We are proud to announce that Cleerit ESG has officially been approved as Friend of EFRAG – Sustainability Reporting, demonstrating our commitment to sustainability reporting and supporting EFRAG’s mission.

Cleerit recognizes the importance of contributing to the development of the European Sustainability Reporting Standards (ESRS) and supporting EFRAG’s activities.

By joining as Friends of EFRAG – Sustainability Reporting, we are committed to providing our support to further EFRAG’s initiatives in this field.

We are convinced that the ESRS will help companies advance both corporate sustainability and performance, and future-proof their business.

⭕ABOUT EFRAG

EFRAG’s mission is to serve the European public interest in both financial and sustainability reporting by developing and promoting European views in the field of corporate reporting. EFRAG builds on and contributes to the progress in corporate reporting.

In its sustainability reporting activities, EFRAG provides technical advice to the European Commission in the form of draft European Sustainability Reporting Standards (ESRS) elaborated under a robust due process and supports the effective implementation of ESRS.

⭕ABOUT CLEERIT ESG

Cleerit’s mission is connecting people, planet and profit at the heart of business strategy and decisions – to reach higher goals.

We are committed to sustainability and passionate about closing the strategy to execution gap – with extensive experience and comprehensive research recognized by French Ministry for Higher Education, Research and Innovation.

The Cleerit ESG solution is at the core of our corporate strategy. The unique capabilities embedded in our holistic and inclusive governance model are a perfect fit to the IRO management model built in the ESRS framework, and make a real difference in advancing both corporate sustainability and performance.

It’s the beginning of a new era, and we are determined to being a key contributor in advancing sustainable corporate strategies, for our and future generations.

⭕ You are welcome to contact us if you need a solution and support to implement ESRS reporting in your organization >>>

Let us pave together the way for a successful implementation of the sustainability reporting standards and a green transition🌱🌍!

#getCSRDready, #CSRD, #ESRS, #CSDDD, #ESG, #Strategy, #Governance, #SustainabilityReporting, #Digitalisation, #Cleerit, #EFRAG

Your ESRS-reporting will help monitor the flow of private capital to fill the investment gap needed to achieve the objectives of the European Green Deal.

This requires investments in new technologies and business models.

Overall, the EU will need to scale up its investments by two-thirds (about EUR 620 billion more each year until 2030), relative to average levels over the 2011-2020 period, to pave the way for climate neutrality and a resilient economy by 2050.

The bulk of funding is to be mobilised by private entities.

When assessing the overall investment needs, albeit significant, they should be compared with the cost of inaction which is of much greater magnitude.

The EU Platform on Sustainable Finance (PSF), an advisory body to the European Commission, has been tasked with developing a methodological framework to monitor the flow of private capital into sustainable investments.

The Platform has recently released an intermediate report with a proposed methodology mainly resting on two types of capital flows:

✔ capital expenditures in real economy entities, which shed light on progress towards filling the investment gap;

✔ flows in and from financial markets, as this represents an important source of capital in support of real economy investments.

⭕Investments dedicated to companies in transition – and under CSRD scope – are at the heart of the monitoring framework.

ESRS indicators will be used to identify such companies.

Taxonomy eligible and aligned CapEx data will be complemented with other reported data on CapEx relevant for transition and reported under the ESRS.

CapEx allocated to a transition plan and available from ESRS disclosures is proposed to become the principal source of data.

Such data will be audited, thus increasing the reliability of the results.

The proposed architecture will provide a first bottom-up estimate of CapEx contributing to filling the Green Deal investment gap.

⭕Examples of ESRS CapEx datapoints:

➡ E1.16.c CapEx Financial resources allocated to action plan, E1-1 – Transition plan for climate change mitigation

➡ ESRS2.69.b CapEx Financial resources allocated to actions in relation to material sustainability matters (MDR-A)

Under ESRS S1 and S2, companies need to include Adequate Wages in their Double Materiality Assessment.

DP 69 in DR S1-10 requires companies to disclose whether all own workforce employees are paid an adequate wage, in line with applicable benchmarks.

If so, stating this is sufficient and no further information is needed. (Information regarding non-employees in own workforce is optional.)

If not, the company needs to disclose the countries where employees earn below the applicable adequate wage benchmark and the percentage of employees for each of these countries.

ESRS defines an Adequate wage as follows:

“A wage that provides for the satisfaction of the needs of the worker and his / her family in the light of national economic and social conditions” (based on a full-time employment relationship).

The lowest wage shall be considered separately for each country in which the company operates, except outside the EEA when the adequate wage is defined at a sub national level.

The adequate wage benchmark used for comparison with the lowest wage shall not be lower than:

⭕ In the EEA

The minimum wage set in accordance with Directive (EU) 2022/2041 of the European Parliament and of the Council on adequate minimum wages in the EU.

