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Flagship blog - eng

Reporting environmental topics under CSRD

The new CSRD (Corporate Sustainability Reporting Directive) on non-financial reporting will affect a number of companies as early as 2025, specifically those with more than 250 employees, a turnover of more than EUR 50 million, or a balance sheet total of more than EUR 25 million. ESRS reporting, which is based on this directive, then mandates companies to report their impacts,risks and opportunities in the environmental and social spheres, as well as in the area of corporate governance. As part of the environmental section of ESRS reporting, companies can expect a lot of new data and questions that they will have to prepare for.
Environmental requirements are reported in five sections, which cover individual topics – climate change, pollution, water resources, biodiversity and circularity. These sections follow similar reporting requirements, but there are differences between them. All sections require the following information:
1. Information on how the company has identified risks, impacts, and opportunities in a given area
2. information about the policies that the company has or prepares,
3. what actions the company takes in this area and how it allocates resources to these actions,
4. what goals has the company set for itself to implement the above policies and actions, and
5. specific, quantifiable information about its impact on given metrics.
Other specifics are then given by different sections. It is also important to keep in mind that reporting does not yet take into account the company value chain (including the supply chains) - companies will have an additional three years to include them. The only exception is the climate change section, where it is necessary to report emissions in supply chains for companies with more than 750 employees. In addition, the double materiality assessment must already take the value chain into account. Some phase-in periods are also associated with other sections. But let's look at that specifically.

Climate Change (E1)

This section is primarily about ensuring that the company has calculated its carbon footprint across its own operations and supply chain, and has a plan for how it will respond to current and future challenges associated with climate change. Here we focus on two operations:
1. Measuring the carbon footprint and setting short-term and long-term goals to reduce it, including considering the risks that could jeopardize the achievement of these goals.
2. Analyses of the risks, opportunities and impacts that are associated with a company's operations and its supply chain within the topic of climate change
In order to properly and effectively fulfill this section, a thorough analysis of the carbon footprint is needed, as well as the possibilities for its reduction. This section shows that the company has thoroughly studied climate change, including its potential impacts, across all operations and suppliers, and that it has a clear plan to minimize the damage and maximize the opportunities that arise from these changes.
In the quantitative part of the reporting, the company primarily provides information about its carbon footprint and energy consumption. In the coming years, it will be necessary to add quantitative information on the financial impacts of climate change on the company, but in the first three years of reporting this can be qualitative.

Pollution (E2)

This section is focused on water, soil and air pollution. This starts with the identification of impacts according to the so-called LEAP approach (although this is not mandatory, it is necessary to explain how otherwise the impacts were identified). In this approach, we look at individual locations where the company has direct activities or impacts in the supply chain (for the double materiality assessment, it will be necessary to map the entire supply chain from the acquisition of primary materials to other stages of their processing). At these locations, the company then considers the risks associated with pollution. The risks are then examined and next steps are considered.
This is again followed by information on policies set up to control pollution, actions taken by the company to reduce pollution, targets to reduce water, soil and air pollution; and finally, information on the specific level of pollution in metrics according to various pollutants, including hazardous ones.

Water Resources (E3)

The water section also focuses on marine resources. Again, we start here with the LEAP approach and mapping of locations. We then focus on how the company addresses the sustainability of water use and marine resources; how it addresses water treatment and purification; how it prevents water pollution; the efforts it makes to reduce water use and negative impacts on drought-prone areas; and how it approaches innovations in products and services to align with water conservation goals.
The procedure is the same as for pollution, and quantitative metrics are used to fill in data mainly on water consumption and water resources management. If the company and its value chain is not very dependent on water resources or does not contribute significantly to water pollution, then this section could be evaluated as non-material and therefore omitted. However, to reach this conclusion, supply chains need to be properly examined.

Biodiversity (E4)

Biodiversity within the ESRS is different mainly in that there is a possibility of deferring reporting by 2 years for companies that have fewer than 750 employees. Assessing materiality for biodiversity also starts with the LEAP approach (again, this is not mandatory). Similar to the climate change chapter, the biodiversity section also requires a “transition plan,” which includes information about how the company’s business plan is aligned with the EU’s . It is important here to assess the so-called transitional, physical and systematic risks to the business model. Biodiversity, like climate change, poses risks that are linked to systematic changes in the environment that will occur as part of the progress of climate change and changes in nature and landscape. It is therefore important to work with different scenarios, assumptions and time horizons of how the changes will take place. As part of how the company anticipates these changes will take place, it must show how prepared it is to respond to these changes in the future. After considering future scenarios and the changing environment, the risk, opportunity and impact on biodiversity is again analyzed. This is followed by a section where the company needs to break down how it manages these areas.
Materiality for biodiversity is a similar process as in the previous topics, but a much more detailed analysis is needed, which is related to the changing environment. This is followed by policies, actions, targets and metrics in terms of biodiversity impact. Here, it is very important to consider supply chains and related legislation such as the EU Deforestation Regulation (EUDR) on deforestation in supply chains

Circularity and Resource Use (E5)

The topic of circularity is mainly about how the company applies the principles of the circular economy and how it tries to minimize the use of resources and waste production. In this section, reporting looks at policies related to reducing waste and implementing circular economy principles. For example, how the company works to minimize the use of natural resources and maximize responsible purchasing, how the company is increasing material efficiency or how much it uses recycled materials.
In the next section, reporting looks at how the company measures its progress and sets goals in the reuse of materials, responsible purchasing or waste treatment. In the last two sections, reporting focuses on material flows towards the company – for example, elements of the circular economy in purchased materials and products, and flows from the company to customers. This is mainly about elements of the circular economy, such as the reparability of the company's products, reusability, packaging materials, or the amount and types of waste.


As far as ESRS reporting is concerned, we strongly emphasize that it is extremely important to create a unified environmental strategy within the company and to conduct a survey of potential environmental impacts and risks across operations and suppliers. The initial data analysis and setting of the strategy will greatly facilitate reporting, as well as transparent marketing communication and obtaining benefits from a responsible approach to the environment and society.
Setting up a strategy for the first time and considering all the impacts reduces the risks of greenwashing, but above all, it allows you to focus efforts where it makes sense. The reporting of data and creation of policies and actions can always be deepened over time, but the identification of key topics and priorities and setting of a baseline is the crucial first step.
If you are interested in more information on how to set up your environmental strategy in your company, or find out the impacts and risks you have in the field of the environment, please contact us. Here you will find an overview of our services that we provide in this area.