What are ESG guidelines?
With the European Green Deal, the European Union has drawn up a comprehensive plan to make the EU the first climate-neutral continent. The EU taxonomy, which many companies are already familiar with, is crucial to this. The ESG criteria it contains set standards in the areas of environment, social affairs and governance. Each of these areas contains further requirements and guidelines. The Corporate Sustainability Reporting Directive - CSRD for short - for example, describes the requirements in the environmental area. The "European Sustainability Reporting Standards" - ESRS - prescribe how these requirements must be reported. They are also divided into the areas of environment, social affairs and corporate governance.
Important: What is mandatory for companies?
Before we delve deeper into the explanation of the EU directives, an important note should be made in advance:
More and more companies are now obliged to meet the requirements of the CSRD. The ESRS E1 standard, the first of five climate-specific standards under the title "Climate Change", contains nine disclosure requirements (E1-1 to E1-9), which must be reported independently of a special materiality test. In other words, unlike other parts of the ESG, this standard is mandatory for (almost) all companies! The ESRS E1-1 to E1-9 ultimately contain the three major steps towards climate neutrality: starting with accounting, through the establishment of measurable targets, to the development and implementation of an action plan.
For the sake of clarity, we do not list the individual disclosure requirements here, but you can find them in the PDF at the bottom of this page.
What and how must be reported?
The CSRD has created a standard for what a company must disclose in its annual sustainability report. It is important to know that these reporting obligations do not apply to smaller companies, but they may still be affected. You can find more information on this and the CSRD in general in this video from us.
The "European Financial Reporting Advisory Group", or EFRAG for short, is a body that advises and supports the EU Commission in these processes. This body has now drawn up standards on how the required information should be reported. Although the "European Sustainability Reporting Standards" (ESRS) still have to be adopted by the EU Commission, no far-reaching changes are to be expected.
So, in a nutshell: The CSRD determines WHAT must be reported, while the ESRS determines HOW it must be reported.
The basic 12 standards covered by the ESRS can be divided into 3 areas. These are Environment, Social and Governance. Just like the ESG guidelines, they are made up of these three main areas. These areas are divided into further subgroups that break down individual aspects in more detail. For example, the topic of climate is covered by ESRS E1, while air and water pollution is covered by ESRS-E2.
Each area of the ESRS is made up of so-called "disclosure requirements". These are the core of the reporting requirements and make it clear which data must be prepared and how. ESRS-E1 contains nine of these disclosure requirements.
In principle, only those areas that actually affect a company are mandatory. Let's take ESRS-E2 again as an example. As mentioned, this deals with air and water pollution. If water pollution is not an issue in your company, you do not need to report on it.
But which disclosure requirements are relevant for you and which are not? The pivotal point here is the materiality analysis. This sets out the points that are actually relevant for your company and must be reported. This analysis should be prepared with great care and reviewed by an external consultant. It may even be necessary to draw up your own disclosure requirements. You can find more information on this in the video description below.
However, the aspects relating to climate, which are set out in ESRS-E1, are mandatory and therefore relevant for every company. They require companies to show what their climate protection plan looks like, what they are actually doing and what targets they have formulated. Figures on energy consumption and the composition of the electricity mix are also prescribed, as well as a corporatecarbon footprint (CCF) and the development of these emissions. A document with the exact wording of the individual disclosure requirements can be found at the bottom of this page as a free PDF for download.
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Summary
To summarize, the EU Commission has adopted a package of directives (ESG) as part of the EU Green Deal, in which sustainability aspects relating to the environment and social issues become mandatory reporting requirements. This includes the CSRD, which sets out WHAT is reported, and the ESRS, which sets out standards for HOW reporting must take place. However, not all of the 12 standards formulated in the ESRS must be reported, but only those that are material to your company. To determine which of these disclosure requirements are material, a materiality analysis must be prepared and externally audited. However, a few of them, such as ESRS-E1 on climate change, are mandatory for everyone and must be reported.
Recommendation for action
Every company that will be affected by the upcoming reporting obligations must ask itself whether it has the appropriate KPIs at hand to fulfill these obligations. Suppliers and SMEs may also be affected, however, as the groups obliged to report could demand figures from them. Sooner or later, every company will have to deal with sustainability and CO2 management.
In order to have all the information and data together in good time, it is therefore best to set up the necessary infrastructure and data sources now. Obtain further information on this topic or seek advice.
We recommend that you set up your own team for this topic and deal with any reporting obligations that may come your way now. Find reliable partners for energy and CO2 management who can help you.
View this topic less as an obligatory evil and more as an opportunity to become a pioneer compared to your competitors, as greater transparency also ensures greater trust among customers and investors.
ENIT's products provide you with almost all the figures you need to comply with ESRS-E1 (and others). We can provide you with individual support tailored to your needs, including reporting, of course. Please do not hesitate to contact us.
Free PDF downloads
Download the detailed PDF now and get comprehensive information about the ESRS-E1 guidelines in exact wording.
To the free PDF download
Find the most important information on the materiality analysis in the free PDF download.