It references both indicative reference values commonly used at international level such as 60 % of the gross median wage and 50 % of the gross average wage, and/or indicative reference values used at national level.

Data can be obtained from the European Labour Force Survey.

⭕ Outside of the EEA (b.i)

The wage level established in any existing international, national or sub-national legislation, official norms or collective agreements, based on an assessment of a wage level needed for a decent standard of living.

Computing living wage estimates is data-intensive, requiring information on needs and prices that is timely and context-specific.

There are a number of international initiatives, such as the Fair Wage Network, the Global Living Wage Coalition and the WageIndicator Foundation, specialized in this.

Paying legal minimum wages, such as the SMIC in France, is not always a guarantee.

As an example, French tire-maker Michelin has recently established its own global living wage.

“The minimum wage in France is not sufficient in Michelin’s eyes to meet what we consider to be a decent wage,” Florent Ménégaux, president of the Michelin group, told Le Figaro.

Read more about Michelin here >>

⭕ You are welcome to contact us if you need a solution and support to implement ESRS reporting in your organization.

Your CSRD reporting will impact your credibility, financial rating, and preferred partner-supplier-employer status. It can also help to protect you against greenwashing accusations.

But for that, you need to follow the instructions. The ESRS standards contain detailed questions. There are over 2000 datapoints whereof more than 400 require a Yes or No answer.

As we are currently supporting our customers navigate towards CSRD excellence, we have picked out 5 things to get right from the start:

⭕ Assess all topics listed ESRS 1 AR 16 when conducting your double materiality assessment.

For example, S1 is divided into 17 granular topics, connected to different impacts, risks and opportunities (IROs).

These topics are also found in the European Social Charter, which is complementary to the European Convention on Human Rights, protecting civil and political rights.

⭕ Assess your specific impacts, risks and opportunities – not only the sustainability topic.

The method described in the ESRS (confirmed by the French CNCC) requires an assessment at the IRO level and not only at the topic level.

⭕ Don’t consider a topic not material just because you think you are managing the connected impacts and risks well.

Materiality is a user-driven concept. 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.

By declaring a sustainability topic not material, you are telling your stakeholders, trust me, there is nothing important for you to see here, please move on. That’s an important responsibility and you need to be prepared to back it up if someone challenges you.

⭕ Don’t provide biased or manipulated information and leave out unfavorable aspects.

ESRS 1 specifically states that the information shall be complete, accurate and neutral.

Information is neutral if it is not slanted, weighted, emphasized, de-emphasized or otherwise manipulated to make it more likely that the users will receive that information favorably or unfavorably.

It shall be balanced and granular enough not to obscure material information.

⭕ Don’t confuse positive and negative impact, and risk mitigation with opportunities.

A positive impact is not just avoiding a negative impact – you do not have a positive impact simply because you avoid doing harm. Positive impact is about increasing positive outcomes for people and the environment based on evidence❗of actual outcomes.

An opportunity is not simply mitigating a risk. It requires a proactive❗stance leading to new business opportunities and positive stakeholder relations that you intend to pursue and that can be calculated in monetary value (ESRS2.48).

⭕ You are welcome to contact us to get CSRD-ready with Cleerit ESG.

A corrigendum to the ESRS was published in the Official Journal of the European Union on Friday April 19.

The corrections do not call into question the requirements spelled out in the ESRS, mandatory under CSRD, but mainly rectify mistakes in paragraph numbers, misspellings and unclear wordings.

In some cases, the wording matters more. For example:

➡ The corrected wording in ESRS 1 Annex I now specifies anticipated, as opposed to potential, financial effects.

➡ The wording in ESRS S1 is now consistently own ‘workforce’ and not own ‘workers’.

➡ In ESRS 2, the DR IRO-1 covers the process to identify and assess material impacts, risks and opportunities – and not the ‘processes’.

➡ On page 96, in Annex I, ESRS E1 ‘Climate change’, Appendix A ‘Application requirements’, paragraph AR 34, table, first column, last row, the total energy consumption (MWh) is calculated as the sum of lines 6, 7 and 11 (and not 6 and 11).

➡ On page 178, in Annex I, ESRS S1 ‘Own workforce’, paragraph 100, it is now specified that the company shall disclose ‘any related fines’ and not only ‘material’ fines.

➡ On page 217, in Annex I, ESRS S3 ‘Affected communities’, table of contents, DR S3-4, the correction specifies that it is about ‘managing’ material risks as opposed to ‘mitigating’ material risks.

⭕ You can download the corrections in English, French and Swedish here:

Corrigendum to the ESRS (en) >>
Rectificatif aux ESRS 19-04-2024 (fr) >>
Rättelse till ESRS 2024-04-19 (sv) >>

⭕ You are welcome to contact us if you need a solution and support to implement CSRD and ESRS reporting in your organization.

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.

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.

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.