment of sold products | ||||||||
| 13 Downstream leased assets | ||||||||
| 14 Franchises | ||||||||
| 15 Investments | ||||||||
| Total GHG emissions | ||||||||
| Total GHG emissions (location-based) (tCO2eq) | ||||||||
| Total GHG emissions (market-based) (tCO2eq) |
AR 49.To highlight potential transition risks, the undertaking may disclose its total GHG emissions disaggregated by major countries and, if applicable, by operating segments (applying the same segments for the financial statements as required by the accounting standards, i.e., IFRS 8 Operating Segments or local GAAP). Scope 3 GHG emissions may be excluded from these breakdowns by country if the related data is not readily available.
AR 50.The Scope 3 GHG emissions may also be presented by according to the indirect emission categories defined in EN ISO 14064-1:2018.
AR 51.If it is material for the undertaking's Scope 3 emissions, it shall disclose the GHG emissions from purchased cloud computing and data centre services as a subset of the overarching Scope 3 category‘upstream purchased goods and services’.
AR 52.The total GHG emissions disaggregated by Scope 1, 2 and 3 GHG emissions may be graphically presented in the sustainability statement (e.g., as a bar or pie chart) showing the split of GHG emissions across the value chain (Upstream, Own operations, Transport, Downstream).
AR 53.When disclosing the information on GHG intensity based on net revenue required under paragraph 53, the undertaking shall:
(a) calculate the GHG intensity ratio by the following formula:
(b) express the total GHG emissions in metric tonnes of CO2eq and the net revenue in monetary units (e.g., Euros) and present the results for the market-based and location-based method;
(c) include the total GHG emissions in the numerator and overall net revenue in the denominator;
(d) calculate the total GHG emissions as required by paragraphs 44 (d) and 52; and
(e) calculate the net revenue in line with the requirements in accounting standards applied for financial statements, i.e., IFRS 15 or local GAAP.
AR 54.The quantitative information may be presented in the following tabular format.
| GHG intensity per net revenue | Comparative | N | % N / N-1 |
| --- | --- | --- | --- | | Total GHG emissions (location-based) per net revenue (tCO2eq/Monetary unit) | | | | | Total GHG emissions (market-based) per net revenue (tCO2eq/Monetary unit) | | | |
AR 55.The reconciliation of the net revenue used to calculate GHG intensity to the relevant line item or notes in the financial statements (as required by paragraph 55) may be done by either:
(a) a cross-reference to the related line item or disclosure in the financial statements; or
(b) if the net revenue cannot be directly cross-referenced to a line item or disclosure in the financial statements, by a quantitative reconciliation using the below tabular format. Net revenue used to calculate GHG intensity Net revenue (other) Total net revenue (in financial statements)
Disclosure Requirement E1-7 – GHG removals and GHG mitigation projects financed through carbon credits
AR 56.In addition to their GHG emission inventories, undertakings shall provide transparency on how and to what extent they either enhance natural sinks or apply technical solutions to remove GHGs from the atmosphere in their own operations and upstream and downstream value chain. While there are no generally accepted concepts and methodologies for accounting for GHG removals, this Standard aims to increase transparency on the undertaking’s efforts to remove GHGs from the atmosphere (paragraphs 56 (a) and 58). The GHG removals outside the value chain that the undertaking supports through the purchase of carbon credits are to be disclosed separately as required by paragraphs 56 (b) and 59.
AR 57.When disclosing the information on GHG removals and storage from the undertaking’s own operations and its upstream and donwstream value chain required under paragraphs 56 (a) and 58, for each removal and storage activity, the undertaking shall describe:
(a) the GHGs concerned;
(b) whether removal and storage are biogenic or from land-use change (e.g., afforestation, reforestation, forest restoration, urban tree planting, agroforestry, building soil carbon, etc.), technological (e.g., direct air capture), or hybrid (e.g., bioenergy with CO2 capture and storage), and technological details about the removal, the type of storage and, if applicable, the transport of removed GHGs;
(c) if applicable, a brief explanation of whether the activity qualifies as a nature-based solution; and
(d) how the risk of non-permanence is managed, including determining and monitoring leakage and reversal events, as appropriate.
