EFRAG SRB meeting

23 November 2023
Agenda paper 02-04

Implementation guidance on value chain (VCIG)

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 [Draft] EFRAG IG 2: Value chain implementation guidance

Disclaimer
This implementation guidance is non-authoritative and accompanies the European
Sustainability Reporting Standards, as stipulated in Articles 19a or 29a of Directive
2013/34/EU (the Accounting Directive) (ESRS) but does not form part of it. This means that
if anything in this guidance appears to contradict any requirement or explanation in ESRS,
ESRS takes precedence. This implementation guidance is issued following EFRAG’s due
process for such non-authoritative documents and under the sole responsibility of EFRAG.
EFRAG assumes no responsibility or liability whatsoever for the content or any
consequences or damages direct, indirect or incidental arising from following the advice or
guidance contained in this document. Users of this document are advised to exercise their
own judgment in applying ESRS. Information contained in this document should not be
substituted for the services of an appropriately qualified professional.
This implementation guidance has been developed for use by large listed and unlisted
companies that are subject to ESRS. It is therefore not intended for use by non-listed small
and medium-sized enterprises (SMEs), which may use the future Voluntary SME standard.
This implementation guidance relates to the sector-agnostic ESRS as adopted by the
European Commission on 31 July 2023. Sector-specific standards may add sector
specifications to be followed by specific sectors.

How to provide feedback on this document

EFRAG welcomes public feedback on this document, by 2 February 2024 by completing
the survey available here. To see a PDF of the survey, click here.

About EFRAG
EFRAG’s mission is to serve the European public interest in both financial and sustainability
reporting by developing and promoting European views in the field of corporate reporting.
EFRAG builds on and contributes to the progress in corporate reporting. In its sustainability
reporting activities, EFRAG provides technical advice to the European Commission in the
form of draft European Sustainability Reporting Standards (ESRS) elaborated under a robust
due process and supports the effective implementation of ESRS. EFRAG seeks input from all
stakeholders and obtains evidence about specific European circumstances throughout the
standard setting process. Its legitimacy is built on excellence, transparency, governance,
due process, public accountability and thought leadership. This enables EFRAG to speak
convincingly, clearly, and consistently, and be recognised as the European voice in
corporate reporting and a contributor to global progress in corporate reporting.

EFRAG is funded by the European Union through the Single Market Programme in which
the EEA-EFTA countries (Norway, Iceland and Liechtenstein), as well as Kosovo participate.
Any views and opinions expressed are however those of the author(s) only and do not
necessarily reflect those of the European Union, the European Commission or of countries
that participate in the Single Market Programme. Neither the European Union, the European
Commission nor countries participating in the Single market Programme can be held
responsible for them.

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 [Draft] EFRAG IG 2: Value chain implementation guidance

Table of contents
Summary in 7 key points ................................................................................................. 4
1. Introduction ................................................................................................................ 5
Structure of the guidance ........................................................................................................... 5
Cross references to the MAIG.................................................................................................... 5
Acronyms used ............................................................................................................................ 5
2. Navigating value chain under CSRD and ESRS ........................................................... 6
General requirements................................................................................................................. 6
Detailed requirements ................................................................................................................ 7
Value chain map .......................................................................................................................... 7
2.1 What is the VC? ......................................................................................................7
Should IROs linked to all actors in the VC be considered? .................................................... 9
How does leverage or influence over the VC impact reporting? .......................................... 9
2.2 Why does VC matter?.............................................................................................9
2.3 From own operations to value chain ................................................................... 10
2.4 Which IROs in the VC to disclose? ....................................................................... 15
2.5 How do the transitional requirements work?...................................................... 15
2.6 What is the LSME cap and does it impact my disclosures? .................................. 16
3. Frequently asked questions ...................................................................................... 17
FAQ 1: Where does the VC begin and end? .............................................................. 17
FAQ 2: Are financial assets (loans, equity and debt investments) considered business
relationships that trigger VC information?................................................................ 18
FAQ 3: How should the MA process be organised to properly capture material IROs
in the VC? .................................................................................................................. 18
1. Basic principles...................................................................................................................... 18
2. Materiality assessment steps ............................................................................................... 19
FAQ 4: How should information about the VC be disclosed in the context of the
materiality assessment? ............................................................................................ 21
BP-1 – General basis for preparation of the sustainability statement.................................. 21
SBM-1 – Market position, strategy, business model(s) and VC – ‘VC mapping’. ................ 21
IRO-1 – VC considerations in MA ............................................................................................. 21
IRO-1 - MA methods and assumptions ................................................................................... 22
SBM-3 - Disclosing the outcome of the MA ........................................................................... 22
FAQ 5: Should VC information be included for Policies, Actions or Targets (PATs)
Disclosure Requirements? ........................................................................................ 23
FAQ 6: Should VC information be included for Metrics Disclosure Requirements? .. 24
FAQ 7: How to assess and quantify the impacts of the VC resulting from business
relationships? ........................................................................................................... 25
FAQ 8: What is ‘reasonable effort’ to collect VC data?.............................................. 26
FAQ 9: How can estimates be developed when primary data cannot be collected
from VC counterparties? ........................................................................................... 28
FAQ 10: Is a case of bribery not involving an employee relevant for the reporting
entity? ....................................................................................................................... 29
4. VC map ...................................................................................................................... 30
VC coverage map of Set 1 ESRS ................................................................................ 30
Appendix A: Names of disclosure requirements ........................................................... 32

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 [Draft] EFRAG IG 2: Value chain implementation guidance

Summary in 7 key points

NB: this implementation guidance (IG) covers the upstream and downstream value chain (VC)
of the undertaking and not its own operations. This guidance should be read together with the
MAIG.
1. The undertaking’s sustainability statement shall include information about all material
impacts, risks and opportunities (IROs) including those that arise or may arise in the
context of its business relationships in the upstream and downstream value chain.
Business relationships are not limited to direct contractual relationships.
2. The undertaking is not required to include value chain (VC) information in all
disclosures, but only when it is connected with material IROs beyond its own
operations, due to its business relationships.
3. Therefore, the materiality assessment shall cover the identification of material IROs in
the VC, with a focus on where (geographies, activities/sectors, operations, suppliers,
customers, other relationships, etc.) in the VC they are likely to materialise. Key
disclosures about the undertaking’s materiality assessment are SBM-1, SBM-3 and IRO-
1 (ESRS 2). They are not limited to but should cover the assessment of IROs in the VC.
4. Topical standards require disclosures about policies, targets and actions (PATs) for
material matters. In particular, they require either the disclosure of such PATs or a
statement about the absence of them. When describing the PATs for material matters,
the disclosure shall include information about how these address material upstream
and/or downstream VC IROs.
5. Topical standards require to include VC data only for a few metrics. However, when the
undertaking considers that a material IRO in the VC is not sufficiently covered by the
requirements in ESRS, it shall include additional entity-specific disclosures, including
metrics when such information is necessary in order to enable users to understand the
undertaking’s material impacts, risks or opportunities.
6. When the undertaking cannot collect primary VC information for the materiality
assessment or in order to prepare its disclosures of material IROs after making
reasonable efforts, it shall estimate the missing information, using all reasonable and
supportable information available without undue cost and effort, including proxies and
sector data and other information from indirect sources. The undertaking shall describe
in its basis for preparation the metrics using value chain estimation and the resulting
level of accuracy.
7. The inclusion of VC information in the sustainability statement does not affect the
undertaking’s reporting boundary, which correspond to the entities included in the
perimeter of its consolidated financial statements. The inclusion of VC information is
the extent to which the sustainability statement covers the relationships that all the
undertakings in the consolidation perimeter have with their respective VC
counterparts, including beyond the first tier. Associates and other investees which are
not consolidated in the financial statements are treated as the other business
relationships, i.e., as actors in the value chain when this is the case. Also refer to chapter
2.3 below on operational control which is relevant for ESRS E1 Climate change.

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 [Draft] EFRAG IG 2: Value chain implementation guidance

1. Introduction
8. The objective of this guidance is to support the implementation activities of preparers
and others using or analysing ESRS reports, in this case specifically on the value chain
information in accordance with the requirements of Articles 19a or 29a of the Directive
2013/34/EU (referred to as the “Accounting Directive”) as amended following the
Corporate Sustainability Reporting Directive (referred to as “the CSRD”).
9. The content of this document has been developed on the basis of the July 2023
delegated act.
10. In its implementation support function, EFRAG cannot develop concepts and reporting
requirements that go beyond the content of the July 2023 delegated act or interpret
Union law. The purpose of the implementation support material is to illustrate how the
provisions of the delegated act may be implemented without introducing new
provisions. New provisions can only result from future standard setting activities (e.g.
future amendments to draft ESRS), if and when applicable in accordance with the
EFRAG due process.
11. As an illustration, when the implementation support documents point to a specific
approach or methodology that is not detailed in the delegated act, this has to be
framed as one of the possible implementation approaches without excluding other
possibilities.

Structure of the guidance

12. The document is organised into the following chapters.
(a) The next chapter covers how to navigate VC requirements in ESRS which is the basis
for the rest of the document.
(b) The following chapter covers how an undertaking may implement VC under ESRS
by using frequently asked questions with the aim of providing practical guidance.
(c) The last chapter includes the ‘upstream and downstream VC map’ that explains the
coverage of the upstream and downstream VC as required by ESRS (excluding
considerations of entity-specific disclosures and SFDR indicators).

Cross references to the MAIG

13. To avoid duplication and reduce the length of this document, there is significant
reference to the Materiality Assessment Implementation Guidance (MAIG) developed
by EFRAG. For example, the due diligence aspects related to the materiality
assessment (and VC aspects) are covered in that guidance rather than here.
14. Please note that references to the MAIG are done in this colour, whereas references in
green refer to this document.

