Below you will find questions and answers, in short, for the following topics:

• ESRS 2 and MDR policies, actions & targets datapoints
• Monetary amounts for revenue and anticipated financial effects related to climate change
• GHG emissions and carbon credits
• GHG removal and storage

Q&As in short on ESRS 2 and MDR policies, actions & targets datapoints

❓ Question 821

When a sustainability matter triggers exposure to both risks and opportunities, should the assessment of materiality be made on each individually or on the combined financial risk and opportunity?

For example, energy consumption is a financial risk because the cost of energy can fluctuate significantly, but there is also an opportunity in terms of reduced energy costs if the company invests in renewable energy and energy-efficient appliances.

➡ Answer

When the nature of an opportunity or a risk relating to a sustainability matter is different, it shall be assessed separately.

The positive deviations are not necessarily identified as separate opportunities but assessed together with the risk.

In the example above, it is the action of investing in renewable energy that creates the opportunity to reduce energy expenses.

❓ Question 762

How shall Minimum Disclosure Requirements (MDR) on policies, actions and targets be reported if they related to more than one topical standard?

➡ Answer

The MDRs on policies, actions, metrics and targets shall be applied together with the corresponding DRs in topical and sector-specific ESRS (ESRS 1 par. 13).

Reference from one part of the sustainability statement to another is allowed, avoiding duplications (ESRS 1 par. 115).

❓ Question 733

Can the ESRS 2 datapoints be overlapping with those in topical standards?

➡ Answer

No, the ESRS 2 Disclosure Requirements do not overlap with those in topical ESRS, with the exception of the MDRs in ESRS 2 Chapter 4.2 as they are a checklist to be used for completeness.

When a datapoint in MDR is already covered by a topical standard, undertakings are not supposed to report twice the same information requirement.

Some Disclosure Requirements in the topical ESRS further specify the ESRS 2 disclosures in relation to the respective topical matter (see ESRS 2 par. 2).

❓ Question 429

Which are the DPs or DRs to consider from ESRS 2 for entity-specific disclosure?

➡ Answer

ESRS 2 GOV-1 to GOV-5, SBM-1 to SBM-3, IRO-1 and the Minimum Disclosure Requirements on policies and actions on metrics and targets, respectively (ESRS 2 par. 60 and 70).

❓ Question 781

Is the general meeting to be considered as an ‘administrative, management and supervisory body’? The general meeting is usually a company’s highest decision-making body.

➡ Answer

No, the general meeting should not be considered an ‘administrative, management and supervisory body’.

It is a separate governance body with specific powers attributed to shareholders or owners.

The general meeting is not addressed by ESRS.

Q&As in short on disclosing monetary amounts for revenue and anticipated financial effects related to climate change

❓Question 395

What does net revenue mean? How is it calculated?

➡ Answer

The terms ‘revenue’, ‘total revenue’ and ‘net revenue’ are to be understood as the amounts presented in the income statement of the undertaking’s financial statements in accordance with the applicable legislation and/or accounting standards.

❓Question 422

Is the disclosure of monetary amount and proportion of assets at risk over the short-/medium-/long-term meant to be broken down by the time horizon (short-/medium-/long-term) or by a single aggregate number for assets at risk in any of those time horizons?

➡ Answer

ESRS E1 paragraphs 66 and 67 do not require a breakdown of monetary amount figures by the three time horizons.

It rather requires the disclosure of a monetary amount that is the result of cumulative financial effects assessed for each of the time horizons (short-, medium- and long-term).

❓Question 555

Please provide more clarity around the requirement to report the anticipated financial effects from chronic and acute physical risks in relation to climate change.

➡ Answer

The monetary amount of the assets that are exposed to impact from chronic and/or acute climate change events provides a measure of exposure to climate risks.

The undertaking is required to disclose (Regulation EU 2022/2453):

(a) the gross carrying amount of exposures sensitive to impact from chronic climate-change events;

(b) the gross carrying amount of exposures sensitive to impact from acute climate change events; and

(c) the gross carrying amount subject to impact from both chronic and acute climate change events.

Q&As in short on disclosure of GHG emissions and carbon credits

❓Question 268

Do Gross GHG scopes 1-3 need to be disclosed each year?

➡ Answer

Yes, an undertaking shall disclose and update their Gross Scopes 1, 2, 3 and Total GHG emissions on an annual basis.

The update of Scope 3 GHG emissions in each significant category shall occur every year on the basis of current activity data.