AR 58.When preparing the information on GHG removals and storage from the undertaking’s own operations and its upstream and donwstream value chain required under paragraphs 56 (a) and 58, the undertaking shall:
(a) consider, as far as applicable, the GHG Protocol Corporate Standard (version 2004), Product Standard (version 2011), Agriculture Guidance (version 2014), Land use, land-use change, and forestry Guidance for GHG project accounting (version 2006);
(b) apply consensus methods on accounting for GHG removals as soon as they are available, notably the EU regulatory framework for the certification of CO2 removals;
(c) if applicable, explain the role of removals for its climate change mitigation *policy*;
(d) include removals from operations that it owns, controls, or contributes to and that have not been sold to another party through carbon credits;
(e) if applicable, mark those GHG removal activities in own operations or the value chain that have been converted into carbon credits and sold on to other parties on the voluntary market;
(f) account for the GHG emissions associated with a removal activity, including transport and storage, under Disclosure Requirement E1-6 (Scopes 1, 2 or 3). To increase transparency on the efficiency of a removal activity, including transport and storage, the undertaking may disclose the GHG emissions associated with this activity (e.g., GHG emissions from electricity consumption of direct air capture technologies) alongside, but separately from, the amount of removed GHG emissions;
(g) in case of a reversal, account for the respective GHG emissions as an offset for the removals in the reporting period;
(h) use the most recent GWP values published by the IPCC based on a 100-year time horizon to calculate CO2eq emissions of non-CO2 gases and describe the assumptions made, methodologies and frameworks applied for calculation of the amount of GHG removals; and
(i) consider nature-based solutions.
AR 59.The undertaking shall disaggregate and separately disclose the GHG removals that occur in its own operations and those that occur in its upstream and downstream value chain. GHG removal activities in the upstream and downstream value chain shall include those that the undertaking is actively supporting, for example, through a cooperation project with a supplier. The undertaking is not expected to include any GHG removals that may occur in its upstream and downstream value chain that it is not aware of.
AR 60.The quantitative information on GHG removals may be presented by using the following tabular format.
| Removals | Comparative | N | % N / N-1 |
|---|---|---|---|
| GHG removal activity 1 (e.g.., forest restoration) | - | ||
| GHG removal activity 2 (e.g.., direct air capture) | - | ||
| … | - | ||
| Total GHG removals from own operations (tCO2eq) | |||
| GHG removal activity 1 (e.g.., forest restoration) | - | ||
| GHG removal activity 2 (e.g.., direct air capture) | - | ||
| … | - | ||
| Total GHG removals in the upstream and downstream value chain (tCO2eq) | |||
| Reversals (tCO2eq) |
AR 61.Financing GHG emission reduction projects outside the undertaking’s value chain through purchasing carbon credits that fulfil high-quality standards can be a useful contribution towards mitigating climate change. This Standard requires the undertaking to disclose whether it uses carbon credits separately from the GHG emissions (paragraphs 56 (b) and 59) and GHG emission reduction targets (Disclosure Requirement E1-4). It also requires the undertaking to show the extent of use and which quality criteria it uses for those carbon credits.
AR 62.When disclosing the information on carbon credits required under paragraphs 56 (b) and 59, the undertaking shall disclose the following disaggregation as applicable:
(a) the share (percentage of volume) of reduction projects and removal projects;
(b) for carbon credits from removal projects, an explanation whether they are from biogenic or technological sinks;
(c) the share (percentage of volume) for each recognised quality standard;
(d) the share (percentage of volume) issued from projects in the EU; and
(e) the share (percentage of volume) that qualifies as a corresponding adjustment under Article. 6 of the Paris Agreement.
AR 63.When preparing the information on carbon credits required under paragraphs 56 (b) and 59, the undertaking shall:
(a) Consider recognised quality standards;.
