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

• 136.To ease the first-time application of this Standard, the undertaking is not required to disclose the comparative information required by section 7.1 Presenting comparative information in the first year of preparation of the sustainability statement under the ESRS. For disclosure requirements listed in Appendix C List of phased-in Disclosure Requirements, this transitional provision applies with reference to the first year of mandatory application of the phased-in disclosure requirement.

10.4   Transitional provision: List of Disclosure Requirements that are phased-in

• 137.Appendix C List of phased-in Disclosure Requirements in this Standard sets phase-in provisions for the Disclosure Requirements or datapoints of Disclosure Requirements in ESRS that may be omitted or that are not applicable in the first year(s) of preparation of the sustainability statement under the ESRS.

Appendix A

Application Requirements

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

Entity specific disclosures

• AR 1.The entity-specific disclosures shall enable users to understand the undertaking’s impacts, risks and opportunities in relation to environmental, social or governance matters.

• AR 2.When developing entity-specific disclosures, the undertaking shall ensure that:

• (a) the disclosures meet the qualitative characteristics of information as set out in chapter 2 Qualitative characteristics of information; and

• (b) its disclosures include, where applicable, all material information related to the reporting areas of governance; strategy; impact, risk and opportunity management; and metrics and targets (see ESRS 2 chapters 2 to 5).

• AR 3.When determining the usefulness of metrics for inclusion in its entity-specific disclosures, the undertaking shall consider whether:

• (a) its chosen performance metrics provide insight into:
• i. how effective its practices are in reducing negative outcomes and/or increasing positive outcomes for people and the environment (for impacts); and/or
• ii. the likelihood that its practices result in financial effects on the undertaking (for risks and opportunities);

• (b) the measured outcomes are sufficiently reliable, meaning that they do not involve an excessive number of assumptions and unknowns that would render the metrics too arbitrary to provide a faithful representation; and

• (c) it has provided sufficient contextual information to interpret performance metrics appropriately, and whether variations in such contextual information may impact the comparability of the metrics over time.

• AR 4.When developing its entity-specific disclosures, the undertaking shall carefully consider:

• (a) comparability between undertakings, while still ensuring relevance of the information provided, recognising that comparability may be limited for entity- specific disclosures. The undertaking shall consider whether the available and relevant frameworks, initiatives, reporting standards and benchmarks (such as technical material issued by the International Sustainability Standards Board or the Global Reporting Initiative) provide elements that can support comparability to the maximum extent possible; and

• (b) comparability over time: consistency of methodologies and disclosures is a key factor for achieving comparability over time.

• AR 5.Further guidance for developing entity-specific disclosures can be found by considering the information required under topical ESRS that addresses similar sustainability matters.

Double materiality

Stakeholders and their relevance to the materiality assessment process

• AR 6.In addition to the categories of stakeholder listed in paragraph 22, common categories of stakeholders are: employees and other workers, suppliers, consumers, customers, end- users, local communities and persons in vulnerable situations, and public authorities, including regulators, supervisors and central banks.

• AR 7.Nature may be considered as a silent stakeholder. In this case, ecological data and data on the conservation of species may support the undertaking’s materiality assessment.

• AR 8. Materiality assessment is informed by dialogue with affected stakeholders. The undertaking may engage with affected stakeholders or their representatives (such as employees or trade unions), along with users of sustainability reporting and other experts, to provide inputs or feedback on its conclusions regarding its material impacts, risks and opportunities.

Assessment of impact materiality

• AR 9.In assessing impact materiality and determining the material matters to be reported, the undertaking shall consider the following three steps:

• (a) understanding of the context in relation to its impacts including its activities, business relationships, and stakeholders;

• (b) identification of actual and potential impacts (both negative and positive), including through engaging with stakeholders and experts. In this step, the undertaking may rely on scientific and analytical research on impacts on sustainability matters;

• (c) assessment of the materiality of its actual and potential impacts and determination of the material matters. In this step, the undertaking shall adopt thresholds to determine which of the impacts will be covered in its sustainability statement.

Characteristics of severity

• AR 10.The severity is determined by the following factors:

• (a) scale: how grave the negative impact is or how beneficial the positive impact is for people or the environment;

• (b) scope: how widespread the negative or positive impacts are. In the case of environmental impacts, the scope may be understood as the extent of environmental damage or a geographical perimeter. In the case of impacts on people, the scope may be understood as the number of people adversely affected; and

• (c) irremediable character: whether and to what extent the negative impacts could be remediated, i.e., restoring the environment or affected people to their prior state.