The update of the full Scope 3 GHG inventory is required at least every three years or on the occurrence of a significant event or a significant change in circumstances (ESRS E1 par. AR 46 (f)).

❓Question 863

When calculating metrics, including value chain metrics, do we have to consider downstream positions for all four quarters (as of 31.03, 30.06, 30.09, 31.12)?

➡ Answer

ESRS do not require to calculate annual averages based on quarterly figures.

❓Question 910

Can the transitional provision in ESRS 1 paragraphs 132 to 135 (difficulty in gathering value chain information for the first 3 years) be applied to the reporting of Scope 3 emissions in ESRS E1 par. 44 (c)?

➡ Answer

No. The disclosure of Scope 3 emissions is a datapoint derived from EU legislation. Despite these transitional provisions, datapoints derived from EU legislation, such as Scope 3 emissions, shall be reported.

However, if the average number of employees during the financial year does not exceed 750, the undertaking may omit the datapoints on Scope 3 emissions and total GHG emissions for the first year.

❓Question 536

Which are the recognised quality standards for carbon credit?

➡ Answer

There is currently no list of quality standards for carbon credit recognised by the EU or recommended by EFRAG.

This list of criteria needs to be met:

(a) must be verifiable by independent third parties; and

(b) make requirements and project reports publicly available and at a minimum ensure:

1. additionality,
2. permanence,
3. avoidance of double counting and provide rules for calculation,
4. monitoring, and
5. verification of the project’s GHG emissions and removals.

As long as those criteria are met, an undertaking can consider the carbon credit as a recognised quality standard for carbon credit.

Q&As in short on GHG removal and storage

❓Question 577

What is the definition of ‘projects’ in ESRS E1 paragraph 56 (a) (GHG removals and storage resulting from projects).

➡ Answer

Projects are all activities/interventions conducted by the undertaking which may lead to GHG removals and storage.

Examples of GHG removal projects include:

reforestation/afforestation, soil carbon enhancement, ecological restoration, blue carbon removals, integration of bioenergy with carbon capture and storage (BECCS) technologies and Direct Air Capture of CO2 with storage (DACCS).

Projects will usually test new concepts, technologies or products within the operating context of the company and have both a novelty component as well as a transitory nature – the related activity is operated as a project for a certain limited period.

❓Question 636

What are the definitions of ‘biogenic removal and storage’, ‘removal and storage from land use’, ‘technological removal and storage’ and ‘hybrid removal and storage’?

➡ Answer

Biogenic removal and storage refers to GHG removal and storage as defined in ESRS, which is classified as biogenic.

This is produced by living organisms or biological processes but not by fossilized or from fossil sources. One example is forest restoration.

Removal and storage from land use refers to GHG removal and storage as defined in ESRS resulting from land-use, which is defined, too, in ESRS.

Additionally, ESRS E1 AR 57 (b) provides examples of such activities (afforestation, reforestation, forest restoration, urban tree planting, agroforestry, building soil carbon).

Technological removal and storage refers to GHG removal and storage as defined in ESRS, which results from use of technology.

Such activities may resemble examples provided in ESRS E1 AR 57 (b) (direct air capture).

Hybrid removal and storage refers to GHG removal and storage as defined in ESRS, which results from combining the use of technology with biogenic removals.

ESRS E1 AR 57 (b) provides an example of this activity (bioenergy with CO2 capture and storage).

Undertakings interested in carbon removals and carbon farming are also advised to check the provisional agreement reached on 20 February 2024 by the European Parliament and the Council of the EU for a Carbon Removals and Carbon Farming (CRCF) Regulation.

The full Q&A compilation for January-July 2024 can be downloaded here: >>

Stay tuned for more CSRD and ESRS insights on our LinkedIn page >>

EFRAG has prepared a report, with the support of the Boston Consulting Group, based on a study aimed at understanding how undertakings are preparing to apply the European Sustainability Reporting Standards (ESRS) required for compliance with the CSRD.

The report illustrates preliminary observed practices and challenges in their initial phase of ESRS implementation as of Q2 2024, divided into 4 sections:

1. Organisational approach
2. Double Materiality Assessment
3. Value Chain mapping
4. Reporting on ESRS Data Points

Below you will find valuable key takeaways. The full report can be downloaded here >>.

1. Organisational set-up for CSRD-related activities

⭕ Cross-functional collaboration models are set up to meet the ESRS requirements more effectively

All companies deploy cross-departmental collaboration.

