ESRS E4 – Biodiversity and ecosystems
The E4 standard is one of 5 environment-specific standards of the European Sustainability Reporting Standards. The standards were developed by EFRAG and are to be applied in accordance with the CSRD. This article is based on the final delegated regulation on the ESRS (European Sustainability Reporting Standards), which was published in the Official Journal of the EU on 22nd December 2023. Here you can find a general overview of the ESRS.
The purpose of ESRS E4 is to specify the disclosures that should be made in connection with biodiversity and ecosystems. In particular, it focuses on the undertaking’s relationship to terrestrial, freshwater, and marine habitats, ecosystems, and related fauna and flora species, including diversity within and between species and ecosystems and their interrelation with indigenous and affected communities.
What does biodiversity mean?
Biological diversity is defined as the variability among living organisms from all sources, including terrestrial, freshwater, marine and other aquatic ecosystems.
What do companies have to disclose under ESRS E4?
In this context, the undertaking shall report on actions taken and their results to prevent, mitigate or restore actual or potential negative impacts on biodiversity and ecosystems, as well as measures to protect or restore biodiversity and ecosystems. Companies must explain the impact of risks and opportunities on the short-, medium- and long-term development, performance and situation of the undertaking.
Furthermore, the undertaking’s plans and capacities to adapt its business models and activities and to align them with the relevant targets of the EU Biodiversity Strategy for 2030 shall be addressed.
Interaction with other ESRS Standards
Since biodiversity and ecosystems is an issue across environmental topics, there are various overlaps, especially with regard to other environmental standards such as pollution (ESRS E2), water and marine resources (ESRS E3), and resource use and circular economy (ESRS E5).
When topics in other environmental ESRS result in significant impacts related to biodiversity and ecosystem change, these are listed and referenced in Standard E4.
In respect to affected communities there are possible overlaps to the topic of biodiversity and ecosystems, with negative impacts to be reported under ESRS E4, considering the requirements of Standard S3.
Disclosure requirements under ESRS E4
The E4 standard includes 6 environmental disclosure requirements (E4-1 to E4-6) as well as two requirements from ESRS 2 (ESRS 2 SBM-3; IRO-1). For an overview, these are listed in table 1 and described in the following subchapters (without claiming to be complete).
| 1 | Angabepflicht E4-1 | Übergangsplan und Berücksichtigung von biologischer Vielfalt und Ökosystemen in Strategie und Geschäftsmodell |
| 2 | Angabepflicht ESRS 2 SBM-3 | Wesentliche Auswirkungen, Risiken und Chancen und ihr Zusammenspiel mit Strategie und Geschäftsmodell |
| 3 | Angabepflicht ESRS 2 IRO-1 | Beschreibung der Verfahren zur Ermittlung und Bewertung der wesentlichen Auswirkungen, Risiken, Abhängigkeiten und Chancen im Zusammenhang mit biologischer Vielfalt und Ökosystemen |
| 4 | Angabepflicht E4-2 | Konzepte im Zusammenhang mit biologischer Vielfalt und Ökosystemen |
| 5 | Angabepflicht E4-3 | Maßnahmen und Mittel im Zusammenhang mit biologischer Vielfalt und Ökosystemen |
| 6 | Angabepflicht E4-4 | Ziele im Zusammenhang mit biologischer Vielfalt und Ökosystemen |
| 7 | Angabepflicht E4-5 | Auswirkungskennzahlen im Zusammenhang mit biologischer Vielfalt und Ökosystemveränderungen |
| 8 | Angabepflicht E4-6 | Erwartete finanzielle Effekte durch wesentliche Risiken und Chancen im Zusammenhang mit biologischer Vielfalt und Ökosystemen |
1. Disclosure requirement ESRS E4-1 – Transition plan and consideration of biodiversity and ecosystems in strategy and business model
The undertaking shall disclose its transition plan which aims to ensure that the business model and strategy are consistent with respect for planetary boundaries, biosphere integrity and land-system change, as well as the relevant targets set out in the EU Biodiversity Strategy 2030. In this context, the undertaking shall explain, for example, how the business development strategy relates to the achievability of its transition plan and indicate whether the administrative, management and supervisory bodies approved the transition plan.
2. Disclosure requirement related to ESRS 2 SBM-3 – Material impacts, risks and opportunities and their interaction with strategy and business model(s)
The undertaking should describe the resilience of the strategy and business model in relation to biodiversity and ecosystems, including the scope and results of the resilience analysis, the time horizon used, and key assumptions. Among others, stakeholder engagement should also be addressed.
3. Disclosure requirement related to ESRS 2 IRO-1 – Description of processes to identify and assess material biodiversity and ecosystem-related impacts, risks, dependencies and opportunities
The undertaking should describe the procedures to identify and assess material impacts, risks and opportunities related to biodiversity and the ecosystem. This should include, for example, whether and how the actual and potential impacts on as well as dependencies on biodiversity and ecosystems at the undertaking`s own site locations and in the value chain have been identified and assessed.
4. Disclosure requirement ESRS E4-2 – Policies related to biodiversity and ecosystems
The undertaking shall describe implemented policies for managing the significant impacts, risks, dependencies, and opportunities related to biodiversity and ecosystems. This should include, for example, whether and how the policies relate to key dependencies, transition risks and opportunities, or how they relate to production, procurement or consumption from ecosystems managed to maintain or enhance biodiversity conditions.
5. Disclosure requirement ESRS E4-3 – Actions and resources related to biodiversity and ecosystems
The company should report on its actions regarding biodiversity and ecosystems as well as the resources allocated for the implementation, including whether biodiversity compensatory measures are part of the company’s planned or implemented actions. In addition to the description, it must for example be explained whether the guiding measures are a one-time initiative or a systematic practice.
6. Disclosure requirement ESRS E4-4 – Targets related to biodiversity and ecosystems
The undertaking shall describe its biodiversity and ecosystem-related targets, including, information regarding progress and tracking of effectiveness. Furthermore, it shall report whether deadlines and milestones have been set for a target, or whether ecological thresholds and allocations have been considered in setting targets, which will allow understanding of whether the targets set are based on conclusive scientific evidence.
7. Disclosure requirement ESRS E4-5 – Impact metrics related to biodiversity and ecosystems change
Undertakings shall report on its material impacts resulting in biodiversity and ecosystem change. For example, if the undertaking has sites located in or near biodiversity-sensitive areas that are negatively affected, the number and the area’s size of owned, leased or managed sites near these protected areas shall be reported. For example, if the undertaking identifies material impacts on the status of species, it shall include in the reporting one or more indicators that measure a change in the number of individuals of a species in a particular area.
8. Disclosure requirement ESRS E4-6 –Anticipated financial effects from material biodiversity and ecosystem-related, risks and opportunities
The undertaking shall report potential financial effects (positive and negative) of material risks and opportunities arising from both impacts and dependencies related to biodiversity and ecosystems. In addition, quantification of the potential financial effects on the entity’s financial position and performance in monetary terms is required, although this may be omitted in the case of financial effects arising from opportunities if the resulting disclosures do not meet the definition of qualitative characteristics of information in ESRS 1.