(b) if applicable, explain the role of carbon credits in its climate change mitigation *policy*;
(c) not include carbon credits issued from GHG emission reduction projects within its value chain as the respective GHG emission reductions shall already be disclosed under Disclosure Requirement E1-6 (Scope 2 or Scope 3) at the time they occur (i.e., double counting is avoided);
(d) not include carbon credits from GHG removal projects within its value chain as the respective GHG removals may already be accounted for under Disclosure Requirement E1-7 at the time they occur (i.e., double counting is avoided);
(e) not disclose carbon credits as an offset for its GHG emissions under Disclosure Requirement E1-6 on GHG emissions;
(f) not disclose carbon credits as a means to reach the GHG emission reduction targets disclosed under Disclosure Requirement E1-4; and
(g) calculate the amount of carbon credits to be cancelled in the future, as the sum of carbon credits in metric tonnes of CO2eq over the duration of existing contractual agreements.
AR 64.The information on carbon credits cancelled in the reporting year and planned to be cancelled in the future may be presented using the following tabular formats.
| Carbon credits cancelled in the reporting year | Comparative | N |
|---|---|---|
| Total (tCO2eq) | ||
| Share from removal projects (%) | ||
| Share from reduction projects (%) | ||
| Recognised quality standard 1 (%) | ||
| Recognised quality standard 2 (%) | ||
| Recognised quality standard 3 (%) | ||
| … | ||
| Share from projects within the EU (%) | ||
| Share of carbon credits that qualify as corresponding adjustments (%) | ||
| Carbon credits planned to be cancelled in the future | Amount until [period] | |
| --- | --- | |
| Total (tCO2eq) |
Disclosure Requirement E1-8 – Internal carbon pricing
AR 65.When disclosing the information required under paragraphs 62 and 63, if applicable, the undertaking shall briefly explain whether and how the carbon prices used in internal carbon pricing schemes are consistent with those used in financial statements. This shall be done in respect of the internal carbon prices used for,
(a) the assessment of the useful life and residual value of its assets (intangibles, property, plant and equipment);
(b) the impairment of assets; and
(c) the fair value measurement of assets acquired through business acquisitions.
AR 66.The information may be presented by using the following table:
| Types of internal carbon prices | Volume at stake (tCO2eq) | Prices applied (€/tCO2eq) | Perimeter description |
|---|---|---|---|
| CapEx shadow price | |||
| Research and Development (R&D) investment shadow price | |||
| Internal carbon fee or fund | |||
| Carbon prices for impairment testing | |||
| Etc. |
Disclosure Requirement E1-9 – Anticipated financial effects from material physical and transition risks and potential climate-related opportunities
AR 67.Material climate-related physical risks and transition risks may affect the undertaking’s financial position (e.g., owned assets, financially-controlled leased assets, and liabilities), performance (e.g., potential future increase/decrease in net revenue and costs due to business interruptions, increased supply prices resulting in potential margin erosions), and cash flows. The low probability, high severity and long-term time horizons of some climate- related physical risk exposures and the uncertainty arising from the transition to a sustainable economy mean that there will be associated material anticipated financial effects that are outside the scope of the requirements of applicable accounting standards.
AR 68.Currently, there is no commonly accepted methodology to assess or measure how material physical risks and transition risks may affect the undertaking’s future financial position, financial, performance and cash flows. Therefore, the disclosure of the financial effects (as required by paragraphs 64, 66 and 67) will depend on the undertaking’s internal methodology and the exercise of significant judgement in determining the inputs, and assumptions needed to quantify their anticipated financial effects.
AR 69.When disclosing the information required under paragraphs 64 (a) and 66, the undertaking shall explain whether and how:
(a) it assessed the anticipated financial effects for assets and business activities at material physical risk, including the scope of application, time horizons, calculation methodology, critical assumptions and parameters and limitations of the assessment; and
(b) the assessment of assets and business activities considered to be at material physical risk relies on or is part of the process to determine material physical risk as required under paragraphs 20 (b) and AR 11 and to determine climate scenarios as required under paragraphs 19 and AR 13 to AR 14. In particular, it shall explain how it has defined medium- and long-term time horizons and how these definitions are linked to the expected lifetime of the undertaking’s assets, strategic planning horizons and capital allocation plans.