The ownership model for the ESG reporting process is being discussed by most companies and may evolve in the future.

Currently ~65% allocate ownership to a single function (e.g., the Chief Sustainability Officer or Chief Financial Officer), while ~35% adopt a co-leadership approach (e.g., CFO in charge of reporting, CSO in charge of DMA).

Typically, five or more departments are regularly engaged in the CSRD implementation process.

Beyond the Sustainability and Finance departments, Risk Management, Human Resources, and Auditing or Internal Controls are the most frequently involved.

Departments such as Procurement, Communications, and Strategy are also commonly engaged, reflecting the interdisciplinary nature of effective ESG reporting.

30% are expecting changes in the organisational model in the near or medium term.

Upskilling is needed for any of the departments in the lead role (e.g., Sustainability on Internal Controls, Finance on ESG content).

Clear governance and forums are needed to exchange updates and implications for the other functions and make decisions.

~90%  have started improving data quality controls, similar to those used for financial reporting.

~85% acknowledge the need for IT transformation.

⭕ The companies expressed consensus that CSRD reporting has:

1️⃣ Enhanced cross-departmental collaboration (e.g., between Sustainability, Finance, Risk, IT and business units).

2️⃣ Highlighted the need for standardising the ESG reporting processes, including data quality controls (akin to financial reporting), in particular in preparation for assurance.

3️⃣ Required several additional capabilities and resources (FTE, knowledge, data and technology), including the need for an IT transformation, to be implemented under different timelines (some companies are starting sooner than others).

2. Double Materiality Assessment (DMA) practices

⭕ A strategic tool for setting ESG managerial priorities

~85% intend to integrate ESG reporting and the result of the DMA into business strategy and decision making.

A few consider DMA as a compliance exercise.

⭕ An overall shift in the DMA process is being observed

DMA is moving away from a judgement-based approach adopted in the previous years.

~70% now apply an objective evidence-based approach and rely mainly on internal and third-party data.

Where data is not available, information is complemented by the judgement of internal experts and stakeholders.

Quantitative measures of IROs (Impacts, Risks, Opportunities) are objective evidence of their materiality. Qualitative information may provide relevant context for understanding quantitative measures.

⭕“Internal expert” refers to

individuals within the organisation who possess specialised knowledge, skills or experience relevant to the environment, social or governance matters analysed or disclosed for sustainability reporting.

⭕ “Stakeholder” refers to

individuals, groups, or organisations external to the company, who can affect or be affected by the company,

including affected stakeholders and users of sustainability statements.

⭕ “Objective evidence-based” refers to

Internal data (e.g., Risk data and thresholds supplied by risk management; Opportunities based on internal projections supplied by strategy departments).

Third-party data (e.g., topic-specific databases; or in-house research on scientific papers).

Input of internal experts and stakeholders, including affected stakeholders for impact materiality.

This excludes results of generic surveys that are not targeted to specific affected stakeholder groups and narrowed to the matters that affect them.

Several highlight that surveys are not the preferred engagement channel as they often result in inconclusive output or insufficient stakeholder expertise.

⭕ “Judgement-based” refers to

Aggregation of views typically gathered through investigations/surveys/workshops with inputs from stakeholders and internal contributors (not necessarily by targeting engagements according to the level of expertise on ESG topics).

Key challenge: possible divergent views on different topics potentially leading to a subjective assessment not anchored to data.

⭕ Financial materiality thresholds

Risks: companies use both data and thresholds developed by the risk management division on ESG risk mapping (ranges expressed in millions of Euros and on different metrics as Revenues, CAPEX, and OPEX).

Opportunities: companies use business thresholds that make a business case material.

⭕ Impact materiality thresholds

Scale: is set by making use of objective external sources as much as possible (including industry proxies).

Scope: is defined according to geographical considerations on the specific topic (e.g., local vs. global footprint) and in line with where the company has established a business presence.

⭕ Interrelation between financial and impact materiality is highlighted

For instance, within the topic of health and safety, there is the human (social) impact of injury and fatalities, as well the financial risk of compensation and the wider reputational risk of an unsafe workplace.

3. Value Chain (VC) practices

⭕ VC mapping

Mapping of relationships, associated actors and financial transactions, is used to achieve visibility into the VC and connected IROs (impacts, risks, opportunities).

VC analysis remains one of the most challenging and least mature areas in ESRS implementation.

