Understanding the Sustainability Statement: The Heart of the Sustainability Reporting
The sustainability statement is the result of sustainability reporting. Sustainability reporting ensures that businesses are accountable for their environmental and societal impact. It allows companies to demonstrate their commitment to sustainable practices. The European Sustainability Reporting Standards (ESRS) provide a framework for this reporting and guide reporting across businesses, making it easier for stakeholders to understand and compare companies’ sustainability efforts.
The Role of the Sustainability Statement
The sustainability statement is the result of sustainability reporting. By law, companies must include their sustainability statements as an integrated or separate part of the annual management report in an electronic format and with digitally tagged information.
The sustainability statement must meet the EU CSRD and Taxonomy Regulation guidelines. It follows the ESRS to provide a detailed overview of a company’s sustainability efforts. Implementation Guides developed by The European Financial Reporting Advisory Group (EFRAG) are supporting guidelines for companies required to report As of June 2024, EFRAG has published the first three ESRS IG documents.
Unlike previous financial reporting, the sustainability statement covers the company’s operations and details about the value chain. This approach gives a more precise picture of the company’s environmental and societal impact.
Key Components of the Sustainability Statement
Writing the sustainability statement requires teamwork and competencies in environmental, social and governance issues as well as financing. ESRS Data collection and preparation should be systematically organised to ensure traceability and transparency in every detail over time. Companies need to be ready for assurance throughout the entire workflow.
The company must structure its sustainability statement into four parts:
- general information
- environmental information
- social information
- governance information
Reporting companies must integrate their EU-taxonomy report into their sustainability statement.The report must be included in the environmental section of the sustainability statement, as a clearly identifiable part.
General information, ESRS 2
General information provides a framework for companies to report on various aspects, including their general characteristics, business model and governance structure. It also includes guidelines on how to disclose information about compliance, strategy, and business model.
Most importantly, the General information should include the company’s double materiality assessment, which encompasses the impact of the company on society and the environment (impact materiality) and the impact society and the environment have on the company (financial materiality).
Environmental Information ESRS E1-E5
Companies that have deemed E1-E5 topics as material, must report environmental information, including mitigation strategies and actions for climate change, impact on pollution, water and marine resources, biodiversity and ecosystems, and efforts towards a circular economy. Environmental information covers, for instance, energy consumption, greenhouse gas emissions, water conservation, biodiversity protection, waste management, and recycling initiatives.
Social Information ESRS S1-S4
Companies must disclose, depending on the result of the double materiality assessment,their workforce management strategies, impact on supply chain and business relationships, societal contributions, and efforts to enhance societal well-being, as well as their impact on consumers and end-users.
Governance Information ESRS G1
Companies must disclose their governance structure, including administrative, management, and supervisory bodies. They must also share their corporate governance code or policy, nomination process, diversity policy, remuneration policy, risk management and internal control processes.
Qualitative Characteristics of Information
The information provided in the sustainability statement should possess the following qualitative characteristics:
- Relevance: The information should be significant and useful.
- Faithful representation: The information should be complete, neutral, and error-free.
- Comparability: The information should be presented so that it can be compared with similar information about other entities and with similar information about the same entity for another period or date.
- Verifiability: The information should be capable of being checked for accuracy and completeness.
- Understandability: The information should be clear and concise so that users can understand it.
Sustainability Statement in a Nutshell
Embracing sustainability is vital for corporations to showcase their dedication to sustainable practices and environmental responsibility. Though mandatory, the sustainability statement is a potent opportunity to convey a company’s commitment to sustainability while simultaneously moving to digitalised reporting format. The sustainability statement consists of four parts: general, environmental, social, and governance information. By adhering to legal requirements and showcasing passion for sustainability, companies can drive profits and play a pivotal role in shaping a greener and more robust economy.
Power of digitalisation for compliant CSRD Reporting
CSRD reporting mandates a digital approach from the beginning, rendering manual efforts obsolete. Compliance with CSRD will require electronically tagged information and submission to the ESAP via the National Contact Point. ESAP is set to be operational in July 2027. Achieving CSRD requirements without specialised software is impossible. Enter Ecobio Manager: Your solution for seamless electronic tagging and ESAP delivery.
Ecobio Manager is a thorough solution for CSRD sustainability reporting. It encompasses double materiality assessment, taxonomy classification, data collection, sustainability statement preparation, assurance, and streamlined delivery to publication. Designed by sustainability experts, Ecobio Manager ensures compliance with CSRD and ESRS standards, streamlining the reporting process.