• AR 11.Any of the three characteristics (scale, scope, and irremediable character) can make a negative impact severe. In the case of a potential negative human rights impact, the severity of the impact takes precedence over its likelihood.

Impacts connected with the undertaking

• AR 12.As an illustration:

• (a) if the undertaking uses cobalt in its products that is mined using child labour, the negative impact (i.e., child labour) is connected with the undertaking’s products through the tiers of business relationships in its upstream value chain. These relationships include the smelter and minerals trader and the mining enterprise that uses child labour; and

• (b) if the undertaking provides financial loans to an enterprise for business activities that, in breach of agreed standards, result in the contamination of water and land surrounding the operations, this negative impact is connected with the undertaking through its relationship with the enterprise it provides the loans to.

Assessment of financial materiality

• AR 13.The following are examples of how impacts and dependencies are sources of risks or opportunities:

• (a) when the undertaking’s business model depends on a natural resource – for example water – it is likely to be affected by changes in the quality, availability and pricing of that resource;

• (b) when the undertaking’s activities result in negative impacts, e.g., on local communities, the activities could become subject to stricter government regulation and/or the impact could trigger consequences of a reputational nature. These might have negative effects on the undertaking’s brand and higher recruitment costs might arise; and

• (c) when the undertaking’s business partners face material sustainability-related risks, the undertaking could be exposed to related consequences as well.

• AR 14.The identification of risks and opportunities that affect or could reasonably be expected to affect the undertaking’s financial position, financial performance, cash flows, access to finance or cost of capital over the short-, medium- or long-term is the starting point for financial materiality assessment. In this context, the undertaking shall consider:

• (a) the existence of dependencies on natural and social resources as sources of financial effects (see paragraph 50);

• (b) their classification as sources of:
• i. risks (contributing to negative deviation in future expected cash inflows or increase in deviation in future expected cash outflows and/or negative deviation from an expected change in capitals not recognised in the financial statements); or
• ii. opportunities (contributing to positive deviation in future expected cash inflows or decrease in deviation in future cash outflows and/or positive deviation from expected change in capitals not recognised in financial statements).

• AR 15.Once the undertaking has identified its risks and opportunities, it shall determine which of them are material for reporting. This shall be based on a combination of (i) the likelihood of occurrence and (ii) the potential magnitude of financial effects determined on the basis of appropriate thresholds. In this step it shall consider the contribution of those risks and opportunities to financial effects in the short-, medium- and long-term based on:

• (a) scenarios/forecasts that are deemed likely to materialise; and

• (b) anticipated financial effects related to sustainability matters deriving either from situations with a below the ‘more likely than not’ threshold or assets/liabilities not, or not yet, reflected in financial statements. This includes:
• i. potential situations that following the occurrence of future events may affect cash flow generation potential;
• ii. capitals that are not recognised as assets from an accounting and financial reporting perspective but have a significant influence on financial performance, such as natural, intellectual (organisational), human, social and relationship capitals; and
• iii. possible future events that may have an influence on the evolution of such capitals.

Sustainability matters to be included in the materiality assessment

• AR 16.When performing its materiality assessment, the undertaking shall consider the following list of sustainability matters covered in the topical ESRS. When, as a result of the undertaking’s materiality assessment (see ESRS 2 IRO-1), a given sustainability matter in this list is assessed to be material, the undertaking shall report according to the corresponding Disclosure Requirements of the relevant topical ESRS. Using this list is not a substitute for the process of determining material matters. This list is a tool to support the undertaking’s materiality assessment. The undertaking still needs to consider its own specific circumstances when determining its material matters. The undertaking, where necessary, also shall develop entity-specific disclosures on material impacts, risks and opportunities not covered by ESRS as described in paragraph 11 of this Standard.

