Option to omit information if you are less than 750 employees

Companies or groups with less than 750 employees do not have to report on these ESRS standards for the first 2 years of preparation of their sustainability statement under CSRD:

➡ E4 Biodiversity and ecosystems
➡ S1 Own workforce
➡ S2 Workers in value chain
➡ S3 Affected communities
➡ S4 Consumers and end-users

But does that mean that it’s ok to forget about these standards for 2 years?

The answer is no.

Especially if the company has identified actual or potential adverse impacts related to the topics covered by these five standards.

Under ESRS 2 (17), the company still needs to report the list of matters covered by these standards in AR 16 ESRS 1 Appendix A, that have been assessed to be material as a result of the company’s materiality assessment.

For each material matter, the company also needs to report a brief description of:

⭕ how the company’s business model and strategy take account of the impacts of the company related to those matters;

⭕ any time-bound targets the company has set related to the matters in question;

⭕ the progress it has made towards achieving those targets;

⭕ whether its targets related to biodiversity and ecosystems are based on conclusive scientific evidence;

⭕ the company’s policies in relation to the matters in question;

⭕ the actions the company has taken to identify, monitor, prevent, mitigate, remediate or bring an end to actual or potential adverse impacts related to the matters in question;

⭕ the result of such actions;

⭕ the metrics relevant to the matters in question.

You are welcome to contact us if you need help to get started

With Cleerit ESG you get collaborative platform tailored to each user profile, so that you can work together while preparing to get CSRD-ready.

Every single ESRS disclosure point has been digitized – to help you navigate the standards, learn, prepare and create your first CSRD report.

We look forward to helping you get CSRD-ready.

Ready to disclose your climate-related risks under CSRD?

Climate change risk assessment is a challenge we need to master under CSRD, as global economic losses from disasters are increasing, and insurers are starting to get cold feet.

ESRS E1 (AR 11) requires the company to explain:

➡ whether and how it has identified climate-related hazards, and screened whether its assets and business activities may be exposed to these hazards;

➡ whether and how this screening has been informed by high emissions climate scenarios such as “Hot house world” or “Too little, too late”;

➡ whether and how it has taken into consideration the likelihood, magnitude and duration of the hazards, as well as the geospatial coordinates specific to the company’s locations and supply chains.

We have 3 years to learn to quantify these risks in monetary amounts, but we need to qualify and disclose on them from year one in the CSRD report.

A recent study showed that only 46% of all large companies currently assess, quantify and publish (or declare that they take into account) their physical climate risks – and 78% do not include their climate transition risks.

This is a real challenge. 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.

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

Storms have been responsible for 33% of the climate costs, heatwaves for 16% and floods and droughts for 10%.

⭕ To get your climate-related physical risks under control, you need to create a register with all your physical assets (offices, factories, warehouses, etc.) and indicate the GPS coordinates for each location.

⭕ When you’ve come this far, there are easy-to-use tools and science-based data available to help you get the overview you need to understand, manage and disclose on your climate-related physical risk exposure in your CSRD-report.

You are welcome to contact us if you need help to get started.

CSRD-readiness assessment for Top Management & Board

Are you ready to assume personal responsibility under CSRD?

Do you have skills, processes, systems, policies, action plans and allocated resources in place to oversee sustainability impacts, risks and opportunities?

How do you oversee the setting of targets related to material sustainability impacts, risks and opportunities (IROs), and how do you monitor progress towards them?

Your company will have to answer these questions, and many more, when you fill in ESRS 2, mandatory for all companies subject to CSRD. Here are some examples.