Acronyms used
15. Acronyms used in this document are:
(a) CSRD – Corporate Sustainability Reporting Directive;
(b) Delegated act – Commission Delegated Regulation supplementing Directive
2013/34/EU as regards sustainability reporting standards;
(c) DR – disclosure requirement

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(d) ESRS – European Sustainability Reporting

Standards; Annexes to the delegated act:

(e) GHG – greenhouse gases or the GHG Annex 1: ESRS including appendices
protocol; Annex 2: Acronyms and glossary of
(f) GRI – Global Reporting Initiative; terms

(g) IROs – impacts, risks and opportunities;

(h) ISSB – International Sustainability Standards Board;
(i) LSME – ESRS for Listed Small Medium Enterprises (SMEs);
(j) PAT – policies, actions and targets;
(k) MA – materiality assessment;
(l) MAIG – the Materiality Assessment Implementation Guidance; and
(m) VC – value chain.

2. Navigating value chain under CSRD and ESRS

16. CSRD art 19(a)(3) and 29(a)(3) require that reported information relates to an
undertaking’s own operations and its upstream and downstream VC, including its
products and services, its business relationships and its supply chain.
17. ESRS have been developed according to this legal requirement. CSRD does not
provide any further definition or guidance about VC. However, with reference to
impacts CSRD refers to international instruments of sustainability due diligence which
specify how the undertakings are expected to identify, address and report on impacts
across their VC.
18. The definitions of ‘value chain’, ‘actors in the value chain’ as well as ‘business
relationships’ are defined in Annex 2 of the July 2023 delegated act.
19. Not all the Disclosure Requirements (DRs) and datapoints in sector agnostic ESRS
require the inclusion of information about the undertaking’s upstream and downstream
VC. In many cases the undertaking is expected to focus on its own operations.

General requirements
20. The general requirements relating to all disclosures on VC can be found in ESRS 1
General requirements:
(a) The general requirements for reporting on the VC are in chapter 5;
(b) Application Requirements AR 17 set out guidance on ‘Estimation using sector
averages and proxies’; and
(c) Lastly, but importantly, ESRS 1 contains specific transitional provisions with respect
to VC in chapter 10.2.
(d) ESRS 1 requires the inclusion of material VC information when this is necessary to
allow users to understand the undertaking’s material IROs and to produce
information that meets the qualitative characteristics of information set for in
Appendix C of ESRS 1 (ESRS 1 paragraph 65). This is a principles-based approach
that works on top of the specific datapoints in ESRS that require to include specific
VC information. This means that where necessary (i.e. reflecting the outcome of the
materiality assessment), the undertaking shall cover VC.

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Detailed requirements
21. Other detailed requirements about value chain can be found in ESRS as follows:
(a) ESRS requires disclosures concerning the process and outcomes of the materiality
assessment are covered in ESRS 2 General disclosures (IRO-1 and SBM-3),
accompanied by SBM-1. See below in FAQ 4 How should information about the VC
be disclosed in the context of the MA as well as rows 1 to 3 of the VC coverage map
of Set 1 ESRS. For details about the materiality assessment process, please refer to
the MAIG and for the related VC aspects please see FAQ 3 How should the MA
process be organised to properly capture material IROs in the VC below. Please also
refer to MAIG FAQ 10 Should the assessment of IROs rely on quantitative
information?
(b) All the topical standards require undertakings to
disclose their policies, actions and targets for Alignment with ISSB and GRI
material IROs; to the extent that such policies, The definitions of value chain
actions and targets address material IROs in the under ISSB and GRI frameworks
VC, this will be reflected in the disclosures. The are aligned with ESRS.
minimum disclosure requirements with respect
to policies, actions and targets require information on scope such as whether it
relates to the VC per ESRS 2 paragraphs 65(b), 68(b), 80(c). (see FAQ 5 Should VC
information be included in PAT disclosures?). Within the disclosures about policies,
actions and targets, the Social topical standards ESRS S2 Workers in the value chain,
ESRS S3 Affected communities and ESRS S4 Consumers and end-users provide a
framework for reporting on material IROs related to these groups of people in the
VC and their management. As a reminder, the undertaking can comply by disclosing
that it has not adopted policies, actions and targets with reference to the relevant
material sustainability matter and provide reasons for this. It may also report a
timeframe in which it aims to adopt them (ESRS 2 paragraphs 62 and 72). Please
refer to rows 4 and 5 of the VC coverage map of Set 1 ESRS.
(c) There are only few sector-agnostic metrics in topical ESRS that require VC
information (see FAQ 6 Should VC information be included in metric DRs?). ESRS S2
to S4 for instance do not include metrics per se. The other metrics do not refer to
the value chain. However, this includes some information about procured materials,
please refer to rows 6 to 8 of the VC coverage map of Set 1 ESRS.
(d) Finally, when an undertaking concludes that a material IRO is not sufficiently covered
by an ESRS, it shall provide additional disclosures to enable users to understand its
IROs. (ESRS 1 paragraph 11 and AR 1 to 5). This may include information, including
when appropriate metrics, about a material IRO in the VC.

Value chain map

22. Chapter 4 of this document presents the VC map which illustrates the type of coverage
of VC information that is required by each specific Disclosure Requirement in sector
agnostic ESRS. This also includes which metrics require inclusion of VC data in the
actual calculation.

2.1 What is the VC?

23. While the focus of this Implementation Guidance is on upstream and downstream VC,
the definition of Value chain in Annex 2 of the delegated act is broader than the
upstream and downstream VC, as it also includes own operations. VC is defined as the

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full range of activities, resources and

What is the difference between relationships related to the undertaking’s
value chain and supply chain? business model and the external environment in
which it operates. A value chain encompasses
In short, the VC includes the supply
the activities, resources and relationships the
chain. The supply chain is the actors in
the VC upstream from the reporting
undertaking uses and relies on to create its
entity. However, VC also includes
products or services from conception to delivery,
downstream entities along with the consumption and end-of- life. Relevant activities,
supply chain. resources and relationships include:
(a) those in the undertaking’s own operations,
The supply chain provides products
such as human resources;
including raw material or components
or services that are used in the (b) those along its supply, marketing and
development of the undertaking’s distribution channels, such as materials and
products or services. Depending on service sourcing and product and service sale
the position in the VC, an undertaking’s and delivery; and
supply chain can be part of the
(c) the financing, geographical, geopolitical
downstream VC of another
and regulatory environments in which the
undertaking.
undertaking operates.
In some industries, upstream or
Value chain includes actors upstream and
downstream refers to specific points in
downstream from the undertaking. Actors
the chain rather than with reference to
upstream from the undertaking (e.g., suppliers
the reporting undertaking’s position in
provide products or services that are used in the
the chain.
development of the undertaking’s products or
However, there are other entities and services). Entities downstream from the
individuals that are connected to the undertaking (e.g., distributors, customers)
undertaking’s operations, products receive products or services from the
and services without being "suppliers", undertaking.
e.g., local police protecting the
24. ESRS use the term “value chain” in the
undertaking’s assets, as they may cause
singular, although it is recognised that
an impact by e.g., using excessive force
undertakings may have multiple value chains.
on people trespassing. In this case,
there is no business relationship, but 25. According to this definition, the VC issues
there is a value chain impact. It may addressed in this implementation guidance
meet the materiality threshold if it is include both upstream and downstream actors
considered severe enough. and their activities. Actors or undertakings
upstream from the reporting undertaking (e.g.,
suppliers) provide products or services that are used in the development of the
undertaking’s own products or services. Actors downstream from the reporting
undertaking (e.g., distributors, customers, waste management) receive, use products
or services of the reporting undertaking or waste stream by the customers or end-users.
26. Annex 2 defines business relationships as ‘[t]he relationships the undertaking has with
business partners, entities in its value chain, and any other non-State or State entity
directly linked to its business operations, products or services. Business relationships are
not limited to direct contractual relationships. They include indirect business
relationships in the undertaking’s value chain beyond the first tier, and shareholding
positions in joint ventures or investments.’
27. Setting out the VC activities may help identifying the VC actors.

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Should IROs linked to all actors in the VC be considered?

28. ESRS does not require information on each and every actor in the VC, but rather the
inclusion of material VC information, i.e., when material IROs arise in the VC (ESRS 1
paragraph 64). When assessing material IROs, all relevant actors (both from direct and
indirect relationships) are to be considered. However, the assessment should focus on
relationships that are likely to be associated with material IROs, for example
relationships with:
(a) those actors that are associated with ‘hot spots’ that expose to the likelihood of
actual and potential impacts (therefore generating impacts on people and/or
environment, which can in turn be sources of risks and opportunities); or
(b) those actors with respect to which the business model of the undertaking shows key
dependencies in terms of products or services (therefore generating risks and
opportunities for the undertaking).

How does leverage or influence over the VC impact reporting?

29. In some cases, an undertaking may have leverage or be able to exert influence over
actors in its VC. Examples include where the undertaking is a large supplier or customer
and so exert influence on the business relationships to manage its impacts.
30. In other cases, its ability to obtain the necessary VC information as well as its capacity
to contribute to or influence the management of IROs arising in the VC, may be limited
given the nature or the absence of direct contractual arrangements, the level of control
that it exercises on the operations outside the consolidation scope and its buying
power.
31. However, leverage does not affect whether IROs that arise in the VC are material or not.
Leverage may affect the ability of the company to obtain data from its counterparties in
the VC. This may be relevant for the reporting of material impacts as well as for
reporting metrics including entity-specific information (See ESRS 1 AR 1 to AR 5) and
may lead the undertaking to use estimates and proxies.

2.2 Why does VC matter?

32. CSRD and ESRS require that the sustainability statement include information about the
upstream and downstream VC.
33. The reason for this is that the major impacts, or major risks and opportunities deriving
from impacts or dependencies, of a reporting undertaking often occur in its upstream
or downstream VC rather than in its own operations. Therefore, focusing on own
operations would provide only a partial picture of the impacts on people and the
environment connected to the undertaking’s activities, products and services.
Furthermore, this would not allow for an appropriate identification of risks and
opportunities.
(a) For example, consider an EU garment and apparel company that sells basic T-shirts
produced in a country outside the EU by an external supplier and that reports under
ESRS. The company may pay its employees an adequate wage under collective
bargaining agreements for its operations in the EU. However, assuming the external
supplier is based in a country outside the EU where the remuneration paid to the
supplier’s employees is below the adequate wage benchmark for the country and
freedom of association in that country may not be allowed, the reporting
undertaking would not provide a relevant depiction of its impacts if it was to consider

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only its own employees when determining the scope of its actual and potential
material negative impacts. In other terms, material impacts on working conditions
may be identified within the workforce in its upstream VC (for this particular
supplier).
(b) Another example is a European retailer with wooden toys made in a factory outside
the EU, where legal requirements are less stringent. The toy-making process has
several environmental and health and safety risks, due to dust and chemicals. There
is therefore a significant risk that the workers and the local communities are exposed
to severe occupational hazard exposures and health risks – important when
considering impact materiality. From a financial materiality perspective, if the
officials in that location start upholding laws rather than accepting bribes as is
currently the case, it could result in significant fines or even possible closure for the
manufacturer. This could have a direct and significant financial impact on the
European retailer.
(c) Similarly, Scope 3 GHG emissions are expected to be material for many or most
undertakings1.