AR 70.When preparing the information on assets at material physical risk that is required to be disclosed under paragraph 66 (a), the undertaking shall:
(a) Calculate the assets at material physical risk in terms of monetary amount and as a proportion (percentage) of total assets at the reporting date (i.e., the proportion is an estimate of the carrying value of assets at material physical risk divided by total carrying value as stated in the statement of financial position or balance sheet). The estimate of assets at material physical risk shall be derived starting from the assets recognised in the financial statements. The estimate of monetary amounts and proportion of assets at physical risk may be presented as either a single amount or range.
(b) All types of assets including finance-lease / right-of-use assets shall be considered when determining the assets at material physical risk.
(c) To contextualise this information, the undertaking shall: i. disclose the location of its significant assets at material physical risk. Significant assets located (52) in the EU territory shall be aggregated by NUTS codes 3 level digits (Nomenclature of Territorial Units for Statistics). For significant assets located outside EU territory, the breakdown by NUTS code will only be provided where applicable. ii. disaggregate the monetary amounts of assets at risk by acute and chronic physical risk (53).
(d) calculate the share of assets at material physical risk resulting from paragraph 66 (a) that is addressed by the climate change adaptation actions based on the information disclosed under Disclosure Requirement E1-3. This aims at approximating net risks.
AR 71.When preparing the information required under paragraph 64 (a) and 66 (d), the undertaking may assess and disclose the share of net revenue from business activities at physical risk. This disclosure
(a) shall be based on the net revenue in line with the requirements in accounting standards applied for financial statements, i.e., IFRS 15 or local GAAP.
(b) may include a breakdown of the undertaking’s business activities with the corresponding details of the associated percentage of total net revenue, the risk factors (hazards, exposure and sensitivity) and, if possible, the magnitude of the anticipated financial effects in terms of margin erosion over the short-, medium- and long-term time horizons. The nature of business activities may also be disaggregated by operating segments if the undertaking has disclosed the contribution of margins by operational segments in its segment reporting in the financial statements.
AR 72.When disclosing the information required under paragraphs 64 (b) and 67 (a), the undertaking shall explain whether and how:
(a) it has assessed the potential effects on future financial performance and position for assets and business activities at material transition risk, including the scope of application, calculation methodology, critical assumptions and parameters, and limitations of the assessment; and
(b) the assessment of assets and business activities considered to be at material transition risk relies on or is part of the process to determine material transition risks as described under paragraphs 20 (c) and AR 12 and to determine scenarios as required under paragraphs AR 12 to AR 15. In particular, it shall explain how it has defined medium- and long-term time horizons and how these definitions are linked to the expected lifetime of the undertaking’s assets, strategic planning horizons and capital allocation plans.
AR 73.When disclosing the information on assets at material transition risk as required under paragraphs 67 (a) and (b):
(a) the undertaking shall at the very least include an estimate of the amount of potentially stranded assets (in monetary amounts and as a proportion/percentage) from the reporting year until 2030 and from 2030 to 2050. Stranded assets are understood as the active or firmly planned key assets of the undertaking with significant locked-in GHG *emissions over their operating lifetime. Firmly planned key assets are those that the undertaking will most likely deploy within the next 5 years. The amount may be expressed as a range of asset values based on different climate and policy *scenarios, including a scenario aligned with limiting climate change to 1.5°C.
(b) the undertaking shall disclose a breakdown of the carrying value of its real estate assets, including rights-of-use assets, by energy efficiency classes. The energy efficiency shall be represented in terms of either the ranges of energy consumption in kWh/m2 or the EPC (54) (Energy Performance Certificate) (55) label class. If the undertaking cannot obtain this information on a best-effort basis, it shall disclose the total carrying amount of the real estate assets for which the energy consumption is based on internal estimates.
(c) the undertaking shall calculate the proportion (percentage) of total assets (including finance lease/right-of-use assets) at material transition risk addressed by the climate change mitigation *actions* based on the information disclosed under Disclosure Requirement E1-3. The total assets amount is the carrying amount on the balance sheet at the reporting date.