The undertaking shall disclose:

⭕ the identity of the management and supervisory bodies (such as a board committee or similar) or individual(s) within a body responsible for oversight of IROs. (ESRS2.22.a)

⭕ how each body’s or individual’s responsibilities for IROs are reflected in the undertaking’s terms of reference, board mandates and other related policies. (ESRS2.22.b)

⭕ a description of management’s role in the governance processes, controls and procedures used to monitor, manage and oversee IROs, incl whether dedicated controls and procedures are applied to the management of IROs and, if so, how they are integrated with other internal function. (ESRS2.22.c.iii)

⭕ how the management and supervisory bodies and senior executive management oversee the setting of targets related to material IROs, and how they monitor progress towards them. (ESRS2.22.d)

⭕ a description of how the management and supervisory bodies determine whether appropriate skills and expertise are available or will be developed to oversee sustainability matters, incl how those skills and expertise relate to the undertaking’s material IROs (ESRS2.23.b)

⭕ including whether the bodies and/or its members have access to other sources of expertise, such as specific experts and training and other educational initiatives to update and develop sustainability-related expertise within these bodies. (ESRS2.AR5)

A recent assessment of large companies in France carried out by the leading network of entrepreneurs in France, MEDEF, together with Deloitte and EY showed that:

➡ Not even half of the companies publish (or declare that they take into account) the analysis of at least one climate scenario and quantify their climate risks – and 4 out of 5 do not include climate transition risks.

➡ Only 31% publish water consumption reduction targets, 13% declare the number of production sites located in or near sensitive areas in terms of biodiversity, 30% have formalized objectives related to the circularity of products and their packaging.

➡ Only 53% publish indicators related to the gender pay gap of their employees at group level, and 8% provide information to compare low wages to decent wages.

❓ Do you still manage ESG performance with Excel? (Do you also manage your financial performance with Excel…?)

You are welcome to contact us to get CSRD-ready with robust Sustainability Strategy, Governance, Performance Management and Reporting capabilities.

Do I really need a digital solution to comply with CSRD?

➡ The answer from a regulatory point of view is yes.

Digitalisation is one of EU’s top-3 political priorities, together with the European Green Deal and geopolitical resilience:

“Digitalisation facilitates supervision and enforcement, creates opportunities to collect and exploit information more efficiently, and holds the potential for significant cost savings for both sustainability report users and companies.

Digitalisation also enables the centralisation at Union and Member State level of data in an open and accessible format that facilitates reading and allows for the comparison of data.” (CSRD – EU directive 2022/2464 of 14 December 2022)

The CSRD report should also be verifiable and needs to be audited, and for that a digitized audit trail is strongly recommended:

“Sustainability information is verifiable if it is possible to corroborate the information itself or the inputs and methods of calculation used to derive it”, and “provide evidence that verify that it reflects the actual plans or decisions made by the undertaking” (ESRS).

➡ The answer from a logical point of view is also yes.

“The wheel was invented 5000 years ago, but it took until the 1970s before the suitcase got wheels. Why did we insist on carry when it’s so much easier to roll? … The wheel changed the world. It reduces friction and provides a leverage effect. Suddenly you can now move the previously immovable. And go where you want to go, faster and with less effort.” (Katrine Marçal, Mother of Invention, 2020)

To succeed, sustainability teams need modern tools. Today, no one would dream of letting the CFO manage financial statements alone with just an Excel spreadsheet. The same now applies to sustainability strategy and reporting.

Research also shows that companies who do not use system support for strategy implementation only have a 30% success rate, but also that the chances of strategic success triple with a digital solution. And failing sustainability strategy is no longer an option.

CSRD, sustainability standards and digitalisation are major opportunities to build awareness, resilience, efficiency and growth opportunities. Why wait? Unless – of course – you are happy carrying and wasting effort 🙂 .

The SaaS solution Cleerit helps you turn intangible ambition into tangible results, unlock the potential of your materiality assessments, create actionable roadmaps for strategic success, and automate sustainability data collection and reporting.

CSRD vs ESRS, what’s the difference?

On 5 January 2023, the EU Corporate Sustainability Reporting Directive (CSRD) entered into force.

The CSRD is an EU “directive” (2022/2464) – a legislative act that sets out a goal that EU countries must achieve.

The CSRD supports the Union’s legal framework and the objectives of the EU Green Deal.

The EU Green Deal is the new growth strategy of the European Union, which aims to transform the Union into a modern, resource-efficient and competitive economy with no net emissions of greenhouse gases (GHG) by 2050, while leaving no person and no place behind.

