Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive 2013/34/EU of the European Parliament and of the Council as regards sustainability reporting standards

QC 12.Comparability is not uniformity. For information to be comparable, like components shall look alike and different components shall look different. Comparability of sustainability information is not enhanced by making unlike things look alike any more than it is enhanced by making like things look different.

Verifiability

QC 13.Verifiability helps to give users confidence that information is complete, neutral and accurate. Sustainability information is verifiable if it is possible to corroborate the information itself or the inputs used to derive it.

QC 14.Verifiability means that various knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation. Sustainability information shall be provided in a way that enhances its verifiability, for example:

(a) including information that can be corroborated by comparing it with other information available to users about the undertaking’s business, about other businesses or about the external environment;

(b) providing information about inputs and methods of calculation used to produce estimates or approximations; and

(c) providing information reviewed and agreed by the administrative, management and supervisory bodies or their committees.

QC 15.Some sustainability information will be in the form of explanations or forward-looking information. Those disclosures can be supportable by faithfully representing on a factual basis for example the strategies, plans and risk analyses of the undertaking. To help users decide whether to use such information, the undertaking shall describe the underlying assumptions and methods of producing the information, as well as other factors that provide evidence that it reflects the actual plans or decisions made by the undertaking.

Understandability

QC 16.Sustainability information is understandable when it is clear and concise. Understandable information enables any reasonably knowledgeable user to readily comprehend the information being communicated.

QC 17.For sustainability disclosures to be concise, they need to (a) avoid generic ‘boilerplate’ information, which is not specific to the undertaking; (b) avoid unnecessary duplication of information, including information also provided in financial statements; and (c) use clear language and well-structured sentences and paragraphs. Concise disclosures shall only include material information.  Complementary information presented pursuant to paragraph 114 shall be provided in a way that avoids obscuring material information.

QC 18.Clarity might be enhanced by distinguishing information about developments in the reporting period from ‘standing’ information that remains relatively unchanged from one period to the next. This can be done, for example, by separately describing features of the undertaking’s sustainability-related governance and risk management processes that have changed since the previous reporting period compared to those that remain unchanged.

QC 19.The completeness, clarity and comparability of sustainability disclosures all rely on information being presented as a coherent whole. For sustainability disclosures to be coherent, they shall be presented in a way that explains the context and the connections between the related information. Coherence also requires the undertaking to provide information in a way that allows users to relate information about its sustainability-related impacts, risks and opportunities to information in the undertaking’s financial statements.

QC 20.If sustainability-related risks and opportunities discussed in the financial statements have implications for sustainability reporting, the undertaking shall include in the sustainability statement the information necessary for users to assess those implications and present appropriate links to the financial statements (see chapter 9 of this Standard). The level of information, granularity and technicality shall be aligned with the needs and expectations of users. Abbreviations shall be avoided and the units of measure shall be defined and disclosed.

Appendix C

This appendix is an integral part of ESRS 1 and has the same authority as the other parts of the Standard.

ESRS	Disclosure Requirement	Full name of the Disclosure Requirement	Phase-in or effective date (including the first year)
ESRS 2	SBM-1	Strategy, business model and value chain	The undertaking shall report the information prescribed by ESRS 2 SBM-1 paragraph 40(b) (breakdown of total revenue by significant ESRS sector) and 40(c) (list of additional significant ESRS sectors) starting from the application date specified in a Commission Delegated Act to be adopted pursuant to article 29b(1) third subparagraph, point (ii), of Directive 2013/34/EU.
ESRS 2	SBM-3	Material impacts, risks and opportunities and their interaction with strategy and business model	The undertaking may omit the information prescribed by ESRS 2 SBM-3 paragraph 48(e) (anticipated financial effects) for the first year of preparation of its sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 may omit the information prescribed by ESRS 2 SBM-3 paragraph 48(e) (anticipated financial effects) for the first 3 years of preparation of their sustainability statement. The undertaking may comply with ESRS 2 SBM-3 paragraph 48(e) by reporting only qualitative disclosures for the first 3 years of preparation of its sustainability statement, if it is impracticable to prepare quantitative disclosures.
ESRS E1	E1-6	Gross Scopes 1, 2, 3 and Total GHG emissions	Undertakings or groups not exceeding on their balance sheet dates the average number of 750 employees during the financial year (on a consolidated basis where applicable) may omit the datapoints on scope 3 emissions and total GHG emissions for the first year of preparation of their sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 not exceeding on their balance sheet dates the average number of 750 employees during the financial year (on a consolidated basis, where applicable) may omit the datapoints on scope 3 emissions and total GHG emissions for the first 3 years of preparation of their sustainability statement.
ESRS E1	E1-9	Anticipated financial effects from material physical and transition risks and potential climate-related opportunities	The undertaking may omit the information prescribed by ESRS E1-9 for the first year of preparation of its sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 may omit the information prescribed by ESRS E1-9 for the first 3 years of preparation of their sustainability statement. The undertaking may comply with ESRS E1-9 by reporting only qualitative disclosures for the first 3 years of preparation of its sustainability statement, if it is impracticable to prepare quantitative disclosures.
ESRS E2	E2-6	Anticipated financial effects from pollution-related risks and opportunities	The undertaking may omit the information prescribed by ESRS E2-6 for the first year of preparation of its sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 may omit the information prescribed by ESRS E2-6 for the first 3 years of preparation of their sustainability statement. Except for the information prescribed by paragraph 40(b) on the operating and capital expenditures occurred in the reporting period in conjunction with major incidents and deposits, the undertaking may comply with ESRS E2-6 by reporting only qualitative disclosures, for the first 3 years of preparation of its sustainability statement.
ESRS E3	E3-5	Anticipated financial effects from water and marine resources-related risks and opportunities	The undertaking may omit the information prescribed by ESRS E3-5 for the first year of preparation of its sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a) of Directive (EU) 2022/2464 may omit the information prescribed by ESRS E3-5 for the first 3 years of preparation of their sustainability statement. The undertaking may comply with ESRS E3-5 by reporting only qualitative disclosures, for the first 3 years of preparation of its sustainability statement.
ESRS E4	All disclosure requirements	All disclosure requirements	Undertakings or groups not exceeding on their balance sheet dates the average number of 750 employees during the financial year (on a consolidated basis where applicable) may omit the information specified in the disclosure requirements of ESRS E4 for the first 2 years of preparation of their sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 may omit the information specified in the disclosure requirements of ESRS E4 for the first 3 years of preparation of their sustainability statement.
ESRS E4	E4-6	Anticipated financial effects from biodiversity and ecosystem-related risks and opportunities	The undertaking may omit the information prescribed by ESRS E4-6 for the first year of preparation of its sustainability statement. The undertaking may comply with ESRS E4-6 by reporting only qualitative disclosures, for the first 3 years of preparation of its sustainability statement.
ESRS E5	E5-6	Anticipated financial effects from resource use and circular economy-related risks and opportunities	The undertaking may omit the information prescribed by ESRS E5-6 for the first year of preparation of its sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 may omit the information prescribed by ESRS E5-6 for the first 3 years of preparation of their sustainability statement. The undertaking may comply with ESRS E5-6 by reporting only qualitative disclosures, for the first 3 years of preparation of its sustainability statement.
ESRS S1	All disclosure requirements	All disclosure requirements	Undertakings or groups not exceeding on their balance sheet dates the average number of 750 employees during the financial year (on a consolidated basis where applicable) may omit the information specified in the disclosure requirements of ESRS S1 for the first year of preparation of their sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 not exceeding on their balance sheet dates the average number of 750 employees during the financial year (on a consolidated basis, where applicable) may omit the information specified in the disclosure requirements of ESRS S1 for the first 3 years of preparation of their sustainability statement.
ESRS S1	S1-7	Characteristics of non-employee workers in the undertaking’s own workforce	The undertaking may omit reporting for all datapoints in this Disclosure Requirement for the first year of preparation of its sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 may omit reporting for all datapoints in this Disclosure Requirement for the first 3 years of preparation of their sustainability statement.
ESRS S1	S1-8	Collective bargaining coverage and social dialogue	The undertaking may omit this Disclosure Requirement with regard to its own employees in non-EEA countries for the first year of preparation of its sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 may omit this Disclosure Requirement with regard to their own employees in non-EEA countries for the first 3 years of preparation of their sustainability statement.
ESRS S1	S1-11	Social protection	The undertaking may omit the information prescribed by ESRS S1-11 for the first year of preparation of its sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 may omit the information prescribed by ESRS S1-11 for the first 3 years of preparation of their sustainability statement.
ESRS S1	S1-12	Persons with disabilities	The undertaking may omit the information prescribed by ESRS S1-12 for the first year of preparation of its sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 may omit the information prescribed by ESRS S1-12 for the first 3 years of preparation of their sustainability statement.
ESRS S1	S1-13	Training and skills development	The undertaking may omit the information prescribed by ESRS S1-13 for the first year of preparation of its sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 may omit the information prescribed by ESRS S1-13 for the first 3 years of preparation of their sustainability statement.
ESRS S1	S1-14	Health and safety	The undertaking may omit the data points on cases of work-related ill health and on number of days lost to injuries, accidents, fatalities and work-related ill health for the first year of preparation of its sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 may omit the data points on cases of work-related ill health and on number of days lost to injuries, accidents, fatalities and work-related ill health for the first 3 years of preparation of their sustainability statement.
ESRS S1	S1-14	Health and safety	The undertaking may omit reporting on non-employees for the first year of preparation of its sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 may omit reporting on non-employees for the first 3 years of preparation of their sustainability statement.
ESRS S1	S1-15	Work-life balance	The undertaking may omit the information prescribed by ESRS S1-15 for the first year of preparation of its sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 may omit the information prescribed by ESRS S1-15 for the first 3 years of preparation of their sustainability statement.
ESRS S2	All disclosure requirements	All disclosure requirements	Undertakings or groups not exceeding on their balance sheet dates the average number of 750 employees during the financial year (on a consolidated basis where applicable) may omit the information specified in the disclosure requirements of ESRS S2 for the first 2 years of preparation of their sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 may omit the information specified in the disclosure requirements of ESRS S2 for the first 3 years of preparation of their sustainability statement.
ESRS S3	All disclosure requirements	All disclosure requirements	Undertakings or groups not exceeding on their balance sheet dates the average number of 750 employees during the financial year (on a consolidated basis where applicable) may omit the information specified in the disclosure requirements of ESRS S3 for the first 2 years of preparation of their sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 may omit the information specified in the disclosure requirements of ESRS S3 for the first 3 years of preparation of their sustainability statement.
ESRS S4	All disclosure requirements	All disclosure requirements	Undertakings or groups not exceeding on their balance sheet dates the average number of 750 employees during the financial year (on a consolidated basis where applicable) may omit the information specified in the disclosure requirements of ESRS S4 for the first 2 years of preparation of their sustainability statement. By way of derogation from the first sentence, undertakings as referred to in Article 5(2), first subparagraph, point (a), and third subparagraph, point (a), of Directive (EU) 2022/2464 may omit the information specified in the disclosure requirements of ESRS S4 for the first 3 years of preparation of their sustainability statement.