AR 74.When disclosing the information on potential liabilities from material transition risks required under paragraph 67(d):
(a) undertakings that operate installations regulated under an emission trading scheme may include a range of potential future liabilities originating from these schemes;
(b) undertakings subject to the EU ETS, may disclose the potential future liabilities that relate to their allocation plans for the period before and until 2030. The potential liability may be estimated on the basis of: i. the number of allowances held by the undertaking at the beginning of the reporting period; ii. the number of allowances to be purchased in the market yearly, i.e., before and until 2030; iii. the gap between estimated future emissions under various transition scenarios and free allocations of allowances that are known for the period until 2030, and iv. the estimated yearly cost per tonne of CO2 for which an allowance needs to be purchased;
(c) In assessing its potential future liabilities, the undertaking may consider and disclose the number of Scope 1 GHG emission allowances within regulated emission trading schemes and the cumulative number of emission allowances stored (from previous allowances) at the beginning of the reporting period;
(d) undertakings disclosing volumes of carbon credits planned to be cancelled in the near future (Disclosure Requirement E1-7) may disclose the potential future liabilities associated with those based on existing contractual agreements;
(e) the undertaking may also include its monetised gross Scope 1, 2 and total GHG emissions (in monetary units) calculated as follows: i. monetised Scope 1 and 2 GHG emissions in the reporting year by the following formula:
ii. monetised total GHG emissions in the reporting year by the following formula:
iii. by use of a lower, middle and upper cost rate (56) for GHG emissions (e.g., market carbon price and different estimates for the societal costs of carbon) and reasons for selecting them.
AR 75.Other approaches and methodologies may be applied to assess how transition risks may affect the future financial position of the undertaking. In any case, the disclosure of anticipated *financial effects* shall include a description of the methodologies and definitions used by the undertaking.
AR 76.When preparing the information required under paragraph 67 (e), the undertaking may assess and disclose the share of net revenue from business activities at transition risks. This disclosure:
(a) shall be based on the net revenue in line with the requirements in accounting standards applied for financial statements, i.e., IFRS 15 or local GAAP.
(b) may include a breakdown of the undertaking’s business activities with the corresponding details of the associated percentage of current net revenue, risk factors (events and exposure), and when possible, the anticipated financial effects related to margin erosion over the short-, medium- and long-term. The nature of business activities may also be disaggregated by operating segments if the undertaking has disclosed the contribution of margins by operational segments in its segment reporting in the financial statements.
AR 77.The reconciliation of the significant amount of assets, liabilities, and net revenue (vulnerable to either material physical risks or transition risks) to the relevant line item or disclosure (e.g., in segment reporting) in the financial statements (as required by paragraph 68) may be presented by the undertaking as follows:
(a) as a cross-reference to the related line item or disclosure in the financial statements if these amounts are identifiable in the financial statements; or
(b) If these cannot be directly cross-referenced, as a quantitative reconciliation of each to the relevant line item or disclosure in the financial statement using the below tabular format:
Carrying amount of assets or liabilities or net revenue vulnerable to either material physical or transition risks Adjusting items Assets or liabilities or net revenue in the financial statements
AR 78.The undertaking shall ensure the consistency of data and assumptions to assess and report the anticipated financial effects from material physical risks and transition risks in the sustainability statement with the corresponding data and assumptions used for the financial statements (e.g., carbon prices used for assessing impairment of assets, the useful life of assets, estimates and provisions). The undertaking shall explain the reasons for any inconsistencies (e.g., if the full financial implications of climate-related risks are still under assessment or are not deemed material in the financial statements).
AR 79.For potential future effects on liabilities (as required by paragraph 67 (d)), if applicable, the undertaking shall cross-reference the description of the emission trading schemes in the financial statements.
AR 80.When disclosing the information under paragraph 69 (a), the undertaking shall explain the nature of the cost savings (e.g., from reduced energy consumption), the time horizons and the methodology used, including the scope of the assessment, critical assumptions, and limitations, and whether and how scenario analysis was applied.