It will contribute to the EU objective of building an economy that works for the people, strengthening the Union’s social market economy, helping to ensure that it is ready for the future and that it delivers stability, jobs, growth and sustainable investment.

To succeed the Green Deal, it is necessary for the EU to reorient capital flows towards sustainable investment in order to achieve sustainable and inclusive growth, manage financial risks stemming from climate change, resource depletion, environmental degradation and social issues, and foster transparency and long-termism in financial and economic activity.

Disclosing relevant, comparable and reliable sustainability information amongst companies is a prerequisite for meeting those objectives.

The EU Commission was therefore empowered to adopt mandatory common sustainability reporting standards, to ensure that information was comparable, and that all relevant information was disclosed consistent with EU needs.

Building on the double materiality principle, the standards needed cover all information that is material to users of that information.

The development of mandatory common sustainability reporting standards was also necessary to

✔ Enable the assurance and digitalisation of sustainability reporting

✔ Facilitate its supervision and enforcement

✔ Reach a situation in which sustainability information has a status comparable to that of financial information

The adoption of such mandatory common sustainability reporting standards was completed by means of a delegated act on the first set of European Sustainability Reporting Standards (ESRS) on 31 July 2023.

ESRS is now to be used for sustainability reporting by all undertakings subject to the CSRD.

These mandatory sustainability reporting standards (ESRS) specify the information that undertakings are to report in accordance with CSRD articles 19a and 29a-b.

🍃 ESRS is where sustainability meets company strategy and sets the stage for real transformation.

You will need CSRD-compliant and ESRS-ready sustainability strategy & reporting software to succeed.

➡ Contact us if you are interested in a one-month trial of the SaaS solution Cleerit ESG for 65 € per month and user.

The entire ESRS framework has been integrated and digitized to facilitate for you to create a best-in-class CSRD compliant sustainability report.

2-year delay for sector-specific ESRS standards and third-country companies

Yesterday (24/1) the European Parliament’s Legal Affairs Committee approved a 2-year delay for sector-specific ESRS standards, until June 2026, including sustainability reporting from third-country companies.

This delay should enable the companies to focus on the implementation of the first set of general ESRS adopted on 31 July 2023, mandatory under CSRD.

It will also rationalise reporting obligations for companies, as well as provide the European Financial Reporting Advisory Group (EFRAG) with more time to develop the new standards.

However, MEPs believe that sector-specific sustainability standards enable comparisons between companies and are therefore valuable source of information for investors.

That is why although they agree with the delay, they also suggest that the Commission publishes eight sector-specific reporting standards (specific to oil, energy and mining industries) as soon as they are ready before the deadline.

“We will delay the deadline for sector specific standards under the Corporate Sustainability Reporting Directive (CSRD) by two years in order to give EFRAG the time to develop quality standards and give companies the time to put them into practice. Companies have been putting up with too much bureaucracy in years of crisis, from Covid to inflation.” (Rapporteur Axel Voss)

The proposal was made by the EU Commission in October, as part of its 2024 Commission Work Programme, which included reducing reporting burdens for companies as one of its priorities, and highlighted the postponement of the deadline for the adoption of sector-specific ESRS as one of the key actions listed.

Sector-specific European Sustainability Reporting Standards (ESRS) should clarify what exactly and to what detail should companies in particular sectors disclose about their impact on people and the planet, including on decarbonisation, biodiversity or human rights since methods and impacts differ depending on the sector.

Reporting obligations for non-EU companies with turnover above 150 million euro and their branches in the EU with turnover above 40 million euro will start to apply in 2028, based on the upcoming standards.


Source : Press release


#getCSRDready,  #CleeritESG

The CSRD double materiality assessment (DMA) engages your responsibility at the highest level

This has been said time and time again, but we want to insist again because we too often see managers make mistakes without necessarily understanding the consequences.

You own your DMA, it is your responsibility.

The proposed International Standard on Sustainability Assurance, ISSA 5000, explains that materiality is a user-driven concept, focused on the users of the information you will publish – your stakeholders.