Appendix D

This appendix is an integral part of ESRS 1 and has the same authority as the other parts of the Standard with respect to reporting in four parts as outlined in paragraph 115.

Part of the management report	ESRS codification	Title
1. General information	ESRS 2	General disclosures, including information provided under the Application Requirements of topical ESRS listed in ESRS 2 Appendix C.
2. Environmental information	Not applicable	Disclosures pursuant to Article 8 of Regulation (EU) 2020/852 (Taxonomy Regulation)
	ESRS E1	Climate change
	ESRS E2	Pollution
	ESRS E3	Water and marine resources
	ESRS E4	Biodiversity and ecosystems
	ESRS E5	Resource use and circular economy
3. Social information	ESRS S1	Own workforce
	ESRS S2	Workers in the value chain
	ESRS S3	Affected communities
	ESRS S4	Consumers and end-users
4. Governance information	ESRS G1	Business conduct

Appendix E

Materiality assessment is the starting point for sustainability reporting under ESRS. This appendix provides a non-binding illustration of the impact- and financial materiality assessment outlined in chapter 3. IRO-1 in section 4.1 of ESRS 2 includes general disclosure requirements (DR) about the undertaking’s process to identify impacts, risks and opportunities and assess their materiality. SBM-3 of ESRS 2 provides general disclosures requirements on the material impact, risks and opportunities resulting from the undertaking’s materiality assessment. The undertaking can omit all disclosure requirements in a topical standard if it assessed that the topic in question is not material. In that case it may disclose a brief explanation of the conclusions of the materiality assessment for that topic but shall disclose a detailed explanation in the case of ESRS E1 climate change (IRO-2 ESRS 2). ESRS set disclosure requirements, not behavioral requirements. Disclosure requirements in relation to action plans, targets, policies, scenario analysis and transition plans are proportionate because they are contingent on the undertaking having these, which may depend on the size, capacity, resources, and skills of the undertaking. Note: The flowchart below does not cover the situation in which the undertaking assesses a sustainability matter as material but it is not covered by a topical standard, in which case the undertaking shall make additional entity specific disclosures (ESRS 1 (30 (b)).

Appendix F

This appendix complements ESRS 1. It provides a non-binding illustration of the structure of the sustainability statement outlined in section 8.2 of this Standard. In this illustration, the undertaking has concluded that biodiversity and ecosystems, pollution, and affected communities, are not material.

Appendix G

This appendix complements ESRS 1. It provides non-binding illustrations of incorporation by reference of another section of the management report into the sustainability statement as outlined in section 9.1 of this Standard.

ESRS 2

GENERAL DISCLOSURES

Objective

1.This ESRS sets out the disclosure requirements that apply to all undertakings regardless of their sector of activity (i.e., sector agnostic) and apply across sustainability topics (i.e., cross-cutting).  This ESRS covers the reporting areas defined in ESRS 1 General requirements section 1.2 Reporting areas and minimum content disclosure requirements on policies, actions, targets and metrics.

