Climate Change Reporting Requirements Under the CSRD (ESRS E1)
Share on LinkedIn16 Sep 2024
Under the new EU Corporate Sustainability Reporting Directive (CSRD), all large companies (those having more than 250 employees, €40million turnover and €20million in total assets) and listed companies (except micro-enterprises) either based in or with significant business in the EU are required to report on their sustainability performance.
These regulations work to standardise sustainability reporting and create increased transparency and comparability between companies, with the potential to lead to meaningful action. In order to comply with the CSRD, organisations must report in line with European Sustainability Reporting Standards (ESRS), a set of 10 standards each relating to a different sustainability topic.
This article will cover the requirements of ESRS E1: Climate Change.
What is ESRS E1?
ESRS 1 is the first of the environmental reporting standards of the ESRS, setting out the guidance for reporting on climate change under the CSRD. This guidance aims to understand the impacts different companies have on climate change; their mitigation and adaptation plans, particularly for reducing emissions to limit warming to 1.5°C; and any related risks and opportunities companies may face.
There are 9 specific requirements companies must report on:
E1-1. Transition Plan for Climate Change Mitigation:
Companies must report their climate change mitigation plan to show how their business is compatible with a 1.5°C warming limit. This involves reporting on:
- Greenhouse gas (GHG) emission reductions targets;
- Relevant decarbonisation levers with actions and investments;
- Assessed locked in emissions;
- How the transition plan aligns with their business strategy; and
- The resilience of their business model to climate change and net-zero transitions.
E1-2. Policies Related to Climate Change Mitigation and Adaptation:
Companies must describe any policies they have that address the impacts, risks and opportunities of climate change, or work towards its mitigation and adaptation. Companies must state which element they aim to address, e.g. renewable electricity or climate change mitigation.
E1-3. Actions and Resources in Relation Climate Change Policies:
Companies must report on what actions they have taken and plan to take in the future to mitigate and adapt to climate change, and which resources they have allocated, for example, specific financial amounts. This section should include the outcome of each action such as the GHG emissions reductions, both achieved or expected.
E1-4. Targets related to Climate Change Mitigation and Adaptation:
Companies must disclose what targets they have set in relation to climate change. This includes setting absolute and (if relevant) intensity- based GHG reduction targets for 2030 and 2050 covering Scopes 1, 2 and 3. These targets must then be updated every 5 years after 2030.
Companies must include with their targets:
- How they were set;
- Current base year and baseline emissions;
- Whether the targets are science based and compatible with limiting warming to 1.5°C; and
- Expected decarbonisation levers with associated quantitative contributions to emissions reductions targets.
E1-5. Energy Consumption and Mix:
Companies must disclose their total energy consumption as well as consumption broken into renewable and non-renewable energy, and different energy sources. Companies must also report on energy intensity (per net revenue) of any activities within high impact sectors.
E1-6. Gross Scopes 1, 2 and 3 and Total GHG Emissions:
Companies must report emissions by each Scope and as a gross total. For Scope 1, companies must also include the percentage of emissions under regulated emissions trading schemes. Companies must include market- and location-based reporting for Scope 2 emissions and intensity by net revenue.
E1-7. GHG removals and GHG mitigation projects financed through carbon credits:
Companies must disclose any carbon removals and storage in their own operations and carbon credit schemes they finance, and include the tCO 2 e removed. When a company has net-zero targets they must disclose how they plan to neutralise any residual emissions. If a company claims carbon neutrality, the company must show they are not relying on offsets and do have accompanying emissions reductions targets.
E1-8. Internal Carbon Pricing:
Companies must state if they have an internal carbon pricing system. If applicable, they must disclose:
- Type, scope (e.g. geographic/activity) and price;
- Percentage of emissions covered; and
- How the scheme impacts decision-making processes.
E1-9. Anticipated Financial Effects from Material Physical and Transition Risk and Potential Climate Related Opportunities:
Companies must report on the monetary amount and percentage of their assets and net revenue at risk of climate change impacts before adaptation or mitigation; proportion of assets and revenue addressed by adaptation and mitigation and any liabilities. Companies should also consider any business opportunities from mitigating or adapting to climate change such as low carbon services or reduced energy bills.
How NUS can help CSRD Reporting Requirements
NUS’ Energy and Sustainability Services (ESS) team have a range of experts specialising in creating transition plans for net zero. This includes Scope 1, 2 and 3 GHG emission assessments, setting emissions reduction targets and creating bespoke decarbonisation strategies. To see how NUS can support your company with CSRD and broader decarbonisation requirements, contact us online or email UKSustainability@nusconsulting.co.uk.
More: Energy Market Commentary, Energy Regulation, EU Corporate Sustainability Reporting Directive (CSRD)
