Understanding ESRS 2 Minimum Disclosure Requirements for Policies

ESRS 2 General Disclosures provide a comprehensive framework for organizations to disclose their sustainability practices. This blog post delves into the minimum disclosure requirements regarding policies under ESRS 2, offering insights into how businesses can align with these standards.

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ESRS 2 General Disclosures set out the overarching requirements for sustainability reporting applicable across all sectors. These standards aim to enhance transparency and comparability of sustainability information disclosed by organizations, facilitating better decision-making by stakeholders. Specifically, ESRS 2 outlines the general disclosure requirements that organizations must meet, ensuring they provide a clear and comprehensive view of their sustainability practices.

Minimum Disclosure Requirements for Policies

Disclosure Content - Policies (DC-P)

Under ESRS 2, organizations are required to disclose policies they have adopted to manage material sustainability matters. This includes providing detailed information about the scope, objectives, and governance of these policies.

Key Requirements:

  • - Description of the Policy: Organizations must describe the key contents of the policy, including its general objectives and which material impacts, risks, or opportunities the policy addresses.
  • - Scope of the Policy: The disclosure should detail the scope of the policy in terms of activities, value chain, geographies, and, if relevant, affected stakeholder groups.
  • - Accountability: Information about the most senior level in the organization accountable for the implementation of the policy must be provided.
  • - References to Standards: If relevant, the policy should reference third-party standards or initiatives the organization commits to respecting through its implementation.
  • - Stakeholder Consideration: A description of how the interests of key stakeholders were considered in setting the policy should be included.
  • - Availability of the Policy: Organizations should disclose whether and how the policy is made available to potentially affected stakeholders and those who need to help implement it.

Disclosure Content - Actions (DC-A)

In addition to policy disclosure, ESRS 2 requires organizations to describe the actions taken to manage material sustainability matters. This includes outlining action plans and resources allocated to achieve policy objectives.

Key Requirements:

  • - List of Key Actions: Organizations must provide a list of key actions taken in the reporting year and those planned for the future, along with their expected outcomes.
  • - Scope of Actions: The scope of these actions in terms of activities, value chain, geographies, and affected stakeholder groups should be described.
  • - Time Horizons: Information about the time horizons under which the organization intends to complete each key action must be disclosed.
  • - Progress of Actions: Quantitative and qualitative information regarding the progress of actions disclosed in prior periods should be included.
  • - Financial Resources: If significant financial resources are allocated to the action plan, details about the type and amount of resources, including sustainable finance instruments, should be provided.

Integration of Sustainability into Governance (GOV-1 to GOV-5)

ESRS 2 emphasizes the importance of integrating sustainability into the governance framework of an organization. This includes:

  • - GOV-1: Role of administrative, management, and supervisory bodies in sustainability matters.
  • - GOV-2: Information provided to these bodies and how sustainability matters were addressed during the reporting period.
  • - GOV-3: Integration of sustainability-related performance in incentive schemes.
  • - GOV-4: Statement on sustainability due diligence.
  • - GOV-5: Risk management and internal controls over sustainability reporting.

Strategy and Materiality Assessment (SBM-1 to SBM-3, IRO-1 to IRO-2)

Organizations must disclose their market position, strategy, business model(s), and value chain as they relate to sustainability. This includes a thorough materiality assessment to identify and prioritize impacts, risks, and opportunities.

Metrics and Targets (DC-M to DC-T)

Finally, ESRS 2 requires organizations to disclose the metrics and targets related to their sustainability matters. This ensures that stakeholders can track the effectiveness of the organization's actions and progress toward their sustainability goals.

Conclusion

Adhering to the minimum disclosure requirements of ESRS 2 ensures that organizations provide comprehensive and transparent sustainability information. By clearly outlining their policies, actions, and governance related to sustainability, organizations can enhance their credibility and support stakeholders in making informed decisions. As sustainability continues to be a critical aspect of business strategy, aligning with ESRS 2 standards is not just a regulatory requirement but a strategic advantage.