AR 81.When disclosing the information required under paragraph 69 (b), the undertaking shall explain how it has assessed the market size or any expected changes to net revenue from low-carbon products and services or adaptation solutions including the scope of the assessment, the time horizon, critical assumptions, and limitations and to what extent this market is accessible to the undertaking. The information on the market size may be put in perspective to the current taxonomy-aligned revenue disclosed under the provisions of Regulation (EU) 2020/852. The entity may also explain how it will pursue its climate-related opportunities and, where possible, this should be linked to the disclosures on policies, targets and actions under Disclosure Requirements E1-2, E1-3 and E1-4.
ESRS E2
POLLUTION
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.
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Pollution of air’ refers to the undertaking’s emissions** into air (both indoor and outdoor), and prevention, control and reduction of such emissions.
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Pollution of water’ refers to the undertaking’s emissions** to water, and prevention, control and reduction of such emissions.
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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
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.
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.
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.
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).
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.
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 (57) (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 (58);
(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.
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.
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 those risks have (or could reasonably be expected to have) a material influence on the undertaking’s financial position, financial performance, and cash flows, over the short, medium and long term.
(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.
The information provided under paragraph 39(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.
Appendix A
This Appendix is an integral part of ESRS E2. It supports the application of the disclosure requirements set out in this standard and has the same authority as the other parts of the Standard.
ESRS 2 GENERAL DISCLOSURES
Impact, risk and opportunity management
AR 1.When conducting a materiality assessment on environmental subtopics, the undertaking shall assess the materiality of pollution in its own operations and its upstream and downstream value chain, and may consider the four phases below, also known as the LEAP approach:
(a) Phase 1: locate where in its own operations and its upstream and downstream value chain the interface with nature takes place;
(b) Phase 2: evaluate the pollution-related dependencies and impacts;
(c) Phase 3: assess the material risks and opportunities; and
(d) Phase 4: prepare and report the results of the materiality assessment.
AR 2.The materiality assessment for ESRS E2 corresponds to the first three phases of this LEAP approach. The fourth phase addresses the outcome of the process.
AR 3.The process to assess the materiality of impacts, dependencies, risks and opportunities shall consider the provisions in ESRS 2 IRO-1 Description of the processes to identify and assess material impacts, risks and opportunities, and IRO-2 Disclosure Requirements in ESRS covered by the undertaking’s sustainability statement.
AR 4.The sub-topics covered by the materiality assessment under ESRS E2 include:
(a) pollution of air, water and soil (excluding GHG emissions and waste), microplastics, and substances of concern;
(b) dependencies on ecosystem services that help to mitigate pollution-related impacts.
AR 5.In Phase 1, to locate where in its own operations and its upstream and downstream value chain the interface with nature takes place, the undertaking may consider:
(a) the site locations of direct assets and operations and related upstream and downstream activities across the value chain;
(b) the site locations where emissions of water, soil and air pollutants occur; and
(c) the sectors or business units related to those emissions or to the production, use, distribution, commercialisation and import/export of microplastics, substances of concern, and substances of very high concern, on their own, in mixtures or in articles.
AR 6.Phase 2 relates to the evaluation of the undertaking’s impacts and dependencies for each material site or sector/business unit including by assessing the severity and likelihood of impacts on the environment and human health.
AR 7.In Phase 3, to assess its material risks and opportunities based on the results of Phases 1 and 2, the undertaking may :
(a) identify transition risks and opportunities in its own operations and its upstream and downstream value chain by the categories of: i. policy and legal: e.g., introduction of regulation, exposure to sanctions and litigation (e.g., negligence towards ecosystems), enhanced reporting obligations; ii. technology: e.g., substitution of products or services by products or services with a lower impact, transition away from substances of concern; iii. market: e.g., shifting supply, demand and financing, volatility or increased costs of some substances; and iv. reputation: e.g., changing societal, customer or community perceptions as a result of an organisation’s role in pollution prevention and control;
(b) identify physical risks, e.g., sudden interruption of access to clean water, acid rain, or other pollution incidents that are likely to lead to or that have led to pollution with subsequent effects on the environment and society;
(c) identify opportunities related to pollution prevention and control categorised by: i. resource efficiency: decrease quantities of substances used or improve efficiency of production process to minimise impacts; ii. markets: e.g., diversification of business activities; iii. financing: e.g., access to green funds, bonds or loans; iv. resilience: e.g., diversification of substances used and control of emissions through innovation or technology; and v. reputation: positive stakeholder relations as a result of a proactive stance on managing risks.