~90% are still working to refine their VC mapping, looking for the right balance of granularity.

Several have adopted a simplified aggregated VC mapping (i.e., upstream, downstream and own operations only).

They use transitional provisions, available for the first 3 years of sustainability reporting under the ESRS, with possible higher efforts to go beyond Tier 1 for the next reporting cycles.

Tier 1 (direct business relationships) suppliers are the primary suppliers that provide goods and services directly to the organization.

⭕ Focusing on direct business relationships (Tier 1)

• Does not reflect material IROs linked to indirect business relationships.
• Will not be compliant with ESRS, in particular for sectors other than financial institutions.
• Not reflecting complexities of value chains raises potential information biases.

~45% have already adopted a more granular mapping of their value chain (i.e., going beyond the high-level upstream, downstream and own operations only).

Especially non-financial institutions are already going beyond Tier 1. They tend to have more visibility of their value chain due to ongoing activities (e.g., supplier screening), especially upstream.

⭕ VC hotspots and due diligence

Severity of impacts is used to prioritise efforts, focusing on VC hotspots.

“Hotspots” are specific areas of the VC where significant IROs are likely to materialise.

Potential ”hotspots” are identified by cross-referencing countries where materials are produced, to social and environmental risk databases (i.e., Type of impact by Country by Actor in the VC). These hotspots may then be further investigated.

Special attention is given to addressing risks such as child labour in specific geographies.

The mapping of the VC for material impacts is expected to use the sustainability due diligence process when it is in place.

⭕ VC aggregation

When aggregating VC components for clarity and manageability, criteria are based on similar business types, products, services, geographical locations and organisational setups.

Such aggregation should not dilute key VC components and should ensure that the internal organisation is reflected in the VC to maintain accountability.

Detailed segmentation enhances effective visibility, management and prioritisation of high-impact areas, supporting compliance and strategic focus on significant VC elements.

Conversely, VC components with no evidence of IROs are excluded.

4. ESRS Data Point (DP) practices

⭕ EFRAG’s Implementation Guidance 3 (IG 3 Excel list)

~95% of the undertakings use IG 3 for running their gap analysis.

~20% are currently using IG 3 as a preliminary base for the upcoming digital tagging/reporting taxonomy (XBRL taxonomy).

~80% mention the complexity of retrieving data, with similar obstacles found across E, S and G.

~75% leverage the phase-in of DPs to spread the preparation efforts. However, the effect of phase-ins needs to be properly communicated.

~40% leverage Information Materiality, a concept that does not yet seem to be well understood by the participants of the study.

~10% choose to report voluntary DPs for material topics because they opt for full disclosure of DPs on material topics.

⭕ Only a minority understand how to assess Information Materiality at a DP level

The materiality of information exercise, which has the potential to direct efforts where they are most needed (i.e., in assessing material DPs), is not fully understood by the participants in this study.

Only the ‘Shall’ DPs in ESRS 2 and DR IRO 1 DPs in topical standards are always to be reported.

All other ‘Shall’ DPs are (i) applicable only when the undertaking concludes that the relevant topic is material and (ii) subject to materiality under the provisions of ESRS 1 paragraph 31 to 35.

MDR DPs are all to be reported only for material matters, per each policy/action/target that the undertaking discloses.

Information Materiality refers to ESRS 1 Appendix E: Flowchart for determining disclosures under ESRS: “Is the individual datapoint material?”

In short:

1️⃣ Perform the impact and financial materiality assessment (DMA) – informed by the topics listed in AR 16 ESRS 1.

Narrative disclosures for material topics

2️⃣ If the topic is material, disclose the DPs from the topical standard.

3️⃣ Disclose the DPs for established policies, taken actions and targets for the topic, per each policy/action/target, as explained in ESRS 2 (MDR).

4️⃣ If no policies, actions and targets have been established, disclose this to be the case. You may report a timeframe in which you aim to have these in place (ESRS1 33).

Metrics for material DRs / DPs

5️⃣ If the Disclosure Requirement (DR) is material, disclose the information required by the DR and the related DPs.

6️⃣ If the individual DP is material, disclose the information required by the DP.

⭕ Key challenges when disclosing all DPs (no use of possible levers highlighted by EFRAG)

• Higher effort required in the short and long term for reporting.
• Not all DPs might always be relevant to users.
• Risk of obscuring material information.
• Potential lower quality of data due to higher coverage needs.