A sustainability topic (including omissions of information on such topics), is considered material if, individually or in the aggregate, it could reasonably be expected to influence decisions of intended users taken on the basis of your information.

In other words, if I had known this, would it have influenced my decision to invest, purchase or work in your company…?
Your opinion is important, but it is secondary.

You have to put yourself in the shoes of those who finance your business, buy your products and services, get up every day to go to work for you…

In short, everyone who is affected by what you do – including nature, which is a silent stakeholder needing to be protected and spoken for.

Obligation to act vs. obligation to publish

The EU CSDDD will be an obligation to act – and a minimum safeguard to be able to claim to be aligned with the green taxonomy.
The CSRD and ESRS standards are an obligation to PUBLISH, not to act.

It is the transparency, for the benefit of your stakeholders, that is important. Your stakeholders will then be able to make informed decisions.

Not publishing detailed information about your specific negative impacts and risks connected to sustainability topics, as defined in the ESRS, will be as serious as deciding not to publish the Liabilities page of your balance sheet just because you don’t like to disclose that you have debts.

This information can no longer remain confidential for internal use – even, and especially, if it risks influencing your stock quote.
It’s that simple, and it’s going to take some getting used to. Just as we have become accustomed to publishing financial statements.

To avoid falling into traps, do not hesitate to contact us. The digital templates integrated into the Cleerit ESG solution will guide you, and we will be by your side throughout the process.


#getCSRDready, #CleeritESG

Update on Sector-specific ESRS Standards

EFRAG has started working on a program that will lead to the issuance of approximately 40 Sector-specific ESRS Standards

The primary focus will be addressing high-impact sectors first.

Given the importance of financial institutions and their role in sustainable finance, these sectors will also be developed in parallel.

EFRAG will put in consultation in 2024 the general approach to sector ESRS and the ESRS Sector classification approach.

The general idea discussed is that companies will have to apply a sector standard for activities that:

(a) generate revenues above 10 per cent of the revenues of all their activities; or

(b) for activities that are connected with material actual or potential negative impacts.

The application of these requirements may result in companies having to apply more than one sector standard.

During a meeting on January 15, EFRAG discussed a draft list of ESRS sectors:

  • Agriculture, Farming and Fishing
  • Forestry
  • Construction and Engineering
  • Power Production and Energy Utilities distribution
  • Water and Waste Services
  • Gaming
  • Recreation and Leisure
  • Capital Markets
  • Credit Institutions
  • Insurance
  • Health Care and Services
  • Accommodations
  • Food and Beverage Services
  • Construction Materials
  • Chemical Products
  • Construction and Furnishing
  • Defence
  • Electronics and electrical equipment
  • Food and Beverages
  • Machinery and Equipment
  • Medical Instruments
  • Metal Processing
  • Motor Vehicles
  • Paper and Wood Products
  • Pharma and Biotechnology
  • Sporting Equipment and Toys
  • Textiles, Accessories, Footwear and Jewelleries
  • Tobacco
  • Mining, Quarrying and Coal
  • Oil and Gas
  • Real Estate and Services
  • Sales and Trade
  • Education
  • Marketing
  • Professional Services
  • Information Technology
  • Media and Communication
  • Other Transportation
  • Road Transport

Source: EFRAG

Consultation of draft XBRL taxonomy of the ESRS

Yesterday (10/1) EFRAG approved the release for a 60-day public consultation of the draft XBRL taxonomy of the ESRS, including the Article 8 digital taxonomy.

After this consultation period, it plans to issue its final advice in the second half of 2024 in the form of a technical recommendation to the European Commission.

The European Securities and Markets Authority (ESMA) is responsible for developing the draft Regulatory Technical Standards (RTS) on ESEF, that regulates the implementation (i.e. timing, level of tagging) and relies on the taxonomy prepared by EFRAG.
ESMA will also consult on the final digitalisation rules and effective date.

The EU legal process then requires that EC shall adopt a delegated act [RTS] as an amendment of ESEF regulation (Reg. 2019/815 UE) on the basis of the [Draft] RTS proposed by ESMA.