2.3 From own operations to value chain

The reporting group as starting point
34. ESRS 1 paragraph 62 states: “The sustainability statement shall be for the same
reporting undertaking as the financial statements.” In the Accounting Directive, a group
is defined as “a parent undertaking and all its subsidiary undertakings”.
35. For sustainability reporting, groups must include information about material IROs of
the subsidiaries. The elimination of internal transactions following the financial
accounting consolidation procedures for the preparation of the financial statements
does not apply in sustainability reporting. The underlying impact that occurs in the
group’s operations are in scope of the reporting, when material, as well as the ones
identified in the VC.
36. Sometimes subsidiaries are excluded from the financial reporting consolidation on the
basis of materiality, for practical reasons. Please refer to the MAIG chapter 5.2 FAQs on
financial materiality for considerations of these for the sustainability statement.
37. The information about material IROs of the parent and subsidiaries (including leased
assets under IFRS) is ‘extended’ to cover VC information. This is defined in ESRS 1
paragraph 63 as information on the material IROs connected with the undertaking
through its direct and indirect business relationships in the upstream and/or
downstream value chain.
38. Associates and joint ventures may also be actors in the value chain of the reporting
undertaking, such as when they are customers or suppliers. When this happens, the
impacts arising from this business relationship are treated as impacts connected to any
business relationship of the same nature (i.e. as impacts connected with customers or
suppliers), irrespective of the accounting treatment in the financial statements. When
they are not actors in the value chain, the reporting shall consider the investment
relationship as potential source of material impacts, risks and opportunities.

1
https://cdn.cdp.net/cdp-production/cms/guidance_docs/pdfs/000/003/504/original/CDP-technical-note-scope-
3-relevance-by-sector.pdf

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39. For environmental matters, ESRS refer to the concept of operational control to identify
situations where information about IROs of a site, an asset or an entity outside the
financial control perimeter have to be reported.
Operational control – E standards
40. ESRS E1 paragraph 46 specifies how to apply Operational control (over an asset, a site
this approach for GHG emissions. It requires or a plant, JVs, Associates etc.)
including in the reported GHG emissions, the
Defined by Annex II of the July 2023
data of the joint ventures, associates,
delegated act as the situation where the
unconsolidated subsidiaries (investment
undertaking has the ability to direct the
entities) and contractual arrangements that are
operational activities and relationships of
joint arrangements not structured through an
the entity, site, operation or asset.
entity (i.e., jointly controlled operations and
assets), to the extent of the operational control AR 40 of ESRS E1 also explains, in the
of the undertaking over them. context of GHG emissions, that this may
happen “when the undertaking holds the
41. ESRS E1 AR 40 clarifies the definition in Annex license - or permit - to operate the assets
II that the undertaking shall include 100% of from these associates, joint ventures,
the GHG emissions of the entities it unconsolidated subsidiaries (investment
operationally controls. It provides an example entities) and contractual arrangements”.
of where an undertaking has a contractually
A company has operational control over an
defined part-time operational control, it shall
entity, site, operation or asset if it has the
consolidate 100% the GHG emitted during the
ability to direct their operational activities
time of its operational control. and relationships. This occurs independently
42. This means that the GHG emissions reported if it is the parent or one of its subsidiaries (i.e.
will reflect the terms and conditions of the it refers to the consolidated group). This is
relevant agreements. For example, an the case where, for example, the company
undertaking (A) with a joint venture under joint has the full authority to introduce and
control with a third party (C), with A as the implement the operating policies, which
operator of the activities in a certain phase of often implies also executing such operations;
the production process and C is the operator or when it is legally recognized - with implied
in another phase of that process. A would legal rights and obligations - under certain
report in its scope 1 and 2 the GHG emissions regulations (for example the EU Emissions
that pertain to the phase that it operationally Trading system) as an "operator" of a facility.
controls. Having operational control does not mean
43. Whether referring to associates, joint that an undertaking necessarily has authority
arrangements and unconsolidated to make all decisions concerning an
subsidiaries under operational control, ESRS operation. For example, big capital
E1 requires disclosing the Scope 1 and 2 investments will likely require the approval of
emissions of these undertakings separately all the partners that have joint control (per
from the ones related to the consolidated IFRS 11).
group for financial reporting (paragraph Sometimes a company can have joint control
50(b)). over an operation, but not operational
44. ESRS E2-4 Pollution of air, water and soil also control. This would require analysis of the
specifically includes those emissions from contractual arrangements to determine
facilities under the operational control of the whether any one of the partners has the
undertaking. Similarly, ESRS 4 Biodiversity and authority to introduce and implement its
ecosystems in paragraph 16 also includes sites operating policies.
under the operational control of the
undertaking.

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45. Beyond these three standards, there may be circumstances where the concept should
be applied such as where bodies of water have been impacted due to pollution by
assets, sites or entities under operational control.
46. ESRS 2 BP 2 requires that the undertaking describes its basis of preparation including
indicating whether operational control was considered or not (see paragraph 152).
Operational control – S standards
47. Undertakings should separately consider any workers related to assets, sites or
operations under operational control to determine whether such workers meet the
definition of own workforce and workers in the value chain. Please refer to ESRS S1 Own
workforce and S2 Workers in the value chain as relevant. Operational control is not
relevant for ESRS S3 and S4 respectively.
Associates and joint arrangements
48. The starting point for ESRS reporting is not equity accounting or proportional
consolidation as one finds under financial reporting. ESRS 1 paragraph 67 states that
when associates or joint ventures are part of the undertaking’s VC, for example as
suppliers or customers, the undertaking shall include information required by ESRS 1
paragraph 63 consistent with approach adopted for the other business relationships in
the VC. Furthermore, when determining impact metrics, the data in relation to the
associates or joint ventures are not limited to the share of equity held but shall be
considered on the basis of the impacts that are directly linked to the undertaking’s
products and services through its business relationships (ESRS 1 paragraph 67). To
illustrate this, an undertaking, P, produces chairs with wood sourced from another
undertaking that is classified as an associate (A) for financial reporting. P holds an equity
share in A of 30%. P buys 10 tons of wood from A to produce its chairs. P will treat A in
the same way as any other supplier when considering the impacts connected with the
wood purchased from A. Therefore, in this case, the impacts related to the 10 tons of
wood purchased rather than estimating its impacts by using its equity share in A.
49. Where associates and joint arrangements do not form part of the value chain as
suppliers or customers, they are treated as investments. Investments form part of the
undertaking’s business relationships (as defined). As such, they may give rise to impacts
that are connected with the undertaking and that are to be considered in the materiality
assessment and reported when material. However, topical ESRS do not have specific
reporting requirements that indicate how to measure these impacts, apart from GHG
Scope 3 Category 15 disclosures where significant in accordance with ESRS E1
paragraph 44(c), AR 39(a) as explained in AR 46 and AR 48.
Other investments, no further transactions.
50. Business relationships with the investees may give rise to impacts that are connected
with the undertaking and that are to be considered in the materiality assessment and
reported when material. There are no specific requirements in topical standards on
how to measure impacts that are connected with the undertaking through its
investments without joint control and/or significant influence, so generally below 20%,
apart from GHG Scope 3 Category 15 disclosures as explained in paragraph 49.
Entity-specific disclosures
51. As explained in paragraph 54(b) below, in the cases above, apart from the materiality
assessment process, the undertaking may also have to provide entity-specific
information including on the VC in terms of ESRS 1 paragraph 11.

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Mapping of financial reporting concepts to sustainability reporting

52. The following table illustrates the treatment of impacts arising from investments of the
undertaking depending on their accounting treatment in the financial statements:
Common Accounting treatment Measuring impacts by metrics in
characteristic(s)2 topical standards
Subsidiary Control or 50%+1 of Include 100% of assets, Fully included (scope of
voting rights or de liabilities, income and consolidation is the same as
facto control less than expenses financial reporting)
50% of voting rights
Associate Significant influence, Investor recognises its Operational control3: GHG
usually between 20% share of profits and emissions to the extent of
and 50% of voting losses and add to value operational control. (ESRS 1 par.
rights; ability to of investment in 67)
influence the decision associate on balance Associates that are actors in the
making through the sheet in a single line item value chain – based on impacts
appointment of a (no proportional connected with the undertaking’s
director to the board. consolidation line by line) products and services through
transactions.
Associates with other business
relationships (i.e. investees only)
There are no specific indications
for metrics in the sector agnostic
standards on how to measure
impacts connected with the
undertaking through its
associates, where they are not
actors in the value chain (except
for category 15 of GHG protocol).
Investments Less than 20% held Recognised at fair value; There are no specific indications in
Trading for short term gain dividends in profit or metrics of the topical standards on
Less than 20% not loss. how to measure impacts
“Strategic” held for short term connected with the undertaking
gain through its investments (except for
category 15 of GHG protocol in
ESRS 1).
Joint venture Joint control with Same as for associates Same as for associates except for
rights to net assets of joint operations where the
the arrangement. assets/liabilities belong to the
Always a separate reporting undertaking and so
entity. form part of own operations.
Joint Joint control with Recognises its assets,
operation rights to assets, liabilities, revenue,
obligations for the expenses including any
liabilities relating to share from items held
the arrangement. Not jointly (proportional
necessarily a separate consolidation).
entity.

2
Please note that this is a very simplified description of the financial reporting requirements (and may differ
between IFRS and local GAAP used in European countries) and so does not capture the nuances involved in
classifying investments.
3
Operational control can also apply to assets under joint control proportionally consolidated. The related GHG
emissions then reflects the terms and conditions of the arrangement.

