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How to interpret ESRS E2: Pollution

Kirjoittanut
Jasper Akkermans
August 27, 2024
‱
8
minimiluku

The roll-out of the Corporate Sustainability Reporting Directive (CSRD) marks a significant step forward in enhancing the quality of corporate sustainability information across Europe.

It also places more than 50,000 companies in unfamiliar territory with the required double materiality assessment and the over 1.100 possible data points.

If your business is one of them, getting a clear understanding of the European Sustainability Reporting Standards (ESRS) – especially ESRS E2 on pollution – should be a top priority. Beyond regulatory compliance, ESRS E2 is an important topic to drive your business towards a more sustainable future and reduce environmental impact.

But what exactly is ESRS E2, and why is it so crucial? What are its core requirements? And how can you implement ESRS E2 effectively? Read on for everything you need to know about reporting on this topic.

The importance of ESRS E2 for pollution management

Pollution is a major environmental issue that affects ecosystems, public health, and sustainability. Addressing pollution in sustainability reports demonstrates an organization's commitment to reducing its environmental impact, providing transparency on its efforts to manage and mitigate harmful emissions and waste.

ESRS E2 is essential within the ESG framework because it ensures that pollution management is a priority. For example, a manufacturing company might disclose how it’s reducing air pollutants by upgrading to cleaner technologies, or a chemical company could report on how it's minimizing hazardous waste. 

This transparency builds trust with investors who prioritize sustainability and reassures regulators that the company is compliant with environmental standards. Additionally, clear pollution management can enhance a company’s reputation among eco-conscious consumers, leading to competitive advantages in the market.

What is ESRS E2 exactly?

ESRS E2 specifically addresses how organizations manage and disclose pollution-related impacts, risks, and opportunities. Its purpose is to ensure companies provide clear, detailed information on how they identify, mitigate, and manage pollution. 

This standard applies to various forms of pollution, including air, water, and soil, and is designed to help stakeholders understand a company’s environmental footprint and its efforts to reduce pollution.

ESRS E2 outlines several critical disclosure requirements. Companies must report on their pollution-related policies, actions, and resource allocation, including how they identify and address pollution risks and opportunities. 

They also need to disclose specific metrics and targets related to pollution reduction, such as the levels of air, water, and soil pollution, the management of hazardous substances, and the anticipated financial effects of pollution on their business. These disclosures provide a comprehensive view of a company’s approach to pollution management, ensuring transparency and accountability in their environmental practices.

Pollution reporting within the CSRD framework

Pollution reporting under the CSRD is a critical component of ensuring that companies provide transparent and detailed accounts of their environmental impact. ESRS E2 specifically requires companies to disclose information on how their operations contribute to air, water, and soil pollution, as well as the measures they are taking to mitigate these effects.

ESRS E2 interacts closely with other ESRS standards, particularly those related to environmental impact, such as ESRS E1 on climate change and ESRS E3 on water and marine resources. 

The ESRS E2 disclosure requirements

Impact, risk and opportunity management

E2-1: Policies related to pollution
To comply with ESRS E2, organizations must establish and disclose their policies related to pollution management in relation to material impacts, risks and/or opportunities. This is in relation to the Minimum Disclosure Requirements - Policy (MDR-P). These policies are crucial as they outline the company’s commitment to minimizing environmental harm, set the framework for pollution prevention, and guide internal practices. 

Examples of pollution-related policies include those aimed at reducing emissions, managing waste disposal, and controlling the release of hazardous substances. Implementing robust pollution policies can help organizations mitigate risks, improve regulatory compliance, and enhance their reputation as responsible corporate citizens.

E2-2: Actions and Resources Related to Pollution
ESRS E2 requires companies to detail the specific actions they are taking to manage pollution and allocate resources effectively. This involves outlining the strategies, initiatives, and operational changes being implemented to reduce pollution, such as adopting cleaner technologies, improving waste management practices, and investing in pollution control systems. This is to be reported in line with MDR-A.

Additionally, companies must report on the resources, both financial and human, dedicated to these efforts.

Metrics and targets

E2-3: Targets related to pollution
Companies must set clear and measurable targets for pollution reduction. These targets should be aligned with both regulatory requirements and broader sustainability goals. Companies are expected to track and report their progress towards these targets, providing transparency on their effectiveness in reducing pollution over time. 