More on costs

Earlier in the process, EFRAG also commissioned Centre for European Policy Studies (CEPS) and its partner Milieu to conduct an assessment of the costs and benefits of the first Set 1 of Draft ESRS presented in November 2022:

• Looking at administrative costs in absolute terms, the largest cost in absolute value (both one-off and recurring) is faced by NFRD listed undertakings.
• These are usually large undertakings requiring longer data collection processes.
• They expect to face, on average, a total of EUR 287 000 as a one-off cost of reporting and about EUR 320 000 on annual basis (of which EUR 173 000 for own costs equivalent to between 2 and 2.5 FTEs on average).
• Non-NFRD non-listed undertakings incur the lowest administrative costs, primarily due to their smaller average size. Their costs are expected to reach about EUR 36 000 on a one-off basis and EUR 40 000 on a recurring basis.

The SaaS solution Cleerit ESG

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And stay tuned for additional ESRS insights on our LinkedIn page >.

EFRAG is responsible to deliver the technical ESRS digital taxonomy to ESMA (the European Securities and Markets Authority) and the EC (European Commission).

It will be adopted via an “RTS” (Regulatory Technical Standards), drafted by ESMA – who will also conduct a cost-benefit analysis.

It will amend the ESEF Delegated Regulation and will be directly applicable in all Member States.

During yesterday’s meeting (16/7), EFRAG presented the changes implemented to the ESRS Set 1 XBRL Taxonomy following the public consultation feedback.

A total of 49 responses were provided in the course of the public consultation, with a wide support for the draft XBRL Taxonomy: 85% of the respondents thought that it appropriately reflected the ESRS.

EFRAG SRB confirmed the implementation of many technical improvements (see the link in the comments to access the details).

It rejected most of the proposal for aggregation, as not compatible with the agreed methodology based on the fundamental principle of reflecting the granularity in ESRS, as well as users’ needs and interoperability with ISSB who has adopted a similar approach.

⭕ EFRAG remarked that when companies draft their report closely to the ESRS, the costs of the tagging process are reasonable and lower than if the disclosures are not well structured and scattered around the report.

On July 5, ESMA, also issued a document stressing:

⭕that it will be particularly important to carefully assess whether the company’s historical approach to the presentation of sustainability information is consistent with the CSRD and ESRS and, if not, to make adjustments accordingly.

⭕the importance that, from the first application of the ESRS, the reporting process is conceived in a way that caters for digitisation of the sustainability statement in a way that is aligned with the granularity of the ESRS requirements – following the structure of the ESRS makes digital tagging easier.

In addition, it was pointed out that,

➡ the burden of digital tagging that preparers face, will be justified by benefits to users of sustainability data,

➡ granular digital tagging will bring cost reductions both for companies and for financial institutions since if standardized and structured digital reporting is not done, the data will be provided by data providers at a high cost,

➡ the number of elements in the GRI taxonomy, which covers impact materiality, plus the number of the ISSB S1 and S2 elements which covers financial materiality is close to the number of ESRS elements, which covers double materiality.

EFRAG has scheduled its publication of the final taxonomy for the second half of August.

In the meantime, only editorial or technical changes will be implemented in the XBRL taxonomy, no XBRL elements will be added or removed.

✅ Book a demo to adopt a taxonomy-centric ESRS report preparation with Cleerit ESG >>>

On July 5 the European Securities and Markets Authority, ESMA, issued a document on the first application of the ESRS.

Here are some key extracts:

✅ In ESMA’s view, the sustainability statements that will be published in 2025 will constitute an important milestone in the learning curve of all stakeholders in the sustainability reporting ecosystem.

✅ Acknowledging this learning curve does not relieve issuers from the responsibility to ensure compliance with ESRS.

⭕ ESMA notes that for undertakings with experience in sustainability reporting under previous requirements, it is necessary to carefully assess whether the existing processes, systems and controls are still fit-for-purpose.

⭕ ESMA stresses that it will be particularly important to carefully assess whether their historical approach to the presentation of sustainability information is consistent with the CSRD and ESRS and, if not, to make adjustments accordingly.

⭕ ESMA stresses the importance that, from the first application of the ESRS, the reporting process is conceived in a way that caters for digitisation of the sustainability statement in a way that is aligned with the granularity of the ESRS requirements.

⭕ ESMA notes that following the structure of the ESRS would make digital tagging easier in the future.

