Tag Archive for: CSRD

Materiality is the quality of being relevant or significant, and in terms of business and finance, materiality applies to all items that must be recorded or reported in detail in a business’s financial statements as reasonably likely to impact investors’ decision-making. 

Double materiality: For corporate sustainability reporting, the concept of double materiality applies – it goes beyond that which affects the company and its investors, extending to information on how the firm is impacting society and the environment. 

The EU Corporate Sustainability Reporting Directive (CSRD) mandates a double materiality assessment for around 50,000 reporting companies from 2024 onwards. 

The European Sustainability Reporting Standards (ESRS) explains that a double materiality assessment takes two perspectives, sometimes referred to as an ‘outside in’ / ‘inside out’ approach: 

              (1) an impact perspective “when it pertains to the [entity’s] material actual or potential, positive or negative impacts on people or the environment over the short-, medium- and long-term”; and 

              (2) a financial perspective “if it triggers or could reasonably be expected to trigger material financial effects on the [entity].” 

A double materiality assessment must cover both a business’ own operations as well as upstream and downstream value chain. It must consider the topics and subtopics covered in the 10 ESRS topical standards. These include climate change, pollution, water, biodiversity, circular economy and topics relating to governance and the workforce. 

Detailed reporting on each is required only if the company decides, following a double materiality assessment involving all stakeholders, that it is ‘material’ or relevant under the reporting rules. Where a company determines a topic to not be material, it must explain its rationale in detail. It is still necessary to have a long-term strategy in place to address your organisation’s future impacts and dependencies on nature (and future risks resulting from) biodiversity loss and climate change. 

Read more: https://www.cisl.cam.ac.uk/news/blog/double-materiality-corporate-sustainability-reporting-encompass-societal-and-environmental-impacts 

https://www.charteredaccountants.ie/Accountancy-Ireland/Articles2/Technical/Latest-News/Article-item/the-corporate-sustainability-reporting-directive-getting-to-grips-with-double-materiality 

 

 

 

 

2023 was a big year for biodiversity and another busy year for Business For Biodiversity Ireland – a look back at some of the major moves transforming the landscape for nature at a global and local level…

EU Nature Restoration Law: After tense negotations and votes by MEPs, a landmark deal was finally reached on the Nature Restoration Law by the EU Parliament, European Commissions and EU Council. The law means that every EU country must have restoration measures in place covering 20% of EU land and sea areas by 2030. It will set legally binding targets and requirements for rewetting peatlands (30%, expanding to 40% by 2050) and for bringing ecosystems back into good condition across multiple habitats. In the build up, BFBI backed the Corporate Leaders Group & Business For Nature letter and online campaigns in support of the NRL, while platform lead Lucy Gaffney appeared on the Newstalk Breakfast Business show with Joe Lynam to discuss the importance of the law.

Citizens Assembly on Biodiversity Loss: Lucy Gaffney addressed Ireland’s Citizens’ Assembly – the first such national citizens’ assembly anywhere in the world – which wrapped in January 2023 and in June, launched 150 recommendations that have the potential to dramatically transform Ireland’s relationship with the natural environment. The recommendations have since been reviewed and accepted by the government. The Joint Committee on Environment and Climate Action recommends advancing a referendum on protecting biodiversity, that would see Ireland become the first in the EU to bestow nature with rights.

Corporate Sustainability Reporting Directive (CSRD) – The directive took effect on January 3, 2023, with 18 months for EU countries to integrate it into law. The European Sustainability Reporting Standards (ESRS) E4 standard addresses corporate sustainability relating to biodiversity and ecosystems. The aim is to help businesses to understand how they affect nature, positively and negatively, and how to interpret the results of corporate biodiversity action.

Science Based Targets for Nature: Over 80 global NGOs and organisations came together and released the first science-based targets for nature, enabling companies to start taking ambitious and measurable action on both climate and nature.

The High Seas Treaty: After decades of negotiations, countries finally agreed to a treaty to protect the world’s oceans outside national boundaries. It provides a framework for setting up marine protected areas, a crucial step to fulfil aims to protect 30% of the world’s oceans by 2030.

Regulation on Deforestation-free products: The European Union is stopping imports of commodities and products linked to deforestation. Under a new regulation that entered into force in June 2023, importers of commodities such as soy, beef, palm oil, wood, cocoa, coffee and rubber “must be able to prove that the products do not come from recently deforested land or have contributed to forest degradation”. This includes products such as chocolate and furniture made from those commodities.

Budget 2024 nature boost: The Irish government announced a new Infrastructure, Climate and Nature Fund with an unprecedented €3.15billion pledged for nature that will use windfall corporate tax profits to fund commitments to the environment up to 2030.

Bioeconomy Action Plan: Ireland’s first Bioeconomy Action Plan for 2023-2025 was jointly issued by the Department of Agriculture, Food & the Marine and the Department of the Environment, Climate & Communications. It includes 33 actions to accelerate support for the development of Ireland’s bioeconomy to bring sustainable scientific practices, technologies and bio-based innovation and solutions into use on farms and by bio-based industries.

COP28: At the global summit in the United Arab Emirates, world leaders finally agreed to launch the long-awaited fund for loss and damage caused by climate change – and the final text, agreed by almost 200 countries, for the first time includes a goal to move away from fossil fuels.

BFBI Community of Practice (CoP): We convened our community of practice in January 2023. This small, multi-sector CoP, comprising a mixture of Irish semi-state, private and academic organisations, met regularly throughout the year to share feedback on testing frameworks to assess their biodiversity impacts and the challenges of transitioning to a nature-positive mode of operation. We’ll be expanding this work with more sector specialisation in 2024, more details to come.