This means that we will not have the formal XBRL rules for yet some time, but we have the working assumptions in the meantime.
If you use Cleerit ESG to prepare your ESRS report you will be well prepared, as the digital templates are based on these working assumptions.

The ESRS digital taxonomy reflects the human-readable version of the ESRS, and includes a set of individual tags to translate in digital requirements the content of ESRS.

The Draft ESRS XBRL Taxonomy can be explored with an XBRL software, or with the Excel file that provides a human-readable illustration.

However, the Excel file will not be used itself to digitally tag ESRS reports. CSRD requires digitalisation of sustainability reporting.

While tagging of quantitative monetary and non-monetary data points is straightforward, designing the optimal tagging for the narrative disclosures requires more attention.

It is worth noting that, differently from financial reporting, where narrative information in most of the cases accompanies and provides context to a quantitative data point, in sustainability reporting narrative statements are in most cases not explanatory of quantitative information, but they are qualitative data points themselves.

And the majority of the data points in ESRS are narrative, so learning to collect, “consolidate” and manage narrative disclosures will be necessary.

An important part of the ESRS taxonomy are the many “Boolean” XBRL elements, used for questions requiring a positive or negative confirmation (the “whether” in the “whether and how” questions).

The boolean gives the advantage to convert the statement into Yes or Not instead of narrative textblock disclosure. This also makes it easy to construct standardized ratings to compare company performance.

If you are not yet ready to manage digital ESRS reporting, you are welcome to contact us to book a demo.

Source: https://efrag.org/Meetings/2311031439057869/EFRAG-SRB-meeting-10-January-2024-?AspxAutoDetectCookieSupport=1

Are the big companies ready for CSRD & ESRS applicable in 2024?

A recent assessment of 100 large companies in France, shows that the road is bumpy and that there is still a lot of work to do:

➡ 83% of the assessed companies present a materiality analysis, but only 14% publish a “double materiality” analysis following the requirements as defined by ESRS 1.

➡ 73% have defined decarbonization objectives validated by the SBTi, but only 17% detail the different decarbonization levers allowing them to achieve their objectives, as required by ESRS E1.

➡ Not even half of the companies publish (or declare that they take into account) the analysis of at least one climate scenario and quantify their climate risks – and 4 out of 5 do not include climate transition risks.

➡ Less than 10% have defined pollution objectives, only 31% publish water consumption reduction targets and only 13% declare the number of production sites located in or near sensitive areas in terms of biodiversity.

➡ Only 30% have formalized objectives related to the circularity of products and their packaging but 51% declare waste management objectives.

➡ 53% publish indicators related to the gender pay gap of their employees at group level, but only 8% provide information to compare low wages to decent wages.

The carbon tunnel vision is not helpful

This assessment of large companies in France, shows what we all already suspected: there is a long way to go – both to grasp the holistic vision of the ESRS framework, and to get organized around these reporting requirements.

Many still think that CSRD is mostly about reporting on GHG emissions, and this carbon tunnel vision is not helpful.

Reducing emissions remains a key challenge, but the fact is that even in the ESRS E1 Climate change standard less than 20% of the disclosure points are about reporting on emissions.

Strategy, governance, processes, climate change resilience, and climate-related impacts, risks & opportunities are very much in focus. It is as much about preparing for a different future, and future-proof our businesses, as it is about mitigating climate change.

A game-changer for corporate accountability

CSRD and ESRS are a game-changer for corporate accountability, in the EU and globally. It is not just about a report to fill in, it’s a new way of governing that will take several months – even years – to prepare.

The best time to get started was yesterday. The next best time is today.

With ESRS the devil is in the detail

Step one is understanding – in detail – what will be expected.

This can be done by navigating and learning the standards – every single disclosure point (approx. 990 in ESRS, whereof approx. 250 metrics, subject to materiality assessment).

The CSRD-compliant and ESRS-ready Sustainability Strategy, Governance & Reporting SaaS solution Cleerit ESG – with every single disclosure point digitized – helps you navigate the standards, learn and prepare – to get CSRD-ready.

Download the full article here >>