ID 37 – Positive impact only

Question asked
Can an impact be material if it is material from a positive impact perspective only?
EFRAG considers that the question should be reworded in the following way to be clearer: Can a sustainability matter be material from a positive impact perspective only?
ESRS reference
ESRS 1 Chapter 3.4; ESRS 1 paragraph 43 and 46
Key terms: Materiality, only positive impact is material
Background as provided by the submitter:
‘It is essential that when I have evaluated and qualitatively assessed the actual/potential negative and positive effects on human beings and the environment, I have concluded that the topic is irrelevant in terms of actual negative impacts and also irrelevant in terms of actual positive impacts. However, it is critical from the perspective of potential positive impacts. Is my topic then considered significant?’
ESRS 1 paragraph 43: ‘A sustainability matter is material from an impact perspective when it pertains to the undertaking’s material actual or potential, positive or negative impacts on people or the environment over the short-, medium- or long-term.’ ESRS 1 paragraph 46 states the criteria on which positive impacts are based.
Yes, a sustainability matter can be material from a positive impact perspective only.
Based on the definition in ESRS 1 paragraph 43, a sustainability matter is material when it pertains:
  1. to material actual or potential impacts or
  2. to material positive or negative impacts.
Positive impacts can be either actual or potential.
ESRS 1 Chapter 3.4 defines the criteria used to assess materiality. For actual positive impacts, the criteria are scale and scope. In addition, for potential positive impacts likelihood is considered.
ESRS 1 paragraph 45 describes the relationship between negative impacts and the due diligence process defined in international instruments (i.e., the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises). In particular, due diligence focuses on negative or adverse impacts on people and the environment, but this does not mean that impact materiality is limited to negative impacts under ESRS reporting.

ID 67 – SBM-3 vocabulary / grammar used

Question asked
Can you provide a more detailed explanation on how the expression ‘as opposed to’ is to be interpreted in the context of the Disclosure Requirement SBM-3 of ESRS 2?
ESRS Reference
ESRS 2 paragraph 48(h)
According to ESRS 2 paragraph 48(h), the undertaking shall disclose a specification of those impacts, risks and opportunities that are covered by ESRS Disclosure Requirements as opposed to those covered by the undertaking using additional entity-specific disclosures.
ESRS 1 Chapter 1.1 describes the three categories of ESRS standards (i.e., cross-cutting, topical and sector-specific). ESRS 1 paragraph 11 explains the entity-specific disclosures that complement the disclosures laid out in these three categories of ESRS standards.
In addition, ESRS 1 AR1 to AR5 provide further guidance on the requirements that entity-specific disclosures shall fulfil.
ESRS 2 paragraph 48(h) requires undertakings to separately distinguish those material impacts, risks and opportunities whose disclosures follow the ESRS standards (i.e., standardised disclosures) from those that have been specifically designed by the undertaking according to the provision in ESRS 1 paragraph 11 and its related Application Requirements (i.e., entity-specific disclosures).

ID 171 and ID 358 – Administrative, management and supervisory bodies

Question asked [ID 171]
Please clarify with examples what is meant by ‘administrative, management and supervisory bodies’ as a collective versus ‘management’ and ‘management-level position’ versus ‘senior executive management’.
This explanation also answers question ID 358: Could you please specify clearly what is to be included in the administrative, management and supervisory bodies? By this, I mean, it refers to only a highest body (Board of Directors) or it refers to another body or other bodies?
ESRS Reference
ESRS 2 paragraph 22(a) and (d)
Annex II of the ESRS defines ‘administrative, management and supervisory bodies’ as follows:
‘The governance bodies with the highest decision-making authority in the undertaking include its committees. If in the governance structure there are no members of the administrative, management or supervisory bodies of the undertaking, the CEO and, if such function exists, the deputy CEO should be included. In some jurisdictions, governance systems consist of two tiers, where supervision and management are separated. In such cases, both tiers are included under the definition of administrative, management and supervisory bodies.’
GRI is also a useful source of complementary guidance: GRI uses ‘highest governance body’ as well in reference to the ‘administrative, management and supervisory bodies’. GRI 102 requires jurisdictions with two tiers of governance bodies to consider both as ‘highest governance bodies’.
ESRS do not define the term ‘senior executive management’. However, GRI explicitly defines ‘senior executive management’ in GRI 102 as top-ranking members of the management of an organisation including a Chief Executive Officer (CEO) and individuals reporting directly to the CEO or to the highest governance body. Each organisation defines which members of its management teams are senior executives.
Undertakings might report the identity of their ‘management body’ and ‘governance body’ as part of the corporate governance statement as they are key actors in the national corporate governance codes. ESRS 1 paragraph 119 allows an undertaking to incorporate in the sustainability statement information prescribed by a Disclosure Requirement of ESRS, including a specific datapoint prescribed by a Disclosure Requirement by reference to the corporate governance statement (if not part of the management report), provided that the conditions in paragraph 120 are met.
As defined in Annex II of ESRS, administrative, management and supervisory bodies as a collective have the highest decision-making authority. The governance bodies which are covered under this definition can vary from one jurisdiction to another. This is because some jurisdictions have different bodies for management and supervision, respectively, whereas others have one unique body carrying out both roles.
‘Senior executive management’ must be understood as a higher position than a ‘management- level position’.
In the description of their governance bodies and management, undertakings need to ensure consistency between the sustainability statement and the corporate governance statement as well as other corporate communications in general.

ID 204 – Phase-in for first-time large undertakings

Question asked
Companies that become ‘large undertakings’ for the first time: do they benefit from the Phase-In Requirements?
[Note by the EFRAG Secretariat: the only question by the submitter marked as ‘1: explanation’ is answered here. The submitter also had a second question: ‘Are the ESRS requirements applicable from the year they exceed the thresholds?’ which is considered to fall outside the scope of the Q&A platform and will be forwarded to the European Commission.]
ESRS reference
Key terms: Phased-In Requirements
ESRS 1 section 10.4 paragraph 137 states: ‘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.’
In setting phase-ins, ESRS 1 Appendix C uses the wording ‘. . . for the first year (for the first two years/for the first three years) of preparation of its sustainability statement . . .’
As stated in ESRS 1 Appendix C, the phase-in requirements apply to the first year, to the first two years or to the first three years ‘of preparation of its sustainability report’. All undertakings meeting the criteria of the Accounting Directive (Directive 2013/34/EU) Article 3 of large undertakings (groups) may benefit from the phase-in requirements listed in ESRS 1 Appendix 1, including undertakings that become ‘large undertakings’ for the first time.
Expand Expand

Welcome to Viewpoint, the new platform that replaces Inform. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory.

signin option menu option suggested option contentmouse option displaycontent option contentpage option relatedlink option prevandafter option trending option searchicon option search option feedback option end slide