2.In the preparation of disclosures under this Standard, the undertaking shall apply the Disclosure Requirements (including their datapoints) set in topical ESRS, as listed in Appendix C of this Standard Disclosure/Application Requirements in topical ESRS that are applicable jointly with ESRS 2 General Disclosures. The undertaking shall apply the requirements listed in Appendix C:

(a) in all instances for the requirements in topical standards related to Disclosure Requirement IRO-1 Description of the processes to identify and assess material impacts , risks and opportunities; and

(b) for all other requirements listed in appendix C, only if the sustainability topic is material based on the undertaking’s materiality assessment (see ESRS 1 chapter 3 Double materiality as the basis for sustainability disclosures).

1. Basis for preparation

4.The objective of this Disclosure Requirement is to provide an understanding of how the undertaking prepares its sustainability statement, including the scope of consolidation, the upstream and downstream value chain information and, where relevant, whether the undertaking has used any of the options for omitting information referred to in points d) and e) in the following paragraph.

5.The undertaking shall disclose the following information:

(a) whether the sustainability statement has been prepared on a consolidated or individual basis;

(b) for consolidated sustainability statements: i. a confirmation that the scope of consolidation is the same as for the financial statements, or, where applicable, a declaration that the reporting undertaking is not required to draw-up financial statements or that the reporting undertaking is preparing consolidated sustainability reporting pursuant to Article 48i of Directive 2013/34/EU; and ii. where applicable, an indication of which subsidiary undertakings included in the consolidation are exempted from individual or consolidated sustainability reporting pursuant to Articles 19a(9) or 29a(8) of Directive 2013/34/EU;

(c) to what extent the sustainability statement covers the undertaking’s upstream and downstream value chain (see ESRS 1 section 5.1 Reporting undertaking and value chain);

(d) whether the undertaking has used the option to omit a specific piece of information corresponding to intellectual property, know-how or the results of innovation (see ESRS 1 section 7.7 Classified and sensitive information and information on intellectual property, know-how or results of innovation); and

(e) for undertakings based in an EU member state that allows for the exemption from disclosure of impending developments or matters in the course of negotiation, as provided for in articles 19a(3) and 29a(3) of Directive 2013/34/EU, whether the undertaking has used that exemption.

7.The objective of this Disclosure Requirement is to provide an understanding of the effect of these specific circumstances on the preparation of the sustainability statement.

8.The undertaking may report this information alongside the disclosures to which they refer.

9.When the undertaking has deviated from the medium- or long-term time horizons defined by ESRS 1 section 6.4 Definition of short-, medium- and long-term for reporting purposes, it shall describe:

(a) its definitions of medium- or long-term time horizons; and

(b) the reasons for applying those definitions.

10.When metrics include upstream and/or downstream value chain data estimated using indirect sources, such as sector-average data or other proxies, the undertaking shall:

(a) identify the metrics;

(b) describe the basis for preparation;

(c) describe the resulting level of accuracy; and

(d) where applicable, describe the planned actions to improve the accuracy in the future (see ESRS 1 chapter 5 Value chain).

11.In accordance with ESRS 1 section 7.2 Sources of estimation and outcome uncertainty, the undertaking shall:

(a) identify the quantitative metrics and monetary amounts it has disclosed that are subject to a high level of measurement uncertainty;

(b) in relation to each quantitative metric and monetary amount identified: i. disclose information about the sources of measurement uncertainty (for example, the dependence of the amount on the outcome of a future event, on a measurement technique or on the availability and quality of data from the entity’s upstream and/or downstream value chain); and ii. disclose the assumptions, approximations and judgements the entity has made in measuring it.

12.When disclosing forward-looking information, the undertaking may indicate that it considers such information to be uncertain.

13.When changes in the preparation and presentation of sustainability information occur compared to the previous reporting period(s), (see ESRS 1 section 7.4 Changes in preparation or presentation in sustainability information), the undertaking shall:

(a) explain the changes and the reasons for them, including why the replaced metric provides more useful information;

(b) disclose revised comparative figures, unless it is impracticable to do so. When it is impracticable to adjust comparative information for one or more prior periods, the undertaking shall disclose that fact; and

(c) disclose the difference between the figure disclosed in the preceding period and the revised comparative figure.

14.When the undertaking identifies material prior period errors (see ESRS 1 section 7.5 Reporting errors in prior periods), it shall disclose:

(a) the nature of the prior period material error;

(b) to the extent practicable, the correction for each prior period included in the sustainability statement; and

(c) if correction of the error is not practicable, the circumstances that led to the existence of that condition.

15.When the undertaking includes in its sustainability statement information stemming from other legislation which requires the undertaking to disclose sustainability information or from generally accepted sustainability reporting standards and frameworks (see ESRS 1 section 8.2 Content and structure of the sustainability statement), in addition to the information prescribed by ESRS, it shall disclose this fact. In case of partial application of other reporting standards or frameworks, the undertaking shall provide a precise reference to the paragraphs of the standard or framework applied.

16.When the undertaking incorporates information by reference (see ESRS 1 section 9.1 Incorporation by reference), it shall disclose a list of the disclosure requirements of ESRS, or the specific datapoints mandated by a Disclosure Requirement, that have been incorporated by reference.

(a) disclose the list of matters (i.e. topic, sub-topic or sub-sub-topic) in AR 16 ESRS 1 Appendix A that are assessed to be material and briefly describe how the undertaking’s business model and strategy take account of the impacts of the undertaking related to those matters. The undertaking may identify the matter at the level of topic, sub-topic or sub-sub-topic;

(b) briefly describe any time-bound targets it has set related to the matters in question, the progress it has made towards achieving those targets, and whether its targets related to biodiversity and ecosystems are based on conclusive scientific evidence;

(c) briefly describe its policies in relation to the matters in question;

(d) briefly describe actions it has taken to identify, monitor, prevent, mitigate, remediate or bring an end to actual or potential adverse impacts related to the matters in question, and the result of such actions; and

(e) disclose metrics relevant to the matters in question.

2. Governance

18.The objective of this chapter is to set disclosure requirements that enable an understanding of the governance processes, controls and procedures put in place to monitor, manage and oversee sustainability matters.

19.The undertaking shall disclose the composition of the administrative, management and supervisory bodies, their roles and responsibilities and access to expertise and skills with regard to sustainability matters.

20.The objective of this Disclosure Requirement is to provide an understanding of:

(a) the composition and diversity of the administrative, management and supervisory bodies;

(b) the roles and responsibilities of the administrative, management and supervisory bodies in exercising oversight of the process to manage material impacts, risks and opportunities, including management’s role in these processes; and

(c) the expertise and skills of its administrative, management and supervisory bodies on sustainability matters or access to such expertise and skills.

21.The undertaking shall disclose the following information about the composition and diversity of the members of the undertaking’s administrative, management and supervisory bodies:

(a) the number of executive and non-executive members;

(b) representation of employees and other workers;

(c) experience relevant to the sectors, products and geographic locations of the undertaking;

(d) percentage by gender and other aspects of diversity that the undertaking considers. The board's gender diversity (¹³) shall be calculated as an average ratio of female to male board members; and

(e) the percentage of independent board members (¹⁴). For undertakings with a unitary board, this corresponds to the percentage of independent non-executive board members. For undertakings with a dual board, it corresponds to the percentage of independent members of the supervisory body.