AR 8.In order to assess materiality, the undertaking may consider Commission Recommendation (EU) 2021/2279 on the use of the Environmental Footprint methods to measure and communicate the life cycle environmental performance of products and organisations.
AR 9.When providing information on the outcome of its materiality assessment, the undertaking shall consider:
(a) a list of site locations where pollution is a material issue for the undertaking’s own operations and its upstream and downstream value chain; and
(b) a list of business activities associated with pollution material impacts, risks and opportunities.
AR 10.The policies described under this Disclosure Requirement may be integrated in broader environmental or sustainability policies covering different subtopics.
AR 11.The description of the policies shall include information on the pollutant(s) or substance(s) covered.
AR 12.
When disclosing information under paragraph 12, the undertaking may include contextual information on the relations between its policies implemented and how they may contribute to the EU Action Plan ‘Towards a Zero Pollution for Air, Water and Soil’ with for instance elements on:
(a) how it is or may be affected by the targets and measures of the EU Action Plan and the revision of existing directives (e.g., the Industrial Emissions Directive);
(b) how it intends to reduce its pollution footprint to contribute to these targets.
AR 13.Where actions extend to upstream or downstream value chain engagements, the undertaking shall provide information on the types of actions reflecting these engagements.
AR 14.When considering resources, examples of operational expenditures could be investments in research and development to innovate and develop safe and sustainable alternatives to the use of substances of concern or to decrease emissions in a production process.
AR 15.Where relevant to achieve its pollution-related policy objectives and targets, the undertaking may provide information on site-level action plans.
Metrics and targets
AR 16.If the undertaking refers to ecological thresholds when setting targets, it may refer to the guidance provided by the Science-Based Targets Initiative for Nature (SBTN) in its interim guidance (Initial Guidance for Business, September 2020), or any other guidance with a scientifically acknowledged methodology that allows setting of science-based targets by identifying ecological thresholds and, if applicable, entity-specific allocations. Ecological thresholds can be local, national and/or global.
AR 17.The undertaking may specify whether the target addresses shortcomings related to the Substantial Contribution criteria for Pollution Prevention and Control as defined in delegated acts adopted pursuant to Article 14(2) of Regulation (EU) 2020/852. Where the Do No Significant Harm (DNSH) criteria for Pollution Prevention and Control as defined in delegated acts adopted pursuant to Article 10(3), Article 11(3), Article 12(2), Article 13(2), and Article 15(2) of Regulation (EU) 2020/852 are not met, the undertaking may specify whether the target addresses shortcomings related those DNSH critera.
AR 18.Where relevant to support the policies it has adopted, the undertaking may provide information on the targets set at site level.
AR 19.The targets may cover the undertaking’s own operations and/or the value chain.
AR 20.The information to be provided on microplastics under paragraph 28(b) shall include microplastics that have been generated or used during production processes or that are procured, and that leave the undertaking’s facilities as emissions, as products, or as part of products or services. Microplastics may be unintentionally produced when larger pieces of plastics like car tires or synthetic textiles wear and tear or may be deliberately manufactured and added to products for specific purposes (e.g., exfoliating beads in facial or body scrubs).
AR 21.The volume of pollutants shall be presented in appropriate mass units, for example tonnes or kilogrammes.
AR 22.The information required under this Disclosure Requirement shall be provided at the level of the reporting undertaking. However, the undertaking may disclose additional breakdown including information at site level or a breakdown of its emissions by type of source, by sector or by geographical area.