✅ ESMA notes that, as a general rule, the ESRS do not envisage cases in which the lack of data justifies the omission of disclosure of material information.

✅ In acknowledgement of the considerable changes for the sustainability reporting practices entailed by these new requirements and with a view to supporting their implementation, ESMA wishes to:

➡ point to elements of guidance by the European Commission and EFRAG

➡ highlight the following key areas of attention which, in ESMA’s view, are of particular relevance in the preparation of ESRS sustainability statements:

✔ establishing governance arrangements and internal controls that can promote high-quality sustainability reporting

✔ properly designing and conducting the double materiality assessment and being transparent about it

✔ being transparent about the use of transitional reliefs

✔ preparing a clearly structured and digitisation-ready sustainability statement

✔ creating connectivity between financial and sustainability information.

✅ ESMA underlines, in particular, the responsibility of top management and supervisory bodies of issuers, as well as the importance of the oversight role of the audit committee and other relevant committees, to:

➡ ensure the overall internal consistency of the sustainability statement and its consistency with the other parts of the annual financial report;

➡ implement and supervise internal controls; and ultimately

➡ contribute to a high-quality sustainability statement.

The full document is available here: >>>

EFRAG has prepared an early-stage paper on the link between the sustainability matters listed in ESRS 1 AR 16 and the Disclosure Requirements (DRs), including Application Requirements (ARs), in the topical standards.

It can be helpful to identify the DRs and datapoints (DPs) that are linked to the matters (topics, sub-topics and sub-sub-topics) assessed as being material.

The list of matters in ESRS 1 AR16 shall be considered during materiality assessment for completeness.

Judgment is required to determine the information to be included in the reporting. The general criteria applied for this judgment are relevance and decision usefulness.

⭕ AR 16 topics are often interrelated. Based on the facts and circumstances of an undertaking, the materiality of a specific AR 16 topic of a topical ESRS can trigger reporting requirements in other topical ESRS.

➡ Since the sub-topics of energy and climate change mitigation are closely linked, it is expected that if one of both is material, the other is as well.

➡ DR E1-9 Anticipated financial effects is not expected to be disclosed if the matter is assessed as material only due to its impacts (and not also due to its risks or opportunities).

➡ For S1, Own Workforce, a holistic view is important as some of the AR 16 topics interrelate. This is the case for instance for working conditions and equal treatment which are issues that often interrelate. A fragmented approach to selecting some disclosure requirements and not others should be avoided.

For metrics, there is no systematic “one-to-one” relationship between a sub-topic or sub-sub-topic, as captured by AR16 (AR16 topic), and a topical disclosure requirement.

⭕ This means that, in general, all DRs in a topical standard are applicable to all AR16 topics covered by the topical standards, with a few exceptions to this rule.

⭕ Some metrics are likely to be relevant when any of the related AR16 topics in a topical standard are assessed to be material.

This is the case when there is evidence of such a direct link when the AR topic is directly mentioned in a datapoint (and not in the title of the DR).

This is the case for instance for microplastics in ESRS E2, for water withdrawals and water discharges in ESRS E3 or for waste in ESRS E5.

⭕When this direct link does not exist, the general rule applies.

➡ An appendix in this paper links each AR16 topic to the relevant DRs >>> Download

Finalization of 3 EFRAG ESRS Implementation Guidance Documents, related to the sector-agnostic ESRS as adopted by the European Commission on 31 July 2023:

✅ EFRAG IG Materiality Assessment >>> Download here

✅ EFRAG IG 2 Value Chain >>> Download here

✅ EFRAG IG 3 ESRS Datapoints >>> Download here  with Explanatory Note >>> Download here

With these documents, EFRAG aims to support undertakings and other stakeholders in the implementation of the ESRS.

⭕Regarding EFRAG IG 3 ESRS Datapoints

This list cannot be used as a basis for the preparation of the machine-readable sustainability reporting – it does not represent the digital ESRS XBRL taxonomy.

EFRAG IG 3 contains the line items only for tables as a whole, which will be used to further disaggregate datapoints in the machine-readable format.

EFRAG IG 3 may be considered an intermediate step on the way to delivering the ESRS XBRL Taxonomy with a human-readable reports that will be easier to digitalise.

A datapoint encompasses a clearly separable and specific piece of information required by the ESRS Disclosure Requirements (DRs), generally at the level of each paragraph, subparagraph and sub-subparagraph.