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Reporting boundary decision tree

53. The following decision tree summarises some of the important aspects related to the
E-standard above:

Reporting undertaking
Parent plus subsidiaries
(including leased assets and
own assets/ liabilities used in
Joint Operations)

ESRS 1 par 62

+
Any other sites, assets, plants, associates, joint ventures, unconsolidated subsidiaries
(investment entities) and contractual arrangements that are joint arrangements not structured
through an entity (i.e., jointly controlled operations and assets) under Operational control?

Yes, I have operational control. No, I do not have operational control.

Include 100% per ESRS E1 AR 40 for

E1 as a separate row per E1 par.
50(b). Operational control mentioned in Are these actors
ESRS E2 and E4. in the value
chain such as
suppliers or
customers?
Include as VC for the share of IROs Yes.
attributable to the reporting undertaking’s
products and services as for other actors
in the VC (ESRS 1 par 63, 67 and ESRS
E1 par 46)

No, they are not actors in the value chain

such as suppliers or customers.

For E1: include as GHG Scope 3 emissions

category 15 ‘Investments’ if significant (ESRS
E1 par. 44(c), AR 39(a), AR 46 and AR 48).

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2.4 Which IROs in the VC to disclose?

54. The two overarching requirements in ESRS 1 that are applicable are:
(a) paragraph 63 requiring information on material IROs connected with the
undertaking’s upstream and downstream VC; and
(b) paragraph 11 requiring entity-specific information when a reporting undertaking
concludes that a material IRO is not covered sufficiently by an ESRS, to enable users
to understand such IRO. Such entity-specific information is expected to cover both
IROs in own operations and IROs in the upstream and downstream VC, when they
are material.
55. An impact may be material to the reporting undertaking if it arises in any part of the VC,
including at any tier of its upstream VC or supply chain. In this regard, in the IRO
assessment in the VC, the undertaking has to consider IROs that it may be connected
to through its operations, products or services by business relationships. (Also see
MAIG FAQ 2 What is meant by the undertaking being “connected” with an impact?).
56. The identification of IRO in upstream and downstream VC is embedded in the
materiality assessment (ESRS 1, Chapter 3 – Double materiality as the basis for
sustainability disclosure). For further information about materiality, please consult the
MAIG.

2.5 How do the transitional requirements work?

57. The general transitional provisions in ESRS 1 paragraph 130 onwards allow a temporary
limit to the information on the VC to be reported during the first three years of reporting
under ESRS. Specifically, preparers are required to consider VC in their materiality
assessment, but the data gathering aspects are limited in their first three years of
reporting.
58. The transitional provisions are intended to provide reporting undertakings with more
time to prepare for the new reporting regime in case not all the necessary information
regarding VC is available. The transitional requirements are optional, i.e., the
undertaking can decide whether it wants to use them or not and they apply whether
the VC actor is an SME or not.
59. The steps an undertaking can consider during this time may include:
(a) Stakeholder engagement and other enhancements to the materiality assessment;
(b) Preparation of technological and other infrastructure required for the reporting;
(c) Updating of contracts with actors in the VC to reflect status of new implemented
policies or target tracking, such as foreseeing the provision of periodic information;
and
(d) Improved knowledge about the structure of the VC, specific actors involved and
associated impacts and dependencies.
60. The transitional requirements (ESRS 1 paragraph 132) foresee that if not all the
necessary VC information is available during the first three years of the reporting
undertaking’s sustainability reporting under ESRS, the undertaking shall explain:
(a) The efforts made to obtain the necessary information;
(b) The reason why it could not obtain the necessary information; and

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(c) Its plans to obtain the necessary information in the future.

61. In addition, during the transitional period, reporting undertakings may limit information
to in-house data (such as data available to the undertaking and publicly available
information) to disclose information on policies, actions and targets for the VC (ESRS 1
paragraph 133 (a)).
62. In addition, with reference to metrics, the undertaking is not required to include
upstream and downstream VC information, except for datapoints derived from other
EU legislation, as listed in ESRS 2 Appendix B (see ESRS 1 paragraph 133 b)) during the
transitional period.
63. Starting from its fourth year of reporting under ESRS, the undertaking shall include VC
information according to ESRS 1 paragraph 63 (ESRS 1 paragraph 135) and as
explained in this document.
64. In addition to the transitional provisions described above, Appendix C of ESRS 1
specifies that for ESRS E1-6 Gross Scopes 1, 2, 3 and Total GHG emissions, undertakings
or groups with less than average of 750 employees at balance sheet dates, may omit
datapoints on Scope 3 emissions and total GHG emissions for the first year of
preparation of their sustainability statement. Similarly, the disclosure requirements for
ESRS S2 Workers in the value chain; ESRS S3 Affected communities and ESRS S4
Consumers and end-users may be omitted for the first two years by undertakings who
have 750 or less employees during the financial year.
Transitional provision with respect to entity-specific disclosures
65. While not exclusively related to the VC, given that entity-specific disclosures may
trigger the inclusion of VC information, the transitional provision applying to entity-
specific disclosures (ESRS 1 paragraph 131) is also relevant here.
66. In the first three annual sustainability statements, when the reporting undertaking is
defining its entity-specific disclosures, it may as a priority:
(a) Include disclosures it previously reported (where these meet the qualitative
characteristics of information per chapter 2 of ESRS 1); and
(b) Add disclosures to cover those material sustainability matters in its sector(s) using
available best practice and/or available frameworks (such as IFRS or GRI sector-
specific requirements).

2.6 What is the LSME cap and does it impact my disclosures?

67. Article 29b(4) of the CSRD limits the VC information that the ESRS shall require
undertakings in scope of the CSRD to obtain from small-medium enterprises (SMEs) for
their reporting under ESRS. ESRS may not require disclosures which will result in
reporting undertakings having to request information from the SMEs in their VC if such
information goes beyond the disclosures required in the listed SME (LSME) ESRS.
68. This limitation is often referred to as the ‘LSME cap’ and it aims at limiting the burden
for SMEs and embed proportionality in the ESRS.
69. The LSME ESRS is still under development. EFRAG expects to be able to consult on
LSME Exposure Draft toward the end of 2023 and one of the aspects to cover in the
consultation is the approach to the implementation of the LSME cap.

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3. Frequently asked questions

70. This chapter provides further practical guidance on the VC principles described in the
previous chapter.

FAQ 1: Where does the VC begin and end?

71. ESRS requires the undertaking to identify and assess material IROs across its entire VC
from a double materiality perspective. In this regard:
(a) relevant impacts are defined as those that are connected with the undertaking,
which includes when they are either caused by or contributed to or that are directly
linked to the undertaking’s operations, products or services through a business
relationship. The relevant impacts are not ringfenced by proximity or contractual
relationship, but by the fact that they occur in connection with the processes at any
stage of the VC that contribute to the undertaking’s operations, products or services,
or that result from the use or end-use of those products or services. Conversely, the
impacts of actors in the value chain not connected to the undertaking’s operations,
products and services are outside of the scope of impact materiality (Also see MAIG
FAQ 2 What is meant by the undertaking being “connected” with an impact?); and
(b) relevant risks and opportunities are those attributable to business relationships, in
particular with actors in the VC that are beyond the scope of consolidation used for
the preparation of financial statements for financial materiality (ESRS 1 par. 49).
72. To assess potential and actual impacts, it is important that the undertaking identifies in
particular:
(a) the location and characteristics of suppliers including beyond the first tier of their
upstream VC or supply chain;
(b) the users of their services and goods;
(c) how the goods are treated in terms of waste at the end of their life; and
(d) who may be affected by their services and goods.
73. See FAQ 7 How to assess and quantify the impacts of the VC resulting from business
relationships? below for recommendations on how to organise the processes to
identify and assess material impacts across the VC.
74. To assess risks and opportunities, the undertaking considers its own dependencies on
natural, human and social resources. The undertaking identifies potential changes in
the availability, price and quality of such resources, which are sources of risks and
opportunities, including those stemming from its upstream and downstream VC. The
following three examples illustrate this concept:
(a) A company has a tier-1 supplier, that provides it with the main components of its
final products, in a region with water scarcity. To provide the components, the
supplier needs minerals from a mining company which is heavily dependent on a
supply of water. As such, this supplier would be at risk if one of the mines was no
longer able to access sufficient water from its existing sources. Consequently, the
supplier may face physical risks in the future due to the water scarcity in the region,
which could lead to operational disruptions and increased costs. This situation could
lead to discontinuities in the supply of steel with disruptions in production.

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(b) If the buying price does not cover the cost of a product bought, it may increase the
pressure on the working conditions at suppliers. If the purchasing department of the
reporting entity does not understand lead times or ignore lead times when ordering
this could have a negative effect on the workforce of their contractual partners in
terms of overtime, accidents or use of forced labour.
(c) A company active in the food sector needs to be constantly supplied with natural
key inputs (such as flours). One of its main suppliers is active in a region at high risk
of biodiversity loss and following the request by local authorities to restore damaged
habitats it has a more variable production of key natural inputs and higher
production costs. This situation could lead to disruptions in the supply of key natural
inputs with consequences in the production of the company active in the food
sector. Active spot markets with delivery close to the company may alleviate the risk
of disruption but may have implications for pricing.

FAQ 2: Are financial assets (loans, equity and debt investments)

considered business relationships that trigger VC information?
75. Yes. Business relationships and VC as defined in Annex II of the July 2023 delegated
act does not exclude any types of activities and business relationships.
76. ESRS 1 AR 12(b) illustrates that where the reporting undertaking provides financial
loans to another enterprise that ultimately results in the contamination of water and
land surrounding the operations of such enterprise, this negative impact is connected
with the reporting undertaking by way of the relationship created by the loan
agreement.
77. Per paragraph 49, for equity investments there is currently only disclosures under
Category 15 of GHG emissions where significant under ESRS E1.
78. EFRAG plans to work on the development of further draft standards or guidelines for
Financial Institutions and on that occasion, specific solutions will be consulted on for
comments.