AR 23.When providing contextual information on the emissions, the undertaking may consider:
(a) the local air quality indices (AQI) for the area where the undertaking’s air pollution occurs;
(b) the degree of urbanisation (DEGURBA) (59) for the area where air pollution occurs; and
(c) the undertaking’s percentage of the total emissions of pollutants to water and soil occurring in areas at water risk, including areas of high-water stress.
AR 24.The information provided under this Disclosure Requirement may refer to information the undertaking is already required to report under other existing legislation (i.e., IED, E- PRTR, etc.).
AR 25.Where the undertaking’s activities are subject to Directive 2010/75/EU of the European Parliament and of the Council on industrial emissions (IED) (60) and relevant Best Available Techniques Reference Documents (BREFs), irrespective of whether the activity takes place within the European Union or not, the undertaking may disclose the following additional information:
(a) a list of installations operated by the undertaking that fall under the IED and EU- BAT Conclusions;
(b) a list of any non-compliance incidents or enforcement actions necessary to ensure compliance in case of breaches of permit conditions;
(c) the actual performance, as specified in the EU-BAT conclusions for industrial installations, and comparison of the undertaking’s environmental performance against ‘emission levels associated with the best available techniques’ the (BAT-AEL) as described in EU-BAT conclusions;
(d) the actual performance of the undertaking against ‘environmental performance levels associated with the best available techniques’(BAT-AEPLs) provided that they are applicable to the sector and installation; and
(e) a list of any compliance schedules or derogations granted by competent authorities according to Art. 15(4) Directive 2010/75/EU that are associated with the implementation of BAT-AELs.
AR 26.When providing information on pollutants, the undertaking shall consider approaches for quantification in the following order of priority:
(a) direct measurement of emissions, effluents or other pollution through the use of recognised continuous monitoring systems (e.g., AMS Automated Measuring Systems);
(b) periodic measurements;
(c) calculation based on site-specific data;
(d) calculation based on published pollution factors; and
(e) estimation.
AR 27.Regarding the disclosure of methodologies required by paragraph 30, the undertaking shall consider:
(a) whether its monitoring is carried out in accordance with EU BREF Standards or another relevant reference benchmark; and
(b) whether and how the calibration tests of the AMS were undertaken and the verification of periodic measurement by independent labs were ensured.
AR 28.In order for the information to be complete, substances in the undertaking’s own operations and those procured shall be included (e.g., embedded in ingredients, semi- finished products, or the final product).
AR 29.The volume of pollutants shall be presented in mass units, for example tonnes or kilogrammes or other mass units appropriate for the volumes and type of pollutants being released.
AR 30.The information provided under this Disclosure Requirement may refer to information the undertaking is already required to report under other existing legislation (i.e., Directive 2010/75/EU, Regulation (EC) No 166/2006 ‘E-PRTR’, etc.).
AR 31.The operating and capital expenditures related to incidents and deposits may include for instance:
(a) cost for eliminating and remediating the respective pollution of air, water and soil including environmental protection;
(b) damage compensation costs including payment of fines and penalties imposed by regulators or government authorities.
AR 32. Incidents may include for instance interruptions of production, whether arising from the supply chain and/or from own operations, which resulted in pollution.
AR 33.The undertaking may include an assessment of its related products and services at risk over the short-, medium- and long-term, explaining how these are defined, how financial amounts are estimated, and which critical assumptions are made.
AR 34.The quantification of the anticipated *financial effects* in monetary terms under paragraph 38(a) may be a single amount or a range.
ESRS E3
WATER AND MARINE RESOURCES
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 (61) (EU Water Framework Directive), Directive 2008/56/EC of the European Parliament and of the Council (62) (EU Marine Strategy Framework Directive), Directive 2014/89/EU of the European Parliament and of the Council (63) (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
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.
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 (64).
9.The undertaking shall describe its policies adopted to manage its material impacts, risks and opportunities related to water and marine resources (65).
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.
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. (66)
The undertaking shall specify whether it has adopted policies or practices related to sustainable oceans and seas (67).
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.
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.
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.
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