In this Excel list (IG 3)

• 161 datapoints are mandatory irrespective of the materiality assessment
• 622 datapoints are subject to the materiality assessment
• 269 are voluntary datapoints marked as ‘may disclose’

In the Draft ESRS XBRL Taxonomy issued in Q1, the number of datapoints are more than the double.

Cleerit ESG – Friend of EFRAG – provides a digitized ESRS Taxonomy centric report template that helps you prepare your report in a both human-readable and machine-readable format.

In EFRAG’s last release of technical Explanations from the ESRS Q&A Platform there is a lot of useful information for various datapoint disclosures.

An example of explanations include additional guidance on stakeholder engagement in double materiality assessment:

⭕When assessing the materiality of a sustainability matter, is the focus on stakeholder opinions or on objective evidence?

There is no conflict between consideration of views of affected stakeholders and objective evidence.

The purpose of both is to get an understanding of the severity (and likelihood) of impacts to present them faithfully in the sustainability statement.

Depending on the circumstances, this may or may not require engagement with affected stakeholders.

The materiality analysis should be driven as much as possible by objective data and evidence.

Scientific evidence is the focus in some cases depending on the type of topic and availability of such evidence.

Quantitative/scientific data on the impact may or may not also be available.

Widespread/systemic impacts often tend to be well documented, and there is often a consensus on their severity.

In other cases, depending on the topic the views of affected (❗) stakeholders are a source of supporting evidence for impact materiality.

However, not all stakeholder opinions are equally relevant for the materiality analysis.

Relevance depends on how much the stakeholders are affected (severity – and likelihood – of impacts).

Understanding entity-specific impacts and/or the manifestation of widespread/systemic impacts in particular contexts and situations requires more careful consideration of specific circumstances, including whether and how people or the environment are affected.

Elements useful to address this question can be found in IG 1 Materiality assessment chapters 3.5 Role and approach to stakeholders in the materiality assessment process and 5.4 FAQ on stakeholder engagement – impact materiality.

⭕It is also reminded that:

The ESRS require disclosure on the materiality assessment and its outcomes but do not mandate specific behaviour on stakeholder engagement or the due diligence process.

The assessment of IROs should rely on quantitative information where possible, as quantitative measures of IROs are objective evidence of their materiality.

The emphasis on objective and quantitative information does not mean to imply that the information from affected stakeholders should be disregarded.

(IG 1 Materiality assessment – FAQ 10, 180-183)

You will find more useful explanations on the ESRS Q&Q Platform >>

CSRD requires companies to share how they are assessing their climate-related risks and how these risks could affect financial performance.

It will be a key area of scrutiny for the financial market and insurers, as there has been a sevenfold increase in reported losses from climate disasters since the 1970s.

Resent research has found that the economic damage brought by climate change is “six times worse than previously thought, with global heating set to shrink wealth at a rate consistent with the level of financial losses of a continuing permanent war”.

Rising temperatures, heavier rainfall and more frequent and intense extreme weather are projected to cause $38tn of destruction each year by mid-century.

In improving disclosures, critical information will be available for boards, management, investors and stakeholders, informing strategy development, financial planning and allocation of capital.

It can also provide an opportunity to attract investors by demonstrating climate-related opportunities and the resilience of the company.

Under CSRD the company will have to reply Yes or No to these two questions (ESRS E1 AR 11):

⭕The company has screened whether assets and business activities may be exposed to climate-related hazards.

⭕ The company has assessed the extent to which assets and business activities may be exposed and are sensitive to identified climate-related hazards.

In addition, the company will need to learn to disclose (ESRS E1-9):

• the monetary value of assets at material physical risk before considering climate change adaptation actions, divided into acute and chronic risk
• net revenue from business activities at material physical risk
• estimated amount of potentially stranded assets.

Extreme weather is causing loss of property, destruction of assets and business interruptions, with financial effects hitting our businesses.

To get your climate-related physical risks under control:

1. Create a register with all your physical assets (offices, factories, warehouses, etc.) and the GPS coordinates for each location.
2. Purchase reliable science-based climate hazard scores for each location.
3. Assess, prioritize and manage your risk exposure.

There are easy-to-use tools and science-based data available to help you assess, manage and disclose on your climate-related physical risk exposure.

You are welcome to contact us: Book a demo

Sources:

Economic damage from climate change six times worse than thought – report | Climate crisis | The Guardian

Climate-related Financial Impact Guide (wbcsd.org)