22.The undertaking shall disclose the following information about the roles and responsibilities of the administrative, management and supervisory bodies:

(a) the identity of the administrative, management and supervisory bodies (such as a board committee or similar) or individual(s) within a body responsible for oversight of impacts, risks and opportunities;

(b) how each body’s or individual’s responsibilities for impacts, risks and opportunities are reflected in the undertaking’s terms of reference, board mandates and other related policies;

(c) a description of management’s role in the governance processes, controls and procedures used to monitor, manage and oversee impacts, risks and opportunities, including: i. whether that role is delegated to a specific management-level position or committee and how oversight is exercised over that position or committee; ii. information about the reporting lines to the administrative, management and supervisory bodies; iii. whether dedicated controls and procedures are applied to the management of impacts, risks and opportunities and, if so, how they are integrated with other internal functions; and

(d) how the administrative, management and supervisory bodies and senior executive management oversee the setting of targets related to material impacts, risks and opportunities, and how they monitor progress towards them.

23.The disclosure shall include a description of how the administrative, management and supervisory bodies determine whether appropriate skills and expertise are available or will be developed to oversee sustainability matters, including:

(a) the sustainability-related expertise that the bodies, as a whole, either directly possess or can leverage, for example through access to experts or training; and

(b) how those skills and expertise relate to the undertaking's material impacts, risks and opportunities.

25.The objective of this Disclosure Requirement is to provide an understanding of how administrative, management and supervisory bodies are informed about sustainability matters, as well as what information and matters they addressed during the reporting period. This in turn allows an understanding of whether the members of these bodies were adequately informed and whether they were able to fulfil their roles.

26.The undertaking shall disclose the following information:

(a) whether, by whom and how frequently the administrative, management and supervisory bodies, including their relevant committees, are informed about material impacts, risks and opportunities (see Disclosure Requirement IRO–1 - Description of the processes to identify and assess material impacts, risks and opportunities of this Standard), the implementation of due diligence, and the results and effectiveness of policies, actions, metrics and targets adopted to address them;

(b) how the administrative, management and supervisory bodies consider impacts, risks and opportunities when overseeing the undertaking’s strategy, its decisions on major transactions, and its risk management process, including whether they have considered trade-offs associated with those impacts, risks and opportunities; and

(c) a list of the material impacts, risks and opportunities addressed by the administrative, management and supervisory bodies, or their relevant committees during the reporting period.

28.The objective of this Disclosure Requirement is to provide an understanding of whether incentive schemes are offered to members of the administrative, management and supervisory bodies that are linked to sustainability matters.

29.The undertaking shall disclose the following information about the incentive schemes and remuneration policies linked to sustainability matters for members of the undertaking's administrative, management and supervisory bodies, where they exist:

(a) a description of the key characteristics of the incentive schemes;

(b) whether performance is being assessed against specific sustainability-related targets and/or impacts, and if so, which ones;

(c) whether and how sustainability-related performance metrics are considered as performance benchmarks or included in remuneration policies;

(d) the proportion of variable remuneration dependent on sustainability-related targets and/or impacts; and

(e) the level in the undertaking at which the terms of incentive schemes are approved and updated.

31.The objective of this Disclosure Requirement is to facilitate an understanding of the undertaking’s due diligence process with regard to sustainability matters.

32.The main aspects and steps of due diligence referred to under ESRS 1 chapter 4 Due diligence are related to a number of cross-cutting and topical Disclosure Requirements under the ESRS. The undertaking shall provide a mapping that explains how and where its application of the main aspects and steps of the due diligence process are reflected in its sustainability statement, to allow a depiction of the actual practices of the undertaking with regard to due diligence (¹⁵).

33.This disclosure requirement does not mandate any specific behavioural requirements with regard to due diligence actions and does not extend or modify the role of administrative, management and supervisory bodies as mandated by other legislation or regulation.

35.The objective of this Disclosure Requirement is to provide an understanding of the undertaking’s risk management and internal control processes in relation to sustainability reporting.

36.The undertaking shall disclose the following information:

(a) the scope, main features and components of the risk management and internal control processes and systems in relation to sustainability reporting;

(b) the risk assessment approach followed, including the risk prioritisation methodology;

(c) the main risks identified and their mitigation strategies including related controls;

(d) a description of how the undertaking integrates the findings of its risk assessment and internal controls as regards the sustainability reporting process into relevant internal functions and processes; and

(e) a description of the periodic reporting of the findings referred to in point (d) to the administrative, management and supervisory bodies.

3. Strategy

37.This chapter sets disclosure requirements that enable an understanding of:

(a) the elements of the undertaking’s strategy that relate to or affect sustainability matters, its business model and its value chain;

(b) how the interests and views of the undertaking’s stakeholders are taken into account by the undertaking’s strategy and business model; and

(c) the outcome of the undertaking’s assessment of material impacts, risks and opportunities, including how they inform its strategy and business model.

39.The objective of this Disclosure Requirement is to describe the key elements of the undertaking’s general strategy that relate to or affect sustainability matters, and the key elements of the undertaking’s business model and value chain, in order to provide an understanding of its exposure to impacts, risks and opportunities and where they originate.

40.The undertaking shall disclose the following information about the key elements of its general strategy that relate to or affect sustainability matters:

(a) a description of: i. significant groups of products and/or services offered, including changes in the reporting period (new/removed products and/or services); ii. significant markets and/or customer groups served, including changes in the reporting period (new/removed markets and/or customer groups); iii. headcount of employees by geographical areas; and iv. where applicable and material, products and services that are banned in certain markets;

(b) a breakdown of total revenue, as included in its financial statements, by significant ESRS sectors. When the undertaking provides segment reporting as required by IFRS 8 Operating segments in its financial statements, this sector revenue information shall be, as far as possible, reconciled with IFRS 8 information;

(c) a list of the additional significant ESRS sectors beyond the ones reflected under paragraph 40(b), such as activities that give rise to intercompany revenues, in which the undertaking develops significant activities, or in which it is or may be connected to material impacts. The identification of these additional ESRS sectors shall be consistent with the way they have been considered by the undertaking when performing its materiality assessment and with the way it discloses material sector-specific information;

(d) where applicable, a statement indicating, together with the related revenues, that the undertaking is active in: i. the fossil fuel (coal, oil and gas) sector (¹⁶), (i.e., it derives revenues from exploration, mining, extraction, production, processing, storage, refining or distribution, including transportation, storage and trade, of fossil fuels as defined in Article 2, point (62), of Regulation (EU) 2018/1999 of the European Parliament and the Council (¹⁷)), including a disaggregation of revenues derived from coal, from oil and from gas, as well as the revenues derived from Taxonomy-aligned economic activities related to fossil gas as required under Article 8(7)(a) of Commission Delegated Regulation 2021/2178 (¹⁸); ii. chemicals production (¹⁹), i.e., its activities fall under Division 20.2 of Annex I to Regulation (EC) No 1893/2006; iii. controversial weapons (²⁰) (anti-personnel mines, cluster munitions, chemical weapons and biological weapons); and/or iv. the cultivation and production of tobacco (²¹);

(e) its sustainability-related goals in terms of significant groups of products and services, customer categories, geographical areas and relationships with stakeholders;

(f) an assessment of its current significant products and/or services, and significant markets and customer groups, in relation to its sustainability-related goals; and

(g) the elements of the undertaking’s strategy that relate to or impact sustainability matters, including the main challenges ahead, critical solutions or projects to be put in place, when relevant for sustainability reporting.