Topical ESRS	Sustainability matters covered in topical ESRS	Sustainability matters covered in topical ESRS	Sustainability matters covered in topical ESRS
	Topic	Sub-topic	Sub-sub-topics
ESRS E1	Climate change	— Climate change adaptation — Climate change mitigation — Energy
ESRS E2	Pollution	— Pollution of air — Pollution of water — Pollution of soil — Pollution of living organisms and food resources — Substances of concern — Substances of very high concern — Microplastics
ESRS E3	Water and marine resources	— Water — Marine resources	— Water consumption — Water withdrawals — Water discharges — Water discharges in the oceans — Extraction and use of marine resources
ESRS E4	Biodiversity and ecosystems	— Direct impact drivers of biodiversity loss	— Climate Change — Land-use change, fresh water-use change and sea-use change — Direct exploitation — Invasive alien species — Pollution — Others
ESRS E4	Biodiversity and ecosystems	— Impacts on the state of species	Examples: — Species population size — Species global extinction risk
ESRS E4	Biodiversity and ecosystems	— Impacts on the extent and condition of ecosystems	Examples: — Land degradation — Desertification — Soil sealing
ESRS E4	Biodiversity and ecosystems	— Impacts and dependencies on ecosystem services
ESRS E5	Circular economy	— Resources inflows, including resource use — Resource outflows related to products and services — Waste
ESRS S1	Own workforce	— Working conditions	— Secure employment — Working time — Adequate wages — Social dialogue — Freedom of association, the existence of works councils and the information, consultation and participation rights of workers — Collective bargaining, including rate of workers covered by collective agreements — Work-life balance — Health and safety
		— Equal treatment and opportunities for all	— Gender equality and equal pay for work of equal value — Training and skills development — Employment and inclusion of persons with disabilities — Measures against violence and harassment in the workplace — Diversity
		— Other work-related rights	— Child labour — Forced labour — Adequate housing — Privacy
ESRS S2	Workers in the value chain	— Working conditions	— Secure employment — Working time — Adequate wages — Social dialogue — Freedom of association, including the existence of work councils — Collective bargaining — Work-life balance — Health and safety
		— Equal treatment and opportunities for all	— Gender equality and equal pay for work of equal value — Training and skills development — The employment and inclusion of persons with disabilities — Measures against violence and harassment in the workplace — Diversity
		— Other work-related rights	— Child labour — Forced labour — Adequate housing — Water and sanitation — Privacy
ESRS S3	Affected communities	— Communities’ economic, social and cultural rights	— Adequate housing — Adequate food — Water and sanitation — Land-related impacts — Security-related impacts
		— Communities’ civil and political rights	— Freedom of expression — Freedom of assembly — Impacts on human rights defenders
		— Rights of indigenous peoples	— Free, prior and informed consent — Self-determination — Cultural rights
ESRS S4	Consumers and end- users	— Information-related impacts for consumers and/or end-users	— Privacy — Freedom of expression — Access to (quality) information
		— Personal safety of consumers and/or end-users	— Health and safety — Security of a person — Protection of children
		— Social inclusion of consumers and/or end-users	— Non-discrimination — Access to products and services — Responsible marketing practices
ESRS G1	Business conduct	— Corporate culture — Protection of whistle-blowers — Animal welfare — Political engagement and lobbying activities — Management of relationships with suppliers including payment practices
		— Corruption and bribery	— Prevention and detection including training — Incidents

Estimation using sector averages and proxies

• AR 17.When the undertaking cannot collect upstream and downstream value chain information as required by paragraph 63 after making reasonable efforts to do so, it shall estimate the information to be reported using all reasonable and supportable information that is available to the undertaking at the reporting date without undue cost or effort. This includes, but is not limited to, internal and external information, such as data from indirect sources, sector-average data, sample analyses, market and peer groups data, other proxies or spend-based data.

Content and structure of the sustainability statement

• AR 18.As an illustration for paragraph 115 in section 8.2 Content and structure of the sustainability statement of this Standard, the undertaking that covers environmental and social matters in the same policy may cross-refer. That means that the undertaking may report on the policy in its environmental disclosures and cross-refer to it from the relevant social disclosures or vice versa. Consolidated presentation of policies across topics is allowed.

Appendix B

Qualitative characteristics of information

This appendix is an integral part of ESRS 1 and has the same authority as the other parts of the Standard. This appendix defines the qualitative characteristics that the information presented in the sustainability statement prepared according to ESRS shall meet.

Relevance

• QC 1.Sustainability information is relevant when it may make a difference in the decisions of users under a double materiality approach (see chapter 3 of this Standard).

• QC 2.Information may make a difference in a decision even if some users choose not to take advantage of it or are already aware of it from other sources. Sustainability information may impact decisions of users if it has predictive value, confirmatory value or both. Information has predictive value if it can be used as an input to processes employed by users to predict future outcomes. Sustainability information does not need to be a prediction or forecast to have predictive value, but rather has predictive value if employed by users in making their own predictions.

• QC 3.Information has confirmatory value if it provides feedback about (confirms or changes) previous evaluations.

