Is it allowed to reference publicly available documents in the sustainability statement? 

You can reference documents, such as policies, that are available, for example, on your company’s website. However, you do have to describe them in detail in the sustainability statement. It is not enough to state that the document is publicly available and include a link. It is mandatory to include exactly what is covered in the referenced document – see Minimum Disclosure Requirement – Policies MDR-P – Policies adopted to manage material sustainability matters, page 49 in the ESRS. Keep in mind that the ESRS allows cross referencing, which means you only need to outline the details once in the sustainability statement. 

Do you have to include climate change information in your sustainability statement?

In early drafts of the ESRS, climate change (ESRS E1) was listed as a mandatory reporting requirement. This is no longer the case. In the new edition, the double materiality assessment decides what topical standards are critical for you. However, climate change is set to be material to most companies. If you decide not to include it, you are required to provide a detailed explanation as to why you have made that decision. See paragraph 57, Disclosure Requirement IRO-2 – Disclosure Requirements in ESRS covered by the undertaking’s sustainability statement on page 48 of the ESRS.

It is also important to consider the stakeholders’ point of view. In most cases, they will be expecting you to include information on climate change. 

Is it mandatory to include a table for GHG emissions? 

If you decide that climate change is a material topic for you after conducting the double materiality assessment, then you must disclose your GHG emissions in accordance with the table provided in AR 46, ESRS E1 Climate change on page 94. If you decide climate change is a material topic, it is mandatory to submit data related to scope 1, 2 and 3 as well as your total GHG emissions. 

What is a management report? How does the sustainability statement fit into the management report? 

The management report is a segment that goes into the annual report alongside the financial data. It includes a summary of the approaches and processes that your company is taking connected to sustainability performance as well as your financial reporting. The management report acts as a way to include your sustainability statement in the annual report. 

Do you need to align your report with the GRI or EU Taxonomy, alongside what is required for ESRS compliance?

You do have options to provide data outside the ESRS scope. The ESRS include numerous disclosures and data points, however, they might not cover all of your material impacts, risks and opportunities. There is a possibility this will change when the sector and industry specific standards are being introduced, but until then many companies will need to include entity specific information. In this circumstance, it is great to refer to other standards such as the GRI and ISSB/SASB. If you have previously reported on data points not included in the ESRS and would like to continue doing so, or if data points from other standards can help make sense of your material ESRS topics, you are free to use other frameworks.

The EU Taxonomy is another EU legislation that you are required to comply with. Information related to this should be included in the same section of your management report as the ESRS data. 

Are there any implications for SMEs publishing an ESRS sustainability statement in their 2023 report? Is it better to share your findings publicly or to keep learning internally before sharing externally? 

The final set of standards have been introduced, meaning that they won’t change. This is something that was made clear by the EU commission when sending the standards to the Parliament and Council. The possibility that the Parliament and Council will submit a rejection is very small, since there is pressure from investors to obtain this information from companies. Things that might be subject to change are the thresholds and transition requirements, for example when you have to report on certain data. 

It is beneficial for companies to start aligning their reporting to the ESRS. The stakeholders that you work with in your value chain, along with investors that will need to comply with the standards earlier, will expect some degree of alignment. 

“It is beneficial for companies to start aligning their reporting to the ESRS.”

Olivia Krall – Manager at Position Green

What are the consequences of not fully complying with the ESRS in the first year of mandatory reporting?

The ESRS is a reporting framework, which means you don’t need to have everything in place. Nevertheless, you need to be able to outline that you are aware of what data is missing, along with a plan on how you intend to gather the data going forward. Transparency is important. If you state that you have reported on specific data points, and it is discovered to be untrue during the assurance process, this can have negative consequences. It can hurt your reputation, but most importantly you will not be able to submit your sustainability statement if it has not been verified, which can lead to an eventual striking off of the actual register. 

Where do you put your data? Is it at the end of the report, after each disclosure requirement or at the end of each section?

It depends on the situation. As long as you add it to a specific chapter of the management report, you are good to go. However, the order of the structure should be as follows: general, environmental, social and finally governance information, see ESRS 1, page 17. The aim is to make the structure easy to understand for the reader, so creating a red thread is the most important advice here. 

Is the final set of ESRS the same as the first set of drafts published on EFRAG’s webpage?

No, it is very different. You should not use any of the early drafts, as the new one includes both minor and significant changes. The current version can be found here.

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