FAQ 3: How should the MA process be organised to properly

capture material IROs in the VC?
1. Basic principles
79. The materiality process is the process by which the undertaking determines material
information on sustainability impacts, risks and opportunities and this includes
information related to the VC, but not information on each and every actor in the VC.
Therefore, for the identification of impacts, risks and opportunities within the materiality
assessment, the undertaking should focus on the parts of their value chains where
material impacts are most likely to occur. As outlined in the MAIG, chapter 3 How is the
materiality assessment performed?, the undertaking should design a process that is fit
for purpose as required by ESRS 1 chapter 3 and disclose per the requirements set out
in ESRS 2 IRO-1. An undertaking, based on its specific facts and circumstances, shall
design a process that is fit for purpose, including consideration of the depth of the
assessment. This principle also applies to the value chain.
80. The ESRS clarify that the materiality assessment process is informed by the due
diligence process.

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2. Materiality assessment steps

81. The guidance on the organisation of the materiality assessment process can be found
in the MAIG, chapter 3 How is the materiality assessment performed? As explained
there (emphasis added): ESRS do not mandate how the materiality assessment shall by
conducted by an undertaking, or how the process should be designed. No one process
would suit all types of economic activities, location(s), business relationships or value
chains (upstream and/or downstream) of all the undertakings applying ESRS. An
undertaking, based on its specific facts and circumstances shall design a process that is
fit for purpose considering the requirements of ESRS 1 Chapter 3, and what needs to be
disclosed regarding the materiality assessment and its outcome (see ESRS 2 IRO-1, IRO-
2 and SBM-3). Therefore, the ESRS provide several aspects that an undertaking takes
account of when designing the materiality assessment process.
82. With this caveat, the MAIG provides guidance for the general organisation of the MA
process. The guidance below reflects how VC aspects can be considered in the
possible process.
Step A. Understand the context
83. As explained in the MAIG, the first step in the MA process is about understanding the
context in which the undertaking operates. Therefore, the undertaking needs to
understand its VC in terms of business actors involved, their size, the sectors or nature
of their activities, geographical locations, and processes. This is a starting point for the
identification of where IROs are likely to arise.
84. The context also includes understanding the undertaking’s strategy and business
model and how they are connected to possible material IROs.
85. The strategy of the undertaking will influence its business model which will focus on its
own operations but also include aspects around its up- and downstream value chain.
All of this will be considered its materiality assessment.
86. The undertaking can consider tracing or mapping its VC activities and actors to identify
whether and which parts of its value chains are in areas of heightened risks. In some
cases, if the undertaking does not have reliable information on the geographical
location of its VC (for example beyond the first tier), it may map the IROs associated
with global value chains for materials, products and services it uses or produces, to the
extent that they are relevant for its VC. For example, a chair manufacturer may use
products such as steel, wood, foam and fabric in its business. These raise questions
around origin of components (oil used to produce foam and cotton for the fabric) and
the transport to the undertaking. Are there any environmental (deforestation,
biodiversity, water usage) or social issues (working conditions, impact on communities)
in countries of origin of the components? What are the sustainability matters pertaining
to the consumers? Here the sales channels may be relevant as well as the ability to re-
use, re-cycle or up-cycle the furniture at the end of its life.
87. As explained in the general instructions in the MAIG, engagement with affected
stakeholders can support the assessment and validation of the impacts the undertaking
should also identify [likely] affected stakeholders and consider engaging with them.
See also MAIG FAQ 17 What is the role of silent stakeholders and how to consider
them?

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Step B. and Step C: Identification of actual and potential IROs as well as Assessment
and determination of the material IROs
88. Identification and assessment of impacts can be challenging for those parts of the VC
where the undertaking is not able to trace the materials and products. ESRS 2
paragraph 5 c) requires a description of the extent to which the disclosures cover the
undertaking’s upstream and downstream VC.
89. The undertaking should aim to gather reliable data from actors in its VC. If this is not
possible after having made reasonable efforts, it may rely as appropriate on sources of
secondary data. Secondary data include information such as publicly available reports
and studies, sector proxies, data from local, regional or national authorities, newspaper
articles, databases, etc. to estimate the IROs where this provides relevant and faithfully
representative information.
Assessment of the involvement of the undertaking with the VC
90. The undertaking is required to provide a description of whether the material impacts,
risks and opportunities connected to the undertaking as well as those that are directly
linked to its operations and services in its upstream or downstream value chain (ESRS 2
SBM-3 paragraph 48 (a)).
91. As explained in MAIG, FAQ 2 What is meant by the undertaking being ‘connected’ with
an impact? the undertaking may for instance be involved in a breach of labour
standards through its procurement and payment policies and practices, or even by
sourcing from suppliers with cases of labour rights abuse.
92. The contribution to the impacts in the VC may concern direct business relationships.
However, the undertaking may find itself contributing to impacts that occur in more
distant parts of the VC. This may for instance be the case when the undertaking or its
direct suppliers are using commodities or components whose production is associated
with severe systemic impacts, such as palm oil or coltan. Similarly, the undertaking may
be contributing to impacts that are a result of the use of its products such as oil and gas
derived fossil fuels, plastics contributing to microplastics pollution, cigarettes, or
pesticides.
93. An undertaking can cause, contribute or be directly linked to an impact in the value
chain. Distinguishing the type of involvement is important given that it could lead to a
different assessment or categorisation of the negative impact.
Environmental topical standards on materiality assessment
94. Environmental standards use the concept of life cycle or life cycle assessment, which
also covers value chain, in the context of materiality assessment. In particular:
(a) ESRS E2 AR 18: “In order to assess materiality, the undertaking may consider
Commission Recommendation (EU) 2021/2279 on the use of the Environmental
Footprint methods to measure and communicate the life cycle environmental
performance of products and organisations.”
(b) ESRS E3 AR 14: “The undertaking may rely on primary, secondary or modelled data
collection or other relevant approaches to assess material impacts, dependencies,
risks and opportunities, including Commission Recommendation 2021/2279 on the
use of the Environmental Footprint methods to measure and communicate the life
cycle environmental performance of products and organisations (Annex I – Product
Environmental Footprint; Annex III – Organisation Environmental Footprint).”

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(c) ESRS E5: the concept of 'life cycle’ is so important that is part of the objective in
paragraph 3 and AR 6 explains its use to assess IROs in own operations and the VC.

FAQ 4: How should information about the VC be disclosed in

the context of the materiality assessment?
95. The disclosure of information about the VC is required in two steps, as a component of
(i) the materiality assessment process and of (ii) the outcome the materiality
assessment.

BP-1 – General basis for preparation of the sustainability statement

96. ESRS 2 paragraph 5(c) requires disclosing to which the extent the sustainability
statement covers the undertaking’s upstream and downstream VC. Therefore, in
addition to metrics, this applies to all the steps below, to the extent that material IROs
arise in the upstream and downstream VC.

SBM-1 – Market position, strategy, business model(s) and VC – ‘VC

mapping’.
97. To provide an understanding of where in the undertaking’s VC material IROs may arise,
ESRS 2 paragraph 42(c) in SBM-1 requires the following description of its VC:
(a) the main features of its upstream and downstream VC;
(b) the undertaking’s position in its VC;
(c) description of the main business actors and their relationship to the undertaking:
(i) key suppliers,
(ii) key distribution channels,
(iii) key customers and/or end-users.
98. Identifying the key actors requires judgement, to reflect the specific circumstances of
the undertaking’s VC and should consider both impact and financial materiality criteria.
99. The mapping of the VC for material impacts is expected to use the sustainability due
diligence process, when it is in place. However, the due diligence process may go
beyond such mapping per se as explained below, looking at the impacts throughout
the VC and identifying potential ‘hot spots’ by cross-referencing countries where
materials are produced to social and environmental risk databases (i.e., Type of impact
by Country by Actor in the VC). These hotspots may then be further investigated.

IRO-1 – VC considerations in MA
100. Subsequently, the undertaking shall describe its materiality assessment process,
including in relation to the VC, and the extent to which it may be informed by the due
diligence process.
101. ESRS 2 IRO-1 paragraph 53 (b) (ii) requires an overview of the process to identify,
assess and prioritise the undertaking’s impacts it is involved through its own operations
or because of its business relationships. Similarly, paragraph 53 requires disclosing an
overview of the process used to identify, assess, prioritise and monitor risks and
opportunities that have or may have financial effects, which may arise due to its
business relationship in the VC. In fact, the business relationships in the upstream and

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downstream VC shall be considered also in the context of assessing the materiality of

risks and opportunities and not just for impacts (ESRS 1 paragraph 66).
102. The disclosure that meets these requirements could be structured as follows:
(a) the types of VC relationships that were considered in the materiality assessment;
(b) the methods the undertaking used, and
(c) the sustainability topics that were evaluated.
103. For impacts, based on the initial mapping, the undertaking may focus on areas where
actual or potential impacts could arise, which in turn reflects areas where the negative
impacts are or could be severe. The undertaking will reasonably focus:
(a) on different types of business relationships and VC segments for different
sustainability matters;
(b) on areas of heightened risk of adverse impacts, affected stakeholder engagement
and prioritisation based on criteria of severity and likelihood.
104. For risks and opportunities, this should include how the process considered any other
factors in the VC that are sources of IROs, including dependencies from natural and
social resources.

IRO-1 - MA methods and assumptions

105. ESRS 2 IRO-1 requires information on methods and assumptions applied in the
materiality assessment (ESRS 2 paragraph 53(a)), including thresholds to determine
materiality (paragraph 53 b (iv)). This should account for any specifics related to the VC.
As per ESRS 2 BP-1, the undertaking should describe the extent of any limitations on
the materiality assessment process with respect to the VC.

SBM-3 - Disclosing the outcome of the MA

106. As a result of the materiality assessment, the undertaking shall disclose the material
IROs originating its VC. ESRS 2 SBM-3 paragraph 48 (a) requires disclosing “where in
its business model, its own operations and its upstream and downstream value chain
these material impacts, risks and opportunities are concentrated”.
107. The preparation of this disclosure may use the evidence of impacts from the due
diligence process, such as the concentration of types of impacts by country or
operational step.
108. ESRS 2 SBM-3 also requires describing the material impacts identified following the
materiality assessment process disclosed under IRO-1: “whether the undertaking is
involved with the material impacts through its activities or because of its business
relationships, describing the nature of the activities or business relationships
concerned” (ESRS 2 paragraph 48 c) iv)).
109. ESRS 2 paragraph 48 (b) requires as well disclosure of: “the current and anticipated
effects of its material impacts, risks and opportunities on its business model, value
chain, strategy and decision-making, and how it has responded or plans to respond to
these effects, including any changes it has made or plans to make to its strategy or
business model as part of its actions to address particular material impacts or risks, or
to pursue particular material opportunities”.