41.If the undertaking is based in an EU Member State that allows for an exemption from the disclosure of the information referred to in Article 18, paragraph 1, sub-point (a) of Directive 2013/34/EU (²²), and if the undertaking has made use of that exemption, it may omit the breakdown of revenue by significant ESRS sector required by paragraph 40(b). In this case the undertaking shall nevertheless disclose the list of ESRS sectors that are significant for the undertaking.

42.The undertaking shall disclose a description of its business model and value chain, including:

(a) its inputs and its approach to gathering, developing and securing those inputs;

(b) its outputs and outcomes in terms of current and expected benefits for customers, investors and other stakeholders; and

(c) the main features of its upstream and downstream value chain and the undertaking’s position in its value chain, including a description of the main business actors (such as key suppliers, customers, distribution channels and end-users) and their relationship to the undertaking. When the undertaking has multiple value chains, the disclosure shall cover the key value chains.

44.The objective of this Disclosure Requirement is to provide an understanding of how stakeholders’ interests and views inform the undertaking’s strategy and business model.

45.The undertaking shall disclose a summarised description of:

(a) its stakeholder engagement, including: i. the undertaking’s key stakeholders; ii. whether engagement with them occurs and for which categories of stakeholders; iii. how it is organised; iv. its purpose; and v. how its outcome is taken into account by the undertaking;

(b) the undertaking’s understanding of the interests and views of its key stakeholders as they relate to the undertaking’s strategy and business model, to the extent that these were analysed during the undertaking’s due diligence process and/or materiality assessment process (see Disclosure Requirement IRO-1 of this Standard);

(c) where applicable, amendments to its strategy and/or business model, including: i. how the undertaking has amended or expects to amend its strategy and/or business model to address the interests and views of its stakeholders; ii. any further steps that are being planned and in what timeline; and iii. whether these steps are likely to modify the relationship with and views of stakeholders; and

(d) whether and how the administrative, management and supervisory bodies are informed about the views and interests of affected stakeholders with regard to the undertaking’s sustainability-related impacts.

47.The objective of this Disclosure Requirement is to provide an understanding of the material impacts, risks and opportunities as they result from the undertaking’s materiality assessment and how they originate from and trigger adaptation of the undertaking’s strategy and business model including its resources allocation. The information to be disclosed about the management of the undertaking’s material impacts, risks and opportunities is prescribed in topical ESRS and in sector-specific standards, which shall be applied in conjunction with the Minimum Disclosure Requirements on policies, actions and targets established in this Standard.

48.The undertaking shall disclose:

(a) a brief description of its material impacts, risks and opportunities resulting from its materiality assessment (see Disclosure Requirement IRO-1 of this standard), including a description of where in its business model, its own operations and its upstream and downstream value chain these material impacts, risks and opportunities are concentrated;

(b) the current and anticipated effects of its material impacts, risks and opportunities on its business model, value chain, strategy and decision-making, and how it has responded or plans to respond to these effects, including any changes it has made or plans to make to its strategy or business model as part of its actions to address particular material impacts or risks, or to pursue particular material opportunities;

(c) with reference to the undertaking’s material impacts: i. how the undertaking’s material negative and positive impacts affect (or, in the case of potential impacts, are likely to affect) people or the environment; ii. whether and how the impacts originate from or are connected to the undertaking's strategy and business model; iii. the reasonably expected time horizons of the impacts; and iv. whether the undertaking is involved with the material impacts through its activities or because of its business relationships, describing the nature of the activities or business relationships concerned;

(d) the current financial effects of the undertaking’s material risks and opportunities on its financial position, financial performance and cash flows and the material risks and opportunities for which there is a significant risk of a material adjustment within the next annual reporting period to the carrying amounts of assets and liabilities reported in the related financial statements;

(e) the anticipated financial effects of the undertaking’s material risks and opportunities on its financial position, financial performance and cash flows over the short-, medium- and long-term, including the reasonably expected time horizons for those effects. This shall include how the undertaking expects its financial position, financial performance and cash flows to change over the short, medium- and long-term, given its strategy to manage risks and opportunities, taking into consideration: i. its investment and disposal plans (for example, capital expenditure, major acquisitions and divestments, joint ventures, business transformation, innovation, new business areas and asset retirements), including plans the undertaking is not contractually committed to; and ii. its planned sources of funding to implement its strategy.

(f) information about the resilience of the undertaking's strategy and business model regarding its capacity to address its material impacts and risks and to take advantage of its material opportunities. The undertaking shall disclose a qualitative and, when applicable, a quantitative analysis of the resilience, including how the analysis was conducted and the time horizons that were applied as defined in ESRS 1 (see ESRS 1 chapter 6 Time horizons). When providing quantitative information, the undertaking may disclose single amounts or ranges;

(g) changes to the material impacts, risks and opportunities compared to the previous reporting period; and

(h) a specification of those impacts, risks and opportunities that are covered by ESRS Disclosure Requirements as opposed to those covered by the undertaking using additional entity-specific disclosures.

49.The undertaking may disclose the descriptive information required in paragraph 46 alongside the disclosures provided under the corresponding topical ESRS, in which case it shall still present a statement of its material impacts, risks and opportunities alongside its disclosures prepared under this chapter of ESRS 2.

4. Impact, risk and opportunity management

50.This chapter sets disclosure requirements that enable an understanding of:

(a) the process to identify material impacts, risks and opportunities; and

(b) the information that, as a result of its materiality assessment, the undertaking has included in its sustainability statement.

52.The objective of this Disclosure Requirement is to provide an understanding of the process through which the undertaking identifies impacts, risks and opportunities and assesses their materiality, as the basis for determining the disclosures in its sustainability statement (see ESRS 1 chapter 3 and its related Application Requirements, which set out requirements and principles regarding the process to identify and assess material impacts, risks and opportunities based on the principle of double materiality).

