The Standard E2 is one of 5 environment-specific standards of the European Sustainability Reporting Standards, which were developed by EFRAG and are to be applied in accordance with the CSRD. This article is based on the English final Draft of the standard ESRS E2.
ESRS E2 is intended to specify the information to be provided regarding pollution of air (indoor and outdoor), water, and soil, and substances of (special) concern. This includes positive, negative, and actual impacts of the company on pollution, as well as the measures taken by the company and their results to prevent, mitigate or remedy them. Pollution is defined as the direct or indirect emission of pollutants into the air, water, or soil caused by human activities that could be harmful to human health or the environment. The Company should provide information on its plans and capacities to adapt and bring its strategy, business models, and activities in line with a sustainable economy and the requirements of pollution prevention, control, and elimination. This should include the impact of risks and opportunities related to the company’s environmental impacts and dependencies on the company’s short, medium and long-term development, performance, and position, and thus on its ability to create shareholder value.
Interaction with other ESRS
As pollution is a broad topic, there are various overlaps in particular with other environmental topics such as climate change (ESRS E1), ESRS E3 – Water and marine resources, biodiversity and ecosystems (ESRS E4), and circular economy and resource use (ESRS E5).
While ESRS E2 deals with pollution in general, the topic of air pollution related to the following seven greenhouse gases is already covered by ESRS E1: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PCFs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3).
With regard to ESRS E3, which specifically addresses water consumption, pollution of water, and marine resources, including from microplastics, resulting from the activities of the company, is already covered by ESRS E2. Similarly, pollution as a direct driver of biodiversity loss is already covered in ESRS E2 and not in ESRS E4, which deals with biodiversity and ecosystems. Also, in the case of ESRS E5 on resource use and circular economy, there is an overlap regarding pollution from waste, which is addressed by ESRS E2. In contrast, when pollution caused by companies impacts communities, ESRS S3 addresses these negative impacts.
Disclosure Requirements according to ESRS E2
The standard E2 includes 6 environmental disclosure requirements (E2-1 to E2-6) and one requirement from ESRS 2 (ESRS 2 IRO-1). Table 1 provides an overview of the disclosure requirements which are briefly described in the following subsections.
| 1 | Disclosure Requirement ESRS 2 IRO-1 | Description of the processes to identify and assess material pollution-related impacts, risks, and opportunities |
| 2 | Disclosure Requirement E2-1 | Policies related to pollution |
| 3 | Disclosure Requirement E2-2 | Actions and resources related to pollution |
| 4 | Disclosure Requirement E2-3 | Targets related to pollution |
| 5 | Disclosure Requirement E2-4 | Pollution of air, water, and soil |
| 6 | Disclosure Requirement E2-5 | Substances of concern and substances of very high concern |
| 7 | Disclosure Requirement E2-6 | Potential financial effects from pollution-related impacts, risks, and opportunities |
Ad 1) Disclosure Requirement ESRS 2 IRO-1 – Description of the processes to identify and assess material pollution-related impacts, risks and opportunities
The company shall describe the procedures used to identify and assess the material pollution-related impacts, risks and opportunities.In particular, the methods and tools used to identify actual and potential physical pollution and transition risks when reviewing sites and operations shall be addressed. Also, information shall be provided on the linkage of risks and opportunities arising from impacts and dependencies, as well as on the process related to consultations.
Ad 2) Disclosure Requirement ESRS E2-1 – Policies related to pollution
The company shall describe implemented policies for managing the material impacts, risks, and opportunities associated with pollution prevention and control. In doing so, the company must indicate, for example, whether and how the policies address mitigation of negative impacts related to air, water, and soil pollution.
Ad 3) Disclosure Requirement ESRS E2-2 – Actions and resources related to pollution
The company shall report on its pollution-related actions and the resources allocated for their implementation, with the description of the pollution-related action plans following the principles defined in ESRS 2 CCR-2.In addition, it is necessary to indicate to which level of the mitigation hierarchy a measure and resources can be assigned. The mitigation hierarchy includes the following.
- Pollution prevention at the source
- Minimization of pollution
- Regeneration and transformation of ecosystems where pollution has occurred
Ad 4) Disclosure Requirement ESRS E2-3 – Targets related to pollution
The company shall disclose the pollution-related targets it has adopted. The descriptions of the targets shall include, among other information, the information defined in ESRS 2 CCR-3. In addition to disclosing the established targets, information must be provided, for example, on whether and how these targets relate to the prevention and control of air pollutants, emissions to water, and soil contamination.
Ad 5) Disclosure Requirement ESRS E2-4 – Pollution of air, water and soil
The company shall disclose the pollutants generated, used, or procured in the production processes that leave its facilities as emissions, as products, or services. In particular, the company’s emissions of air pollutants, emissions to water, emissions of inorganic pollutants, and emissions of ozone-depleting substances and microplastics produced by the company shall be disclosed. In this context, the company shall describe the changes over time, the measurement methodology used, and the procedures for collecting the data.
Ad 6) Disclosure Requirement ESRS E2-5 – Substances of concern and substances of very high concern
The company shall disclose information on the production, use, distribution, commercialization, and import/export of substances of concern and substances of very high concern on their own, in mixtures, or in articles. In respect to substances of very high concern, the company shall present the required information separately. Substances of concern are substances that meet the criteria of Articles 57 and 59 (1) of the REACH Regulation (Regulation concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals) (Regulation (EC) No 1907/2006) and are classified in various hazard categories (e.g. carcinogenicity or reproductive toxicity) in accordance with this Regulation.
Substances of very high concern are substances that meet the criteria of Article 57 of the REACH Regulation (Regulation (EC) No 1907/2006) and have been identified in accordance with Article 59 (1) of the Regulation.
Ad 7) Disclosure Requirement ESRS E2-6 – Potential financial effects from pollution-related impacts, risks and opportunities
The company shall report on potential (positive and negative) financial effects of pollution-related impacts, risks, and opportunities. This shall include, as far as practicable, a quantification of the potential financial effects in monetary terms. Additionally, the disclosed information shall include contextual disclosures, including a description of significant incidents where pollution has or is likely to have an adverse effect on the environment or on the entity’s cash flows, financial position, or financial performance in the short, medium, and long term.