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110. This implies that when strategically important hotspots for VC IROs have been
identified, ESRS 2 SBM-3 requires information about discussions of the impacts at the
relevant managerial level or governance bodies in charge (Paragraph 48(b)).
111. The disclosures should be consistent with the corresponding information on whether
and how the VC was considered in the materiality assessment.
112. The information required by ESRS 2 SBM-3 paragraph 48 (a) and (b) (such as effects
on and changes of the VC, business strategy and how it responds or plans to respond
to those effects) should enable an understanding of the undertaking's basic ability to
influence those IROs, and any potential effects on the undertaking.
113. When providing information required by ESRS SBM-3 on material IROs or PAT,
qualitative information may be sufficient (for instance for human rights policies with
respect to the VC). However, quantitative information may be required to help users
understand impacts, their severity and likelihood and/or track the effectiveness of
actions to manage them.

FAQ 5: Should VC information be included for Policies, Actions

or Targets (PATs) Disclosure Requirements?
114. Yes, for material IROs (including those in the VC), where the undertaking has PATs, it
should disclose this (ESRS 2 paragraphs 64(b), 67(b) and 70(b)). Therefore, where a PAT
addresses all or some VC actors that should be disclosed. Examples could include:
(a) policies to prevent and control pollution by its VC actors;
(b) policies against bribery and corruption for VC actors and training for them;
(c) actions and resources related to pollution as well as targets to reduce pollution
generated by a supplier (ESRS E2 Pollution AR 13 and 19);
(d) clauses regarding the respect of fundamental human rights in contracts with VC
actors;
(e) audits conducted on high-risk suppliers;
(f) selection criteria for new suppliers such as the existence of effective grievance
mechanisms or freedom of association; and
(g) targets for suppliers on sustainable material use for example X% recycled content or
X% less waste.
115. VC information coverage is also important for ESRS E1-1 paragraph 16(b) that
requires disclosing the decarbonisation levers identified by the undertaking in setting
its targets and defining its actions, including levers in the VC. This type of information
is expected to be primarily needed in order to set and manage the targets and
implement the actions. Reporting is expected to use data existing for such purposes.
116. As a reminder, the undertaking can comply by disclosing that it has not adopted
policies and/or actions with reference to the relevant sustainability matter and provide
reasons for this. It may also report a timeframe in which it aims to adopt them (ESRS 2
paragraph 62). The same applies to targets (ESRS 2 paragraph 72).
117. In addition, the undertaking should always consider the need to provide entity-
specific information. Please refer to paragraph (b) above.
118. In ESRS 4 Biodiversity and ecosystems, there are specific requirements dealing with
value chain information: ESRS 4-1 Transition plan and consideration of biodiversity and

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ecosystems in strategy and business model; as well as topical specification ESRS 2 IRO-
1 Description of processes to identify and assess material biodiversity and ecosystem-
related impacts, risks, dependencies and opportunities as well as ESRS E4-4 (paragraph
32(c)) Targets related to biodiversity and ecosystems. These do not necessarily result
in the need to collect VC data from actors in the VC solely for the purpose of reporting.
The undertaking is expected to leverage on information that is collected for business
purposes, e.g., E4-1 par 13, E4 ESRS 2 IRO 1 par 17(a), E4-4 par 32(c).

FAQ 6: Should VC information be included for Metrics

Disclosure Requirements?
119. Mostly not. DRs related to metrics cover only own operations except for entity-specific
disclosures where the undertaking determines whether VC information is required (see
paragraph 122 below). There are the following few metrics set out in the sector-
agnostic ESRS that require disclosures of VC information:
(a) Disclosure Requirement ESRS E1-6 Gross Scopes 1, 2, 3 and total GHG emissions;
(b) Disclosure Requirement ESRS E1-7 GHG removals and GHG mitigation projects
financed through carbon credits; and
(c) Disclosure Requirement ESRS E5-4 Resource inflows requires a description of
resource inflows where material which may include a description of the IROs in the
value chain (ESRS 5 paragraph 30). However, when disclosing the quantification of
materials used in the production of the undertaking’s products and services, this
relates only to own operations (ESRS 5 paragraph 31). The undertaking determines
whether additional information on the VC is needed on an entity-specific basis.
(d) ESRS E5-4 par 30 requires a qualitative description of its resource inflows along the
upstream value chain. ESRS E2-5 and ESRS E5-5 refers to materials procured and
used within the undertaking. While they do not explicitly refer to value chain
information, the impacts that arise from the upstream value chain are indirectly
covered by the description of the procured material.
120. Following from paragraph 94, ESRS E4 paragraph 36 also refers to life cycle
assessment: “If the undertaking has identified material impacts with regards to land-
use change, or impacts on the extent and condition of ecosystems, it may also disclose
their land-use based on a Life Cycle Assessment.” It is also covered in ESRS E4 AR 31:
‘With regard to life cycle assessment for land-use, the undertaking may refer to the
“Land use related environmental indicators for Life Cycle Assessment” by the Joint
Research Center.’
121. With reference to the social standards, ESRS S2
Affected communities suffer the
Workers in the value chain and S4 Consumers and
consequences of the undertaking or
end users cover the VC by definition. ESRS S3
its VC’s operations. However, they
Affected communities address impacts on are not necessarily part of the VC.
communities affected directly by the undertaking For example, an affected
as well as by the actors in the VC. These standards community is part of the VC where it
do not specify any metrics, but the ESRS require the provides the land on which the
undertaking to consider entity-specific metrics, as mining takes place.
explained below.
122. Beyond the specific provisions on metrics in the sector agnostic ESRS, the undertaking
shall provide additional VC information metrics or integrate VC data into their metrics,
when according to the outcome of its materiality assessment, this is necessary from an

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 [Draft] EFRAG IG 2: Value chain implementation guidance

entity-specific perspective (ESRS 1 paragraph 11 and AR 1 to 5 read with ESRS 1

paragraph 65). In particular, ESRS require the undertaking to consider appropriate
entity-specific metrics needed for understanding of the impacts or tracking
effectiveness of companies’ actions. Possible examples are the following:
(a) impact data of suppliers should be included in the reported metrics, when the
undertaking depends in its upstream VC or supply chain from activities that have a
high impact on the environment;
(b) the percentage of workers in value chains in high-risk areas being covered by social
security schemes; and/or
(c) the percentage reduction in health and safety incidents compared to incidents in the
prior period or as compared to a base period where the quality of the information
can be assured.
123. It is important to note that this is relevant only for those activities of VC actors that are
associated with material IROs and not for all VC actors.
124. Sector-specific ESRS will cover the inclusion of VC data in its impact metrics when
relevant. In the transition period until the ESRS sector standards are available, the
undertaking as part of its entity-specific disclosures shall consider this aspect and take
inspiration from the available best reporting practices (see ESRS 1 paragraph 131(b)).

FAQ 7: How to assess and quantify the impacts of the VC

resulting from business relationships?
125. As set out in the MAIG FAQ 10 Should the assessment of IROs rely on quantitative
information?, quantitative measures of impact are the most objective evidence of the
severity of an impact. However, quantitative measures may not always be available, and
the undertaking may apply quantitative or qualitative thresholds when conducting the
MA depending on the circumstances. Refer to the MAIG chapter 3.6 Deep dive on
impact materiality: Setting thresholds.
126. For the materiality assessment and for the inclusion of VC data required by metrics,
the undertaking may either obtain information directly from actors in its VC or use
estimates or proxies or combine both approaches.
127. Obtaining information directly is the most appropriate approach in certain cases, for
instance for major tier 1 suppliers (the direct and substantial contractual relationship is
a good basis for organising appropriate flows of data) or for customers of products and
services in particular when they are end-users (the undertaking knows the parameters
of its products and services). When this is the case, the undertaking may need to ask its
suppliers and other relationships for information enabling the quantification of the
impacts. The undertaking may use questionnaires, surveys and audits to obtain the
information. Its buying power and overall contractual influence may help in this regard.
128. It should be noted that the more severe the impact is, there may be a strong incentive
to omit such sensitive information, and this could impact the reliability of the
information provided by such supplier. This may be particularly relevant for incidents
of child or forced labour in the VC.
129. Apart from this issue, the reliability of information directly obtained from the VC may
improve over time since VC actors may not be able to quantify their impacts yet but
may be in a position to do so in the future given evolution of sustainability reporting.
Therefore, supporting such actors to set up effective systems may be important. It may

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also be advisable to engage with them and where relevant, also encourage them to do
the same with their value chains.
130. Generally, the effort placed on actors in the VC should be proportionate. E.g. the
undertaking does not need to query all direct suppliers and could exclude those that
deliver insignificant products or services to the undertaking (e.g. a small bakery that
delivers pastries once or twice a year for events the undertaking hosts). This would
create disproportionate effort for both the reporting company and for the baker who
may need to complete similar requests from a multitude of customers. As mentioned
above, undertakings do not have to report on each and all value chain actors.
131. As further explained under FAQ 9 How can estimates be developed when primary
data cannot be collected from VC counterparties?, the undertaking shall estimate the
impact when it cannot collect the necessary data to the required reliability after
reasonable effort. Estimates and proxies may be used in combination with information
obtained directly as well if quantification is required. Using estimates, similar to
financial reporting, is acceptable if organised under a process designed to comply with
the characteristics of quality expected from sustainability information. Estimates and
proxies may currently be the only available solution to quantify impacts in certain cases,
due to unreasonable efforts required to collect data. Examples include tier 2 or tier N
suppliers; tier 1 suppliers when they are excessively high in number; customers when
they are not end-users (e.g., when the undertaking delivers products or services that
are further transformed before contributing to the delivery of products and services to
the end-users).
132. An example where obtaining primary data may not be possible and estimates may be
used is a beverage company that advises that its drinks are best served cold, i.e., using
refrigeration capacity and it has determined energy use as a material matter. This
undertaking would find it impossible to precisely measure its impact with each and
every customer. However, from its materiality assessment, it assesses that electricity use
is a significant part of its impact in the downstream VC. In this case, estimating its impact
would involve considering variables such as volumes sold, average time the inventory
will be cooled before consumption and an estimate of the average electricity used to
cool its products on a unit basis. This may need to also consider location and related
prices. Depending on its assessment of the materiality of electricity use, the
undertaking may want to provide a sensitivity analysis of its electricity use depending
on reasonably possible changes in the important variables in its calculation. Proxies are
often available at sector or product level. In all cases the undertaking shall clearly
explain the basis for its estimates and the proxies used as well as any factor affecting
their consistency over time.
133. ESRS 2 paragraph 10 requires the undertaking to disclose the metrics that include VC
data estimated using indirect sources, including the basis for preparation, the resulting
level of accuracy and the planned actions to improve accuracy in the future.