53.The undertaking shall disclose the following information:

(a) a description of the methodologies and assumptions applied in the described process;

(b) an overview of the process to identify, assess, prioritise and monitor the undertaking’s potential and actual impacts on people and the environment, informed by the undertaking’s due diligence process, including an explanation of whether and how the process: i. focusses on specific activities, business relationships, geographies or other factors that give rise to heightened risk of adverse impacts; ii. considers the impacts with which the undertaking is involved through its own operations or as a result of its business relationships; iii. includes consultation with affected stakeholders to understand how they may be impacted and with external experts; iv. prioritises negative impacts based on their relative severity and likelihood, (see ESRS 1 section 3.4 Impact materiality) and, if applicable, positive impacts on their relative scale, scope and likelihood, and determines which sustainability matters are material for reporting purposes, including the qualitative or quantitative thresholds and other criteria used as prescribed by ESRS 1 section 3.4 Impact materiality;

(c) an overview of the process used to identify, assess, prioritise and monitor risks and opportunities that have or may have financial effects. The disclosure shall include: i. how the undertaking has considered the connections of its impacts and dependencies with the risks and opportunities that may arise from those impacts and dependencies; ii. how the undertaking assesses the likelihood, magnitude, and nature of effects of the identified risk and opportunities (such as the qualitative or quantitative thresholds and other criteria used as prescribed by ESRS 1 section 3.5 Financial materiality); iii. how the undertaking prioritises sustainability-related risks relative to other types of risks, including its use of risk-assessment tools;

(d) a description of the decision-making process and the related internal control procedures;

(e) the extent to which and how the process to identify, assess and manage impacts and risks is integrated into the undertaking’s overall risk management process and used to evaluate the undertaking’s overall risk profile and risk management processes;

(f) the extent to which and how the process to identify, assess and manage opportunities is integrated into the undertaking’s overall management process where applicable;

(g) the input parameters it uses (for example, data sources, the scope of operations covered and the detail used in assumptions); and

(h) whether and how the process has changed compared to the prior reporting period, when the process was modified for the last time and future revision dates of the materiality assessment.

55.The objective of this Disclosure Requirement is to provide an understanding of the Disclosure Requirements included in the undertaking’s sustainability statement and of the topics that have been omitted as not material, as a result of the materiality assessment.

56.The undertaking shall include a list of the Disclosure Requirements complied with in preparing the sustainability statement, following the outcome of the materiality assessment (see ESRS 1 chapter 3), including the page numbers and/or paragraphs where the related disclosures are located in the sustainability statement. This may be presented as a content index. The undertaking shall also include a table of all the datapoints that derive from other EU legislation as listed in Appendix B of this standard, indicating where they can be found in the sustainability statement and including those that the undertaking has assessed as not material, in which case the undertaking shall indicate ‘Not material’ in the table in accordance with ESRS 1 paragraph 35.

57.If the undertaking concludes that climate change is not material and therefore omits all disclosure requirements in ESRS E1 Climate change, it shall disclose a detailed explanation of the conclusions of its materiality assessment with regard to climate change (see ESRS 2 IRO-2 Disclosure Requirements in ESRS covered by the undertaking’s sustainability statement), including a forward-looking analysis of the conditions that could lead the undertaking to conclude that climate change is material in the future.

58.If the undertaking concludes that a topic other than climate change is not material and therefore omits all the Disclosure Requirements in the corresponding topical ESRS, it may provide a brief explanation of the conclusions of its materiality assessment for that topic.

59.The undertaking shall provide an explanation of how it has determined the material information to be disclosed in relation to the impacts, risks and opportunities that it has assessed to be material, including the use of thresholds and/or how it has implemented the criteria in ESRS 1 section 3.2 Material matters and materiality of information.

60.This section sets out minimum disclosure requirements to be included when the undertaking discloses information on its policies and actions to prevent, mitigate and remediate actual and potential material impacts, to address material risks and/or to pursue material opportunities (collectively, to ‘manage material sustainability matters’). They shall be applied together with the Disclosure Requirements, including Application Requirements, provided in the relevant topical and sector-specific ESRS. They shall also be applied when the undertaking prepares entity-specific disclosures.

61.The corresponding disclosures shall be located alongside disclosures prescribed by the relevant ESRS. When a single policy or same actions address several interconnected sustainability matters, the undertaking may disclose the required information in its reporting under one topical ESRS and cross reference to it in its reporting under other topical ESRS.

62.If the undertaking cannot disclose the information on policies and actions required under relevant ESRS, because it has not adopted policies and/or actions with reference to the specific sustainability matter concerned, it shall disclose this to be the case, and provide reasons for not having adopted policies and/or actions. The undertaking may disclose a timeframe in which it aims to adopt them.

63.The undertaking shall apply the minimum disclosure requirements defined in this provision when it discloses the policies it has in place with regard to each sustainability matter identified as material.

64.The objective of this Minimum Disclosure Requirement is to provide an understanding of the policies that the undertaking has in place to prevent, mitigate and remediate actual and potential impacts, to address risks and to pursue opportunities.

65.The undertaking shall disclose information about policies adopted to manage material sustainability matters. The disclosure shall include the following information:

(a) a description of the key contents of the policy, including its general objectives and which material impacts, risks or opportunities the policy relates to and the process for monitoring;

(b) a description of the scope of the policy, or of its exclusions, in terms of activities, upstream and/or downstream value chain, geographies and if relevant, affected stakeholder groups;

(c) the most senior level in the undertaking’s organisation that is accountable for the implementation of the policy;

(d) a reference, if relevant, to the third-party standards or initiatives the undertaking commits to respect through the implementation of the policy;

(e) if relevant, a description of the consideration given to the interests of key stakeholders in setting the policy; and

(f) if relevant, whether and how the undertaking makes the policy available to potentially affected stakeholders, and stakeholders who need to help implement it.

66.The undertaking shall apply the requirements for the content of disclosures in this provision when it describes the actions through which it manages each material sustainability matter including action plans and resources allocated and/or planned.

67.The objective of this Minimum Disclosure Requirement is to provide an understanding of the key actions taken and/or planned to prevent, mitigate and remediate actual and potential impacts, and to address risks and opportunities, and where applicable achieve the objectives and targets of related policies.

68.Where the implementation of a policy requires actions, or a comprehensive action plan, to achieve its objectives, as well as when actions are implemented without a specific policy, the undertaking shall disclose the following information:

(a) the list of key actions taken in the reporting year and planned for the future, their expected outcomes and, where relevant, how their implementation contributes to the achievement of policy objectives and targets;

(b) the scope of the key actions (i.e., coverage in terms of activities, upstream and/or downstream value chain, geographies and, where applicable, affected stakeholder groups);

(c) the time horizons under which the undertaking intends to complete each key action;

(d) if applicable, key actions taken (along with results) to provide for and cooperate in or support the provision of remedy for those harmed by actual material impacts;

(e) if applicable, quantitative and qualitative information regarding the progress of actions or action plans disclosed in prior periods.

69.Where the implementation of an action plan requires significant operational expenditures (Opex) and/or capital expenditures (Capex) the undertaking shall:

(a) describe the type of current and future financial and other resources allocated to the action plan, including if applicable, the relevant terms of sustainable finance instruments, such as green bonds, social bonds and green loans, the environmental or social objectives, and whether the ability to implement the actions or action plan depends on specific preconditions, e.g., granting of financial support or public policy and market developments;

(b) provide the amount of current financial resources and explain how they relate to the most relevant amounts presented in the financial statements; and

(c) provide the amount of future financial resources.

5. Metrics and targets

70.This chapter sets out Minimum Disclosure Requirements that shall be included when the undertaking discloses information on its metrics and targets related to each material sustainability matter. They shall be applied together with the Disclosure Requirements, including Application Requirements, provided in the relevant topical ESRS. They shall also be applied when the undertaking prepares entity-specific disclosures.