 

Man in suit with grey hair chats to blonde woman in beige coat in hallway with red carpet and beige walls

Minister of State Malcolm Noonan & BFBI’s Lucy Gaffney chat at SETU policy event

Business For Biodiversity Ireland key presentations & events of 2023

BFBI’s platform lead Lucy Gaffney spoke at several high-profile in-person conferences, as well as webinars and online discussions.

These included the business and biodiversity breakfast at Green Week, the CIEEM Irish Conference on Nature Positive, major annual conference Environment Ireland 2023 and she also addressed the Business Post’s ESG Summit.

Lucy also gave an overview of natural capital concepts for Chartered Accountants Ireland, joined a panel for Sustainability Week and took part in a Policy Forum for Ireland discussion on next steps for climate policy & action. She joined in a discussion on Addressing Biodiversity Loss with Sustainable Finance Solutions, alongside Minister for Heritage Malcolm Noonan, pictured with Lucy above, at an Irish Research Council-funded SouthEast Technical University Policy Workshop.

Other notable events included the SETAC Europe Conference, a biodiversity literacy Lunch & Learn talk for Irish broadcasters with the Broadcasting Sustainability Network, Climate Finance Week and a DCU Centre for Climate & Society panel discussion. You can watch back the stream, moderated by Dr Diarmuid Torney, DCU School of Law and Government and Co-Director of the Centre for Climate and Society, HERE.

Our team also attended the EU Business & Nature Summit in Milan in October – you can read their key takeaways HERE.

Coming soon – a look ahead at biodiversity trends for 2024 and beyond.

Sign up to our newsletter updates at the bottom of the BFBI homepage HERE.

In the Corporate Sustainability Reporting Directive (CSRD), the European Sustainability Reporting Standards (ESRS) E4 standard specifically addresses corporate sustainability relating to biodiversity and ecosystems.

The aim of ESRS E4 is to help businesses understand how they affect nature, positively and negatively, actually and potentially and how to interpret the results of corporate biodiversity action.

Key questions for your business

  • How does the business contribute to achieving the objectives of the European Green Deal, the Sustainable Development Goals (SDGs) and the Global Biodiversity Framework (GBF)?
  • Can the business evolve its operations so that it no longer contributes to ecological damage?
  • Does the business understand the operational risks posed by deteriorating ecosystems and the potential opportunities that could be associated with the protection and conservation of nature?
  • How is the business managing those risks?

ESRS E4 specifies the information that must be disclosed about biodiversity and ecosystems across all sectors. Specific sectoral disclosure will be defined by ESRS SEC 1 Sector Classification and the CSRD requirements are expected to be in place for financial years beginning on or after 1 January 2024 by large publicly traded entities that have more than 500 employees at the same time (i.e. entities already subject to the Non-Financial Reporting Directive) and by 2025 for other large companies. Small and medium-sized enterprises (SMEs) will also be subject to a reporting obligation starting in 2027.

Disclosure Requirements

  1. ESRS E4 requires that a business discloses its strategic plan to ensure that their business model will become compatible with the transition to achieve no net loss of biodiversity by 2030, net gain from 2030 and full recovery by 2050. This disclosure will need to include plans to address nature loss within the value chain as well as confirmation that the strategy has been approved by the relevant management boards. 
  2. Each business will be required to disclose all policies relating to biodiversity and ecosystems. This is to ensure that businesses actually have policies to protect nature and how these policies are monitored and managed.
  3. Businesses will have to disclose plans and methodology that will support their biodiversity policies.
  4. A disclosure on the social consequences of nature loss will also be required. This includes, for example, information related to fair and equitable benefit sharing arising from the utilization of genetic resources and traditional knowledge.
  5. Disclosures will have to include information on how business policies are connected and aligned with global goals and agreements, such as the SDGs, the GBF and the European Green Deal.
  6. Targets will form part of the disclosure mandate. Businesses will be required to disclose the biodiversity and ecosystem-related targets that it has adopted, including timelines, milestones, respect to ecological thresholds and planetary boundaries. In addition, these targets must be supported by the business management board and in alignment with and informed by guidelines set out by the Convention on Biological Diversity (CBD) and Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES).
  7. Businesses must be transparent and disclose all biodiversity actions, action plans and allocation of resources that will enable the organisation to meet its policy objectives. 
  8. The standard requires the disclosure of pressure metrics. Does the business understand how its activities put additional pressure on the drivers of biodiversity loss? These include, but are not limited to pollution, invasive species, land use, climate change and exploitation of natural resources.
  9. Businesses must also disclose impact metrics related to geography or raw materials. This may include impacts on species and their extinction risk or impacts on ecosystems, reporting on extent, condition and function.
  10. Businesses will be required to disclose response metrics to understand how the business has tried to minimise, rehabilitate or restore nature in areas where it has had a significant negative impact.
  11. There is an optional disclosure on biodiversity-friendly consumption and production metrics which will provide insights into its consumption and production which may be considered biodiversity-friendly.
  12. The Taxonomy Regulation requires businesses to disclose information on the proportion of turnover, capital expenditure and operating expenditure that qualify as environmentally sustainable.
  13. Another voluntary disclosure is around biodiversity offsets, where the business may disclose actions, development and financing of biodiversity projects. 
  14. A disclosure on potential financial effects of nature-related risks and opportunities will be required.

This is an evolving space and many businesses will need to implement this as a first step. If a business cannot make these disclosures because strategies have not been developed or adopted, they will need to provide timeframes around when an appropriate strategy will be developed and adopted.

One of the chief aims of BFBI is to guide our businesses through upcoming policy changes around nature-related disclosures.

This article was also published in investESG.