E2-4: Pollution of air, water, and soil
ESRS E2 mandates the reporting of specific metrics related to the pollution of air, water, and soil. Companies must disclose data on emissions to the air, contaminants released into water bodies, and soil pollution levels. 

These metrics are critical for assessing the environmental impact of a company’s operations and are used to evaluate compliance with environmental standards. Accurate and comprehensive reporting on these pollutants helps stakeholders understand the extent of the organization’s environmental impact and the effectiveness of its mitigation strategies.

E2-5: Substances of Concern and Substances of Very High Concern
Companies must identify and disclose information about substances of concern and substances of very high concern (SVHCs) as part of their ESRS E2 obligations. This includes detailing how these hazardous substances are managed, minimized, or substituted to reduce their environmental and health impacts. 

E2-6: Anticipated financial effects from pollution-related impacts, risks, and opportunities

‍Companies are required to report on the financial implications of pollution-related impacts, risks, and opportunities under ESRS E2. This includes analyzing how pollution may affect the company’s financial performance, such as through potential fines, remediation costs, or changes in market demand due to environmental concerns. Additionally, companies should identify opportunities for financial gain, such as cost savings from improved efficiency or revenue from sustainable products.

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Practical steps for implementing ESRS E2 disclosure requirements

Conduct a double materiality assessment

Start understanding ESRS E2 by conducting a double materiality assessment to evaluate the significance of pollution within your organization’s operations. This involves identifying the types of pollution your business may be responsible for and determining their impact on both the environment and your stakeholders.

Engage with key stakeholders, including employees, customers, and regulatory bodies, to understand which pollution issues are most material to your organization. This helps in establishing what pollution sources are most significant, so that your company can prioritize efforts and allocate resources more efficiently.

Address key pollution issues

Focus your efforts on the primary areas of pollution: air, water, and soil. For air pollution, assess emissions from operations, such as greenhouse gasses or particulate matter, and explore ways to reduce these emissions. Water pollution management should involve monitoring effluents, controlling runoff, and ensuring proper wastewater treatment. Soil pollution requires careful handling of contaminants and hazardous waste to prevent soil degradation. Additionally, identify and manage substances of concern within your operations, ensuring they are safely handled, stored, and, where possible, replaced with safer alternatives.

Create a pollution management plan

Develop a comprehensive pollution management plan that outlines your strategies for controlling and reducing pollution. This plan should detail specific actions your organization will take to minimize environmental impact, such as adopting cleaner technologies, enhancing waste management processes, and improving operational efficiency. 

Your pollution management plan should include robust pollution policies, which are an integral part of ESRS E2 disclosures, specifically under the policy section of the minimum disclosure requirements. These policies provide the framework for your pollution prevention efforts and must be clearly articulated and communicated within your organization.

Set pollution reduction goals

Establish clear, measurable pollution reduction targets that align with your organization’s broader sustainability objectives. These targets should be specific to the types of pollution identified in your materiality assessment, whether it’s reducing emissions, cutting down on effluent discharge, or minimizing soil contamination. 

Monitor and report pollution metrics

Implement robust systems for tracking pollution metrics across air, water, and soil. This involves collecting accurate data on emissions, discharges, and contaminant levels, as well as monitoring the presence of hazardous substances within your operations. Regularly analyze this data to assess progress towards your pollution reduction targets and identify areas needing improvement. Report these metrics transparently, ensuring that stakeholders have a clear understanding of your environmental impact and the steps you are taking to mitigate it.

Assess financial impacts

Evaluate the financial implications of pollution on your organization, considering both risks and opportunities. Analyze potential costs associated with regulatory compliance, fines, remediation efforts, and the impact of pollution on your reputation. 

On the other hand, identify opportunities for cost savings through efficiency improvements, as well as potential revenue gains from sustainable products or practices. Understanding the financial impacts of pollution will help you make informed decisions and integrate environmental considerations into your overall business strategy.

Leverage technology for pollution reporting

Select and implement the right tools and software to streamline the collection, analysis, and reporting of pollution data. These tools can also help you identify trends, predict future pollution levels, and ensure compliance with ESRS E2 requirements. Leveraging technology not only simplifies the reporting process but also supports more proactive and informed decision-making in your pollution management efforts.

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