• QC 4.Materiality is an entity-specific aspect of relevance based on the nature or magnitude, or both, of the items to which the information relates, as assessed in the context of the undertaking’s sustainability reporting (see chapter 3 of this Standard).

Faithful representation

• QC 5.To be useful, the information must not only represent relevant phenomena, it must also faithfully represent the substance of the phenomena that it purports to represent. Faithful representation requires information to be (i) complete, (ii) neutral and (iii) accurate.

• QC 6.A complete depiction of an impact, a risk or an opportunity includes all material information necessary for the users to understand that impact, risk or opportunity. This includes how the undertaking has adapted its strategy, risk management and governance in response to that impact, risk or opportunity, as well as the metrics identified to set targets and measure performance.

• QC 7.A neutral depiction is without bias in its selection or disclosure of information. Information is neutral if it is not slanted, weighted, emphasised, de-emphasised or otherwise manipulated to make it more likely that the users will receive that information favourably or unfavourably. It shall be balanced, so as to cover favourable/positive and unfavourable/negative aspects. Both negative and positive material impacts from an impact materiality perspective as well as material risks and opportunities from a financial materiality perspective shall receive equal attention. Any aspirational sustainability information, for example targets or plans, shall cover both aspirations and factors that could prevent the undertaking from achieving these aspirations in order to have a neutral depiction.

• QC 8.Neutrality is supported by the exercise of prudence which is the exercise of caution when making judgements under conditions of uncertainty. Information shall not be netted or compensated to be neutral. The exercise of prudence means that opportunities are not overstated and risks are not understated. Equally, the exercise of prudence does not allow for the understatement of opportunities or the overstatement of risks. The undertaking may present net information, in addition to gross values, if such presentation does not obscure relevant information and includes a clear explanation about the effects of the netting and the reasons for the netting.

• QC 9.Information can be accurate without being perfectly precise in all respects. Accurate information implies that the undertaking has implemented adequate processes and internal controls to avoid material errors or material misstatements. As such, estimates shall be presented with a clear emphasis on their possible limitations and associated uncertainty (see section 7.2 of this Standard). The amount of precision needed and attainable, and the factors that make information accurate, depend on the nature of the information and the nature of the matters it addresses. For example, accuracy requires that:

• (a) factual information is free from material error;

• (b) descriptions are precise;

• (c) estimates, approximations and forecasts are clearly identified as such;

• (d) no material errors have been made in selecting and applying an appropriate process for developing an estimate, approximation or forecast, and the inputs to that process are reasonable and supportable;

• (e) assertions are reasonable and based on information of sufficient quality and quantity; and

• (f) information about judgements about the future faithfully reflects both those judgements and the information on which they are based.

Comparability

• QC 10.Sustainability information is comparable when it can be compared with information provided by the undertaking in previous periods and, can be compared with information provided by other undertakings, in particular those with similar activities or operating within the same industry. A point of reference for comparison can be a target, a baseline, an industry benchmark, comparable information from either other undertakings or from an internationally recognised organisation, etc.

• QC 11.Consistency is related to, but is not the same as, comparability. Consistency refers to the use of the same approaches or methods for the same sustainability matter, from period to period by the undertaking and other undertakings. Consistency helps to achieve the goal of comparability.

• 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

List of phased-in Disclosure Requirements

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

Structure of the ESRS sustainability statement

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

Flowchart for determining disclosures under ESRS

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)).

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Appendix F

Example of structure of ESRS sustainability statement

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.

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Appendix G

Example of incorporation by reference

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.