FAQ 8: What is ‘reasonable effort’ to collect VC data?

134. When inclusion of VC information is necessary, under ESRS 1 paragraph 63 or on
entity-specific basis, a reporting entity collects information about its upstream and
downstream VC only to the extent that this is compatible with a reasonable effort
(ESRS 1 paragraph 69) for use it its sustainability statement. In all other circumstances,
it shall estimate the missing information based on “all reasonable and supportable
information that is available to the undertaking at the reporting date without undue
cost or effort” (ESRS 1 paragraph AR17). This includes estimates, sector-average data

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and other proxies. For example, an undertaking could use country and sector statistic-
based risk assessment data. If more details are known, such as the specific location of
farming and manufacturing processes, more specific data may be available. Also refer
to paragraph 132 on the necessity to comply with the quality of characteristics
requirement.
135. The undertaking should determine the best available way to prepare meaningful VC
information and dedicate proportionate resources once the degree of difficulty has
been properly assessed.
136. As explained above, the undertaking should report on material IROs in its own
operations and in its upstream and downstream VC. In this context, putting the
appropriate processes in place is a matter of management decision, internal
organisation and allocation of resources. ‘Reasonable effort’ and ‘undue cost or effort’
relate to the processes put in place by the undertaking to collect VC information and
to the amount of resources dedicated to these processes. “Reasonable effort” cannot
be an excuse for no disclosure. ‘Reasonable effort’ and ‘undue cost and effort’ depends
on facts and circumstances specific to the undertaking. On the basis of FAQ 7 above,
using free and publicly available information may in some cases be considered a
reasonable effort. In determining whether an action is beyond ‘reasonable effort’
and/or beyond ‘undue cost and effort’, the undertaking shall balance the reporting
burden of obtaining direct data and the potential lower quality of the information
resulting from not undertaking that action. The estimation procedures adopted by the
undertaking when direct data are not used are subject to ESRS 2 paragraph 10.
137. For VC data, a good starting point is a deep understanding of what, where and how
the inputs for its products and/or services are sourced upstream and/or its products
and services are brought to market downstream.
138. ESRS 1 paragraph 68 indicates that the undertaking’s ability to obtain VC information
may vary depending on factors such as its contractual arrangements, the level of control
it may exercise beyond the consolidation perimeter and its buying power. Therefore,
there are cases where obtaining the information may be more challenging. In such
cases, the undertaking may use other sources of information. For example, an
undertaking may have a major exposure to forced labour, because it is getting
significant volumes of agricultural commodities and products from jurisdictions where
forced labour in agriculture has been documented by the ILO (the International Labour
Organisation) and the FAO (Food and Agriculture Organization of the UN). For
materiality assessment it is not necessary for the undertaking to change practices and
estimate the number of cases of child or forced labour in its value chain. What is
important is that it has enough information to conclude that the impacts are severe
(based on scale, severity and irremediability).
139. Similarly, undertakings calculating their full environmental footprint, may use
estimates not only because it would be unreasonable to get primary data, but also
because such data would not be reliable.
140. In the context of materiality assessment, the focus on the VC and VC information
should be on where the undertaking is expected to have severe negative impact (on
people and the environment). This means that general impact assessments could be
useful for the initial work on collecting VC information. Examples include general
information about the undertaking’s region or sectors of sourcing. For example, where
an undertaking is sourcing its products mostly indirectly from Country A and Country
B, it may look at available general information about the minimum wage in those
countries when considering its social impacts. In Country A the minimum wage is

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 [Draft] EFRAG IG 2: Value chain implementation guidance

generally 100% to 120% of the living wage but in Country B the minimum wage is less
than 80% of the living wage. Therefore, the exposure to significant impacts is more
likely in Country B, all other aspects being constant.
141. For its own governance as well as for purposes of an audit trail for its assurance
provider, it would be good for the undertaking to document its efforts, the outcomes
and how the information has been incorporated in its reporting process. (Also refer to
MAIG FAQ 12: Should the materiality assessment be documented/evidenced?)

FAQ 9: How can estimates be developed when primary data

cannot be collected from VC counterparties?
142. As discussed in paragraph 28 above, primary VC information is not required for all
disclosures in the sustainability statement. However, where the undertaking determines
that VC information is required and primary data (i.e., directly collected from the actor
in the VC) is not available, estimated data can be used.
143. When collecting the necessary information from counterparties in the VC is not
possible after reasonable effort, ESRS require that the reporting undertaking estimate
the missing information, using internal and external information. Such estimates can
be used either for assessing material IROs, or for disclosing metrics in the VC, as
outlined in ESRS 1 Chapter 5.2. When assessing material IROs in the VC, a combination
of primary (i.e. directly collected from the actor in the VC) and estimated data (using
secondary data as input) can be employed.
144. Secondary data include data from indirect sources, sector-average data, sample
analyses, market and peer groups data, other proxies, or spend-based data.
Examples of external data sources 145. The text box opposite shows some
sources of such data. Some of these require a fee
• Academic institutions such as the and are provided as examples, but ESRS do not
Environmental Performance Index require the use of fee-based external sources.
• Government bodies such as the These are examples of external sources that help
European Social Progress Index of address environmental, social, human rights, and
the European Commission and the corruption matters.
US Department of State’s Social
Progress Index, 146. It is difficult to collect VC information
• Non-profit organisations such as the necessary to produce the relevant disclosure
World Justice Project, or other about impacts caused by indirect business
NGOs. relationships where the undertaking does not
have a direct contractual relationship and has less
leverage. If the undertaking cannot collect the necessary data after making reasonable
effort to do so, the undertaking may then need to rely on data from indirect sources,
like sector-average data, sample analyses, market and peer groups data, other proxies,
etc. For example, for VC workers extracting commodities used as components of the
undertaking’s products, the undertaking may be able to arrange site audits. However,
if those actions to obtain primary data and information are not possible after
reasonable effort, the undertaking may rely on sector or country data estimating those
impacts (e.g., negative impacts on safety, health; risk of child labour etc.) in the location
of the mining activities.
147. Disclosing quantitative measures of indirect impacts does not produce relevant
information about the undertaking’s impact in all circumstances. Consider a
manufacturer of bike parts, who uses steel in its products, and therefore has an issue

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with pollution generated by its steel production. It is theoretically possible to estimate

the volume of pollution/quantify the environmental footprint as some have done.
However, this may not be necessary and would not be relevant information, as it would
fail to inform about the undertaking’s contribution to mitigate the pollution that derives
from its products. The undertaking could instead measure its performance in terms of
ESRS E5 metrics on circular economy.
148. When a reporting entity does not have data received directly from VC actors, after
making reasonable efforts, it shall estimate the information to be reported using sector
data or similar data as a starting point (ESRS 1 paragraph 69). Examples include Scope
3 emissions or living wage data of facilities in very high-risk countries, including beyond
the first tier of business relationships.
149. As set out in AR 73 of ESRS S1 Own workforce, the WageIndicator is indicated as a
potential source (with others) for calculating adequate wage benchmarks outside of the
EEA as the last option in the hierarchy. The WageIndicator provides information about
minimum and living wages for more than 200 countries which could be an example of
applicable benchmarks as referred to under ESRS S1-10 Adequate wages.
Undertakings can use this information to explain prioritisation of actions and targets in
specific countries or regions for both own workforce and workers in the VC. The
information from such sources could form part of the undertaking’s explanation under
ESRS 2 SBM-3 of how it identified and assessed material IROs. The exact living wages
may differ in certain facilities and are dependent on the composition of the family of a
worker, however these sources can be useful in the context of the materiality
assessment. Once wage has been identified as a material risk, it can be that more
accurate data is needed to set targets and to report on progress.
150. Undertakings need to be aware that setting up a reliable data collection system which
includes VC partners takes time. They may consider processes and controls to collect
data and report the information. The quantity and quality of VC information is likely to
improve over time, but until then sector data or similar sources can be a good starting
point. As mentioned in paragraph 28 above, information about each and every actor in
the VC is not required.
151. The use of appropriate estimates or proxies is critical for the quality of reported
information. The origin of the data may influence the quality of the information
provided in the sustainability statement. Therefore, transparent disclosure and
explanation of the use of estimates are essential.
152. ESRS 2 BP-2 paragraph 10 requires preparers to:
(a) identify the metrics for which estimates are used;
(b) describe the basis for preparation,
(c) the resulting level of accuracy and,
(d) where applicable, the planned actions to improve the accuracy in the future.

FAQ 10: Is a case of bribery not involving an employee relevant

for the reporting entity?
153. Consider a case where Q, an employee at a customer (XYZ) of the reporting
undertaking (ABC), was found to have been bribed by S, an employee at one of XYZ’s
suppliers. In this case, ABC would not have to disclose this under the metrics of ESRS
G1-4, as an employee of the reporting undertaking is not involved in the case and as

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explained in ESRS G1 paragraph 26. However, ABC would consider this information
when it considers the risks around corruption and bribery in the sector/geographical
area going forward.

