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 2 paragraph 48(h)

Key terms: ESRS 2 Disclosure Requirement SBM-3

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).

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 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.

Companies that become ‘large undertakings’ for the first time: do they benefit from the Phase-In Requirements?

ESRS 1 paragraph 137 and Appendix C: List of phased-in Disclosures Requirements

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.