71.The corresponding disclosures shall be located alongside disclosures prescribed by the topical ESRS.

72.If the undertaking cannot disclose the information on targets required under the relevant topical ESRS, because it has not set targets with reference to the specific sustainability matter concerned, it shall disclose this to be the case, and provide reasons for not having adopted targets. The undertaking may disclose a timeframe in which it aims to adopt them.

73.The undertaking shall apply the requirements for the content of disclosures in this provision when it discloses on the metrics it has in place with regard to each material sustainability matter.

74.The objective of this Minimum Disclosure Requirement is to provide an understanding of the metrics the undertaking uses to track the effectiveness of its actions to manage material sustainability matters.

75.The undertaking shall disclose any metrics that it uses to evaluate performance and effectiveness, in relation to a material impact, risk or opportunity.

77.For each metric, the undertaking shall:

(a) disclose the methodologies and significant assumptions behind the metric, including the limitations of the methodologies used;

(b) disclose whether the measurement of the metric is validated by an external body other than the assurance provider and, if so, which body;

(c) label and define the metric using meaningful, clear and precise names and descriptions;

(d) when currency is specified as the unit of measure, use the presentation currency of its financial statements.

78.The undertaking shall apply the requirements for the content of disclosures in this provision when it discloses information about the targets it has set with regard to each material sustainability matter.

79.The objective of this Minimum Disclosure Requirement is to provide for each material sustainability matter an understanding of:

(a) whether and how the undertaking tracks the effectiveness of its actions to address material impacts, risks and opportunities, including the metrics it uses to do so;

(b) measurable time-bound outcome-oriented targets set by the undertaking to meet the policy s objectives, defined in terms of expected results for people, the environment or the undertaking regarding material impacts, risks and opportunities;

(c) the overall progress towards the adopted targets over time;

(d) in the case that the undertaking has not set measurable time-bound outcome-oriented targets, whether and how it nevertheless tracks the effectiveness of its actions to address material impacts, risks and opportunities and measures the progress in achieving its policy objectives; and

(e) whether and how stakeholders have been involved in target setting for each material sustainability matter.

80.The undertaking shall disclose the measurable, outcome-oriented and time-bound targets on material sustainability matters it has set to assess progress. For each target, the disclosure shall include the following information:

(a) a description of the relationship of the target to the policy objectives;

(b) the defined target level to be achieved, including, where applicable, whether the target is absolute or relative and in which unit it is measured;

(c) the scope of the target, including the undertaking’s activities and/or its upstream and/or downstream value chain where applicable and geographical boundaries;

(d) the baseline value and base year from which progress is measured;

(e) the period to which the target applies and if applicable, any milestones or interim targets;

(f) the methodologies and significant assumptions used to define targets, including where applicable, the selected scenario, data sources, alignment with national, EU or international policy goals and how the targets consider the wider context of sustainable development and/or local situation in which impacts take place;

(g) whether the undertaking’s targets related to environmental matters are based on conclusive scientific evidence;

(h) whether and how stakeholders have been involved in target setting for each material sustainability matter;

(i) any changes in targets and corresponding metrics or underlying measurement methodologies, significant assumptions, limitations, sources and processes to collect data adopted within the defined time horizon. This includes an explanation of the rationale for those changes and their effect on comparability (see Disclosure Requirement BP-2 Disclosures in relation to specific circumstances of this Standard); and

(j) the performance against its disclosed targets, including information on how the target is monitored and reviewed and the metrics used, whether the progress is in line with what had been initially planned, and an analysis of trends or significant changes in the performance of the undertaking towards achieving the target.

81.If the undertaking has not set any measurable outcome-oriented targets:

(a) it may disclose whether such targets will be set and the timeframe for setting them, or the reasons why the undertaking does not plan to set such targets;

(b) it shall disclose whether it nevertheless tracks the effectiveness of its policies and actions in relation to the material sustainability-related impact, risk and opportunity, and if so: i. any processes through which it does so; ii. the defined level of ambition to be achieved and any qualitative or quantitative indicators it uses to evaluate progress, including the base period from which progress is measured.

Appendix A

This appendix is an integral part of ESRS 2 and has the same authority as other parts of the Standard.

1. Basis for preparation

Disclosure Requirement BP-1 – General basis for preparation of sustainability statements

AR 1.When describing to what extent the sustainability statement covers the undertaking’s upstream and downstream value chain (see ESRS 1 section 5.1 Reporting undertaking and value chain), the undertaking may distinguish between:

(a) the extent to which its materiality assessment of impacts, risks and opportunities extends to its upstream and/or downstream value chain;

(b) the extent to which its policies, actions and targets extend to its value chain; and

(c) the extent to which it includes upstream and/or downstream value chain data when disclosing on metrics.

Disclosure Requirement BP-2 – Disclosures in relation to specific circumstances

AR 2.The undertaking may disclose whether it relies on any European standards approved by the European Standardisation System (ISO/IEC or CEN/CENELEC standards), as well as the extent to which data and processes that are used for sustainability reporting purposes have been verified by an external assurance provider and found to conform to the corresponding ISO/IEC or CEN/CENELEC standard.

2. Governance

Disclosure Requirement GOV-1 – The role of the administrative, management and supervisory bodies

AR 3.In describing the role and responsibilities of the administrative, management and supervisory bodies with regard to sustainability matters, the undertaking may specify:

(a) the aspects of sustainability over which oversight is exercised with regard to the environmental, social and governance matters the undertaking may be facing, including: i. any assessment of and changes to sustainability-related aspects of the undertaking’s strategy and business model; ii. the identification and assessment of material risks, opportunities and impacts; iii. related policies and targets, action plans and dedicated resources; and iv. sustainability reporting;

(b) the form such oversight takes for each of the above aspects: i.e., information, consultation or decision-making; and

(c) the way such oversight is organised and formalised, i.e., processes by which the administrative, management and supervisory bodies engage with these aspects of sustainability.

AR 4.In describing the undertaking’s organisation of governance regarding sustainability matters, a description of complex governance structure may be complemented by their presentation in the form of a diagram.

AR 5.The description of the level of expertise or access to expertise of the administrative, management and supervisory bodies may be substantiated by illustrating the composition of the bodies, including members on whom these bodies rely for expertise to oversee sustainability matters, and how they leverage that expertise as a body. In the description, the undertaking shall consider how the expertise and skills are relevant to the undertaking’s material impacts, risks and opportunities and 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.

Disclosure Requirement GOV-2 – Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies

AR 6.Depending on the undertaking’s structure, the administrative, management and supervisory bodies may focus on overarching targets, while management focuses on the more detailed targets. In this case, the undertaking may disclose how the governance bodies ensure that an appropriate mechanism for performance monitoring is in place.

Disclosure Requirement GOV-3 – Integration of sustainability-related performance in incentive schemes

AR 7.For listed undertakings, this Disclosure Requirement should be consistent with the remuneration report prescribed in articles 9a and 9b of Directive 2007/36/EC on the exercise of certain rights of shareholders in listed companies. Subject to the provisions of ESRS 1, paragraphs 119, 120 and 122, a listed undertaking may make a reference to its remuneration report.