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ESRS 2

GENERAL DISCLOSURES

TABLE OF CONTENTS	TABLE OF CONTENTS
	Objective
1.	Basis for preparation
–	Disclosure Requirement BP-1 – General basis for preparation of sustainability statements
–	Disclosure Requirement BP-2 – Disclosures in relation to specific circumstances
2.	Governance
–	Disclosure Requirement GOV-1 – The role of the administrative, management and supervisory bodies
–	Disclosure Requirement GOV-2 – Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies
–	Disclosure Requirement GOV-3 - Integration of sustainability-related performance in incentive schemes
–	Disclosure Requirement GOV-4 - Statement on due diligence
–	Disclosure Requirement GOV-5 - Risk management and internal controls over sustainability reporting
3.	Strategy
–	Disclosure Requirement SBM-1 – Strategy, business model and value chain
–	Disclosure Requirement SBM-2 – Interests and views of stakeholders
–	Disclosure Requirement SBM-3 - Material impacts, risks and opportunities and their interaction with strategy and business model
4.	Impact, risk and opportunity management
4.1	Disclosures on the materiality assessment process
–	Disclosure Requirement IRO-1 – Description of the process to identify and assess material impacts, risks and opportunities
–	Disclosure Requirement IRO-2 – Disclosure requirements in ESRS covered by the undertaking’s sustainability statement
4.2	Minimum disclosure requirement on policies and actions
–	Minimum disclosure requirement - Policies MDR-P – Policies adopted to manage material sustainability matters
–	Minimum disclosure requirement - Actions MDR-A – Actions and resources in relation to material sustainability matters
5.	Metrics and targets
–	Minimum disclosure requirement – Metrics MDR-M – Metrics in relation to material sustainability matters
–	Minimum disclosure requirement – Targets MDR-T – Tracking effectiveness of policies and actions through targets
Appendix A:	Application Requirements
1.	Basis for preparation
–	Disclosure Requirement BP-1 – General basis for preparation of the sustainability statement
2.	Governance
–	Disclosure Requirement GOV-1 – The role of the administrative, management and supervisory bodies
–	Disclosure Requirement GOV-2 – Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies
–	Disclosure Requirement GOV-3 – Integration of sustainability-related performance in incentive schemes
–	Disclosure Requirement GOV-4 – Statement on due diligence
–	Disclosure Requirement GOV-5 – Risk management and internal controls over sustainability reporting
3.	Strategy
–	Disclosure Requirement SBM–1 Strategy, business model and value chain
–	Disclosure Requirement SBM-2 – Interests and views of stakeholders
–	Disclosure Requirement SBM-3 - Material impacts, risks and opportunities and their interaction with strategy and business model
4.	Impact, risk and opportunity management
–	Disclosure Requirement IRO-2 – Disclosure requirements in ESRS covered by the undertaking’s sustainability statement
–	Minimum Disclosure Requirement - Policies MDR-P – Policies adopted to manage material sustainability matters
–	Minimum Disclosure Requirement - Actions MDR-A – Actions and resources in relation to material sustainability matters
5.	Metrics and targets
–	Minimum Disclosure Requirement - Targets MDR-T – Tracking effectiveness of policies and actions through targets
Appendix B:	List of datapoints in cross-cutting and topical standards that derive from other EU legislation
Appendix C:	Disclosure/Application Requirements in topical ESRS that are applicable jointly with 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

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

• 1. The undertaking shall disclose the general basis for preparation of its sustainability statement.

• 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.

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

• 1. The undertaking shall provide disclosures in relation to specific circumstances.

• 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.

Time horizons

• 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.

Value chain estimation

• 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).

Sources of estimation and outcome uncertainty

• 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.

Changes in preparation or presentation of sustainability information

• 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.

Reporting errors in prior periods

• 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.

Disclosures stemming from other legislation or generally accepted sustainability reporting pronouncements

• 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.

Incorporation by reference

• 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.

Use of phase-in provisions in accordance with Appendix C of ESRS 1

• 1. If an undertaking or group omits the information required by ESRS E4, ESRS S1, ESRS S2, ESRS S3 or ESRS S4 in accordance with the rows of Appendix C of ESRS 1 showing ‘All disclosure requirements’ in the column ‘Full name of the Disclosure Requirement’, it shall nevertheless disclose whether the sustainability topics covered respectively by ESRS E4, ESRS S1, ESRS S2, ESRS S3 and ESRS S4 have been assessed to be material as a result of the undertaking’s materiality assessment. In addition, if one or more of these topics has been assessed to be material, the undertaking shall, for each material topic:

• (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.

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

• 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 ([^E0013]) shall be calculated as an average ratio of female to male board members; and

• (e) the percentage of independent board members ([^E0014]). 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.

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

• 1. The undertaking shall disclose how the administrative, management and supervisory bodies are informed about sustainability matters and how these matters were addressed during the reporting period.

• 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.

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

• 1. The undertaking shall disclose information about the integration of its sustainability-related performance in incentive schemes.

• 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.

Disclosure Requirement GOV–4 - Statement on due diligence

• 1. The undertaking shall disclose a mapping of the information provided in its sustainability statement about the due diligence process.

• 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 ([^E0015]).

• 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.

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

• 1. The undertaking shall disclose the main features of its risk management and internal control system in relation to the sustainability reporting process.

• 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.

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

• 1. The undertaking shall disclose the elements of its strategy that relate to or impact sustainability matters, its business model and its value chain.

• 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;