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. Lucy Gaffney explains more…

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 disclose 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 utilisation 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 Insight.