Disclosure Requirement GOV-4 – Statement on due diligence

AR 8.The mapping required by paragraph 30 may be presented in the form of a table, cross-referencing the core elements of due diligence, for impacts on people and the environment, to the relevant disclosures in the undertaking’s sustainability statement, as set out below.

AR 9.The undertaking may include additional columns to the table below to clearly identify those disclosures that relate to impacts on people and/or the environment given that, in some cases, more than one disclosure may provide information about the same due diligence step.

AR 10.The main references in the international instruments of the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises to the core elements of the due diligence process are listed in ESRS 1 chapter 4.

CORE ELEMENTS OF DUE DILIGENCE	PARAGRAPHS IN THE SUSTAINABILITY STATEMENT
a) Embedding due diligence in governance, strategy and business model
b) Engaging with affected stakeholders in all key steps of the due diligence
c) Identifying and assessing adverse impacts
d) Taking actions to address those adverse impacts
e) Tracking the effectiveness of these efforts and communicating

Disclosure Requirement GOV-5 – Risk management and internal controls over sustainability reporting

AR 11.This Disclosure Requirement focuses solely on the internal control processes over the sustainability reporting process. The undertaking may consider risks such as the completeness and integrity of the data, the accuracy of estimation results, the availability of upstream and/or downstream value chain data, and the timing of the availability of the information.

3. Strategy

Disclosure Requirement SBM–1 Strategy, business model and value chain

AR 12.To provide the information on sectors required by paragraph 40, the undertaking shall map its significant activities in accordance with ESRS sectors. If a code for a sub-sector does not exist, the caption ‘others’ shall be used.

AR 13.For the purposes of the disclosures required in paragraph 40, a group of products and/or services offered, a group of markets and/or customer groups served, or an ESRS sector, is significant for the undertaking if it meets one or both of the following criteria:

(a) it accounts for more than 10 per cent of the undertaking’s revenue;

(b) it is connected with material actual impacts or material potential negative impacts of the undertaking.

AR 14.In preparing disclosures relating to its business model and value chain, the undertaking shall consider:

(a) its key activities, resources, distribution channels and customer segments;

(b) its key business relationships and their key characteristics, including relationships with customers and suppliers;

(c) the cost structure and revenue of its business segments, in line with IFRS 8 disclosure requirements in the financial statement, where applicable;

(d) the potential impacts, risks and opportunities in its significant sector(s) and their possible relationship to its own business model or value chain.

AR 15.Contextual information may be particularly relevant for users of the undertaking’s sustainability statement, to understand to what extent the disclosures include upstream and/or downstream value chain information. The description of the main features of the upstream and/or downstream value chain and where applicable the identification of key value chains should support an understanding of how the undertaking applies the requirements of ESRS 1 chapter 5 and the materiality assessment performed by the undertaking in line with ESRS 1 chapter 3. The description may provide a high-level overview of the key features of upstream and/or downstream value chain entities indicating their relative contribution to the undertaking’s performance and position and explaining how they contribute to the value creation of the undertaking.

Disclosure Requirement SBM-2 – Interests and views of stakeholders

AR 16.The views and interests of stakeholders that are expressed as part of the undertaking’s engagement with stakeholders through its due diligence process may be relevant to one or more aspects of its strategy or business model. As such, they may affect the undertaking’s decisions regarding the future direction of the strategy or business model.

Disclosure Requirement SBM-3 – Material impacts, risks and opportunities and their interaction with strategy and business model

AR 17.When describing where in its upstream and/or downstream value chain material impacts, risks and opportunities are concentrated, the undertaking shall consider: geographical areas, facilities or types of assets, inputs, outputs and distribution channels.

AR 18.This disclosure may be expressed in terms of a single impact, risk or opportunity or by aggregating groups of material impacts, risks and opportunities, when this provides more relevant information and does not obscure material information.

4. Impact, risk and opportunity management

Disclosure Requirement IRO-2 – Disclosure Requirements in ESRS covered by the undertaking’s sustainability statement

AR 19.Notwithstanding the basis for the presentation of the information about sustainability matters included in ESRS 1 chapter 8 Structure of sustainability statement, the undertaking may disclose the list of the Disclosure Requirements complied with in preparing the sustainability statement (see paragraph 54) in the general information part or in other parts of the sustainability statement as it deems appropriate. The undertaking may use a content index, i.e., a tabular list of the Disclosure Requirements included in the sustainability statement, with the indication of where they are located (page/paragraphs).

Minimum Disclosure Requirement – Policies MDR-P – Policies adopted to manage material sustainability matters

AR 20.Due to the interdependency between impacts on people and the environment, risks and opportunities, a single policy may apply to several material sustainability matters, including matters addressed by more than one topical ESRS. For example, if a single policy covers both an environmental matter and a social matter, the undertaking may report on the policy in the environmental section of its sustainability statement. In this case, it should include in the social section a cross-reference to the environmental section where the policy is reported. Equally a policy may be reported in the social section with a cross-reference to it in the environmental section.

AR 21.The description of the scope of the policy may explain which activities and/or segments of the undertaking’s own operations or upstream and downstream value chain it concerns. The description may also explain further boundaries relevant to the specific topic or the undertaking’s circumstances, which may include geographies, life cycles, etc. In certain cases, such as if the policy does not cover the full value chain, the undertaking may provide clear information regarding the extent of the value chain covered by the policy.

Minimum disclosure requirement – Actions MDR-A – Actions and resources in relation to material sustainability matters

AR 22.Key actions in the context of this Minimum Disclosure Requirement are those actions that materially contribute to achieving the undertaking’s objectives in addressing material impacts, risks and opportunities. For reasons of understandability, key actions may be aggregated where appropriate.

AR 23.Information on resource allocation may be presented in the form of a table and broken down between capital expenditure and operating expenditure, and across the relevant time horizons, and between resources applied in the current reporting year and the planned allocation of resources over specific time horizons.

5. Metrics and targets

Minimum Disclosure Requirement – Targets MDR-T – Tracking effectiveness of policies and actions through targets

AR 24.When disclosing targets related to the prevention or mitigation of environmental impacts, the undertaking shall prioritise targets related to the reduction of the impacts in absolute terms rather than in relative terms. When targets address the prevention or mitigation of social impacts, they may be specified in terms of the effects on human rights, welfare or positive outcomes for affected stakeholders.

AR 25.The information on progress made towards achieving the targets may be presented in a comprehensive table, including information on the baseline and target value, milestones, and achieved performance over the prior periods.

AR 26.Where the undertaking describes progress in achieving the objectives of a policy in the absence of a measurable target, it may specify a baseline against which the progress is considered. For example, the undertaking may assess an increase of wages by a certain percentage for those below a fair wage; or may assess the quality of its relationships with local communities by reference to the proportion of issues raised by communities that were resolved to their satisfaction. The baseline and the assessment of the progress shall be related to the impacts, risks and opportunities which underpin the materiality of the matter addressed by the policy.

Appendix B

This appendix is an integral part of the ESRS 2. The table below illustrates the datapoints in ESRS 2 and topical ESRS that derive from other EU legislation.