ESG

Reporting Guidelines
Guide for issuers

October 2023
September 2023


Disclaimer

This document is informed by the Polish and European

legislative landscapes and the international standards and
frameworks on sustainability reporting available by the cut-off
date of the publication (October 2023). As the relevant ESG
reporting standards and legal framework develop over time, the
contents of these Guidelines may have to be updated in the
future.

This publication has been produced by the Steward Redqueen

with the assistance of the European Bank for Reconstruction
and Development (EBRD) and the Warsaw Stock Exchange
(WSE). The contents of this document do not necessarily reflect
the views of the EBRD and the WSE. Whilst every effort was
taken to avoid errors, EBRD, WSE and Steward Redqueen
cannot accept responsibility for the accuracy of any statement
or information contained within the report, nor for any decision
made on the basis of any statement or information included
herein.

The document has been prepared in the English language. If

any text of the original edition in English is inconsistent with the
text of the Polish translation, the original edition in English shall
govern.

ESG Reporting Guidelines 2

Contents
Abbreviations and acronyms 5

Part 1 What is ESG and why should a company report on it? 8

1 Introduction 9
1.1 What is the purpose of the Guidelines? 9
1.2. How should the Guidelines be used? 9
1.3. What has changed in the updated Guidelines?  10
1.4 Sustainability reporting in Poland 10

2 ESG – what it is and why it is important 12

2.1 ESG – what does it mean?  12
2.2 Governance in ESG 13
2.3 The business case for ESG 14
2.4 Attracting capital – ESG in the financial sector  15

Part 2 EU ESG regulatory framework  16

3 Regulatory landscape  17
3.1 The EU Sustainable Finance Action Plan  17
3.2 Corporate Sustainability Reporting Directive (CSRD)  18
3.3 European Sustainability Reporting Standards (ESRS)  20
3.4 EU Taxonomy  20
3.5 Sustainable Finance Disclosure Regulations (SFDR)  22

4 Zoom-in on the ESRS  25

4.1 ESRS structure 25
4.1.1 Cross-cutting standards 26
4.1.2 Topical standards  28
4.2 Transitional provisions 29
4.3 Key reporting principles under ESRS 29
4.3.1 Double materiality 29
4.3.2. Sustainability due diligence 31
4.3.3 Value chain approach 33

Part 3 Reporting on ESG  34

5 Reporting process – key considerations  35

5.1 Format and location of sustainability disclosures under ESRS 35
5.2 ESRS vs other sustainability reporting standards 36
5.3 Assurance requirements under the CSRD 38

6 Reporting on climate change 39

6.1 Taskforce on Climate-related Financial Disclosures (TCFD) 39
6.2 ESRS E1 Climate Change: what companies need to know 40
7 Step-by-step approach to report on ESG 45
7.1 Step 1: Perform double materiality assessment  46
7.2 Step 2: Describe your sustainability governance 47
7.3 Step 3: Describe your strategy and business model 48
7.4 Step 4: Report on implemented policies and action plans 48
7.4 Step 5: Report relevant metrics and targets 49

8 Recommended ESG disclosure metrics 51

8.1 General information 53
8.2 Environmental disclosures  55
8.3 Social disclosures  59
8.4 Governance disclosures 63

Appendices 68

Appendix A – EU sustainability disclosure regulations 69

Appendix B – ESG ratings explained  70
Appendix C – Relevance of the Guidelines to investors 72
Appendix D – Reference list 75
Appendix E – Reporting template 76


Abbreviations and acronyms

CAPEX Capital expenditures IRO Impact, risk and opportunity

CDSB Climate Disclosure Standards Board ISSB International Sustainability Standards Board

CEE Central Eastern Europe NFRD Non-Financial Reporting Directive

Organisation for Economic Co-operation and

CO2 Carbon dioxide OECD
Development

Corporate Sustainability Due Diligence

CSDDD OPEX Operating expenditures
Directive

CSR Corporate Social Responsibility PAI Principal Adverse Impact

Corporate Sustainability Reporting

CSRD PRI Principles for Responsible Investment
Directive

DNSH Do No Significant Harm SASB Sustainability Accounting Standards Board

Dobre Praktyki Spółek Notowanych na

DPSN SDGs Sustainable Development Goals
GPW