4. VC map
154. The table below maps the disclosure requirements in the sector-agnostic ESRS and
whether reporting undertakings have to report VC information.
155. The VC map below does not cover disclosures that fall under entity-specific
disclosures mandated under ESRS 1 paragraph 11. It is the responsibility of the
undertaking to determine whether entity-specific VC information is required to allow
users to understand the undertaking’s material IRO’s and/or to meet the qualitative
characteristics of information per Appendix B of ESRS 1. (Paragraph 65 of ESRS 1)

VC coverage map of Set 1 ESRS

Level of VC coverage Disclosure Requirements with this level of VC coverage
1. The undertaking shall assess its material IROs across its VC IRO-1
2.The undertaking shall describe its VC SBM-1◘
3.The undertaking shall describe its material IROs and report where in the VC they arise SBM-3◘
4.The undertaking shall reflect BP-1/2◘, E1-2 to E1-4 E4-1 to E4-4, S2-1 to S2-5 G1-1,
whether and how policies, actions or SBM-2, E2-1 to E2-3, E5-1 to E5-3, S3-1 to S3-5 G1-2,
targets (PAT) cover VC.
GOV-4/5 E3-1 to E3-3, S1-1 to S1-5 S4-1 to S4-5 G1-3
5. The standard covers PAT for IROs that are linked to people in the VC. The S2 S4
undertaking shall disclose whether and how PAT cover VC. S3 4

6.The disclosure only reflects own GOV-1/3, E1-8 -E1-9, E3-4/5 S1-1 to S1- G1-4
operations, as no coverage of VC is IRO-2, E2-4◘, E4-5/6 175 to
required G1-6
E1-5 E2-6, E5-4 par 31
7.Disclosure of procured materials E2-5◘ E5-5◘
8.There are specific quantitative datapoints in this DR that requires VC coverage 6 E1-6 E1-7
9.There are specific qualitative datapoints in this E1-1 E4 IRO 1 par 17(a) E5-4
DR that requires VC coverage7 E4-1 par 13 E4-4 par 32(c) par 30

10.SFDR indicators8 listed in ESRS 2 VC to be covered to the extent that foreseen in the relevant
Appendix B technical standards
11.Other EU law (excluding SFDR) in ESRS 2 Appendix B VC to be covered

4
The standard ESRS S3 Affected communities covers a group of people that may also part of the undertaking’s
upstream and downstream VC when they also have business relationships with the undertaking.
5
Some consider DR S1-7 as requiring information about the VC however, these employees form part of own
workforce and therefore own operations.
6
Coverage of VC information does not mean necessarily collection of data from actors in the value chain, see
paragraphs 125 to 126 above.
7
Coverage of VC information does not mean necessarily collection of data from actors in the value chain, see
paragraphs 125 to 126 above.
8
The SFDR regulation is open for consultation and changes may follow.

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156. The above table should be read with the following additional notes for those DRs
marked with the symbol ◘.
DR Content
BP-1 To what extent the sustainability statement covers the undertaking’s upstream
and downstream VC.
BP-2 When metrics include VC data estimated using indirect sources, such as
sector-average data or other proxies, the undertaking shall:
i. identify the metrics; and
ii. describe the basis for preparation, E4-1 par 13
iii. the resulting level of accuracy and,
iv. where applicable, the planned actions to improve the accuracy in the
future.
SBM-1 Requires that value chain is covered but is not expected to trigger data
requests to actors in the value chain, i.e. can be covered by internal or public
information.
SBM-3 For each material IRO identified in the materiality assessment, the undertaking
shall report whether the undertaking is involved with the negative or positive
impact through its activities or because of its business relationships.
E2-4 AR 20 refers to procurement of microplastics
E2-5 Relates to the products/materials and/or substances procured which ends up
in products / manufacturing.
E5-5 Includes supplied material but does not expand to suppliers
E5-6 Waste treatment may sometimes require information from supplier who treats
waste
157. Per paragraph 114, for material IROs where the undertaking has policies, actions and
targets covering the VC, it should disclose this (ESRS 2 paragraphs 64(b), 67(b) and
70(b)). If not, either because the undertaking does not have such a PAT or because it
does not cover the VC, the undertaking will comply by indicating this.
158. The names of the disclosure requirements are provided in Appendix A.

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Appendix A: Names of disclosure requirements

1. The list of names of the disclosure requirements is to help in the use of the VC map.
ESRS 2 – General disclosures
DR 2-BP-1 – General basis for preparation of sustainability statement
DR 2-BP-2 – Disclosures in relation to specific circumstances
DR 2-GOV-1 – The role of the administrative, management and supervisory bodies
DR 2-GOV-2 – Information provided to and sustainability matters addressed by the undertaking’s administrative,
management and supervisory bodies
DR 2-GOV-3 – Integration of sustainability-related performance in incentive schemes
DR 2-GOV-4 – Statement on due diligence
DR 2-GOV-5 – Risk management and internal controls over sustainability reporting
DR 2-SBM-1 – Strategy, business model and value chain
DR 2-SBM-2 – Interests and views of stakeholders
DR 2-SBM-3 – Material IROs and their interaction with strategy and business model
DR 2-IRO-1 – Description of the processes to identify and assess material IROs
DR 2-IRO-2 – Disclosure Requirements in ESRS covered by the undertaking’s sustainability statement
Policies MDR-P – Policies adopted to manage material sustainability matters
Actions MDR-A – Actions and resources in relation to material sustainability matters
Metrics MDR-M – Metrics in relation to sustainability matters
Targets MDR-T – Tracking effectiveness of policies and actions through targets

ESRS E1- Climate change

DR E1-1 – Transition plan for climate change mitigation
DR E1-2 – Policies related to change mitigation and adaptation
DR E1-3 – Actions and resources in relation to climate change policies
DR E1-4 – Targets related to climate change mitigation and adaptation
DR E1-5 – Energy consumption and mix
DR E1-6 – Gross Scopes 1, 2, 3 and Total GHG emissions
DR E1-7 – GHG removals and GHG mitigation projects financed through carbon credits
DR E1-8 – Internal carbon pricing
DR E1-9 – Anticipated financial effects from material physical and transition risks and potential climate-related opportunities

ESRS E2 - Pollution
DR E2-1 – Policies related to pollution
DR E2-2 – Actions and resources related to pollution
DR E2-3 – Targets related to pollution
DR E2-4 – Pollution of air, water and soil
DR E2-5 – Substances of concern and substances of very high concern
DR E2-5 – Anticipated financial effects from pollution-related IROs

ESRS E3 - Water and marine resources

DR E3-1 – Policies related to water and marine resources
DR E3-2 – Actions and resources related to water and marine resources
DR E3-3 – Targets related to water and marine resources
DR E3-4 – Water consumption
DR E3-5 – Anticipated financial effects from water and marine resources-related IROs

ESRS E4 - Biodiversity and ecosystems

DR E4-1 –Transition plan and consideration of biodiversity and ecosystems in strategy and business model
DR E4-2 – Policies related to biodiversity and ecosystems
DR E4-3 – Actions and resources related to biodiversity and ecosystems
DR E4-4 – Targets related to biodiversity and ecosystems
DR E4-5 – Impact metrics related to biodiversity and ecosystems change
DR E4-6 – Anticipated financial effects from biodiversity and ecosystem-related IROs

ESRS E5 - Resource use and circular economy

DR E5-1 – Policies related to resource use and circular economy
DR E5-2 – Actions and resources related to resource use and circular economy
DR E5-3 – Targets related to resource use and circular economy

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ESRS E5 - Resource use and circular economy

DR E5-4 – Resource inflows
DR E5-5 – Resource outflows
DR E5-6 – Anticipated financial effects from material resource use and circular economy-related IROs

ESRS S1 - Own workforce

DR S1-1 – Policies related to own workforce
DR S1-2 – Processes for engaging with own workforce and workers’ representatives about impacts
DR S1-3 – Processes to remediate negative impacts and channels for own workforce to raise concerns
DR S1-4 – Taking action on material impacts on own workforce, and approaches to mitigating material risks and pursuing
material opportunities related to own workforce, and effectiveness of those actions
DR S1-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks
and opportunities
DR S1-6 – Characteristics of the undertaking’s employees
DR S1-7 – Characteristics of non-employee workers in the undertaking’s own workforce
DR S1-8 – Collective bargaining coverage and social dialogue
DR S1-9 – Diversity metrics
DR S1-10 – Adequate wages
DR S1-11 – Social protection
DR S1-12 – Persons with disabilities
DR S1-13 – Training and skills development metrics
DR S1-14 – Health and safety metrics
DR S1-15 – Work-life balance metrics
DR S1-16 – Compensation metrics (pay gap and total compensation)
DR S1-17 – Incidents, complaints and severe human rights impacts

ESRS S2 - Workers in the value chain

DR S2-1 – Policies related to value chain workers
DR S2-2 – Processes for engaging with value chain workers about impacts
DR S2-3 – Processes to remediate negative impacts and channels for value chain workers to raise concerns
DR S2-4 – Taking action on material impacts on value chain workers, and approaches to managing material risks and pursuing
material opportunities related to value chain workers, and effectiveness of those actions
DR S2-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks
and opportunities

ESRS S3 - Affected communities

DR S3-1 – Policies related to affected communities
DR S3-2 – Processes for engaging with affected communities about impacts
DR S3-3 – Processes to remediate negative impacts and channels for affected communities to raise concerns
DR S3-4 – Taking action on material impacts on affected communities, and approaches to managing material risks and
pursuing material opportunities related to affected communities, and effectiveness of those actions
DR S3-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks
and opportunities

ESRS S4 - Consumers and end-users

DR S4-1 – Policies related to consumers and end-users
DR S4-2 – Processes for engaging with consumers and end-users about impacts
DR S4-3 – Processes to remediate negative impacts and channels for consumers and end-users to raise concerns
DR S4-4 – Taking action on material impacts on consumers and end-users and approaches to managing material risks and
pursuing material opportunities related to consumers and end-users, and effectiveness of those actions
DR S4-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks
and opportunities

ESRS G1 - Business conduct

DR G1-1 – Business conduct policies and corporate culture
DR G1-2 – Management of relationships with suppliers
DR G1-3 – Procedures to address corruption or bribery
DR G1-4 – Incidents of corruption or bribery
DR G1-5 – Political influence and lobbying activities
DR G1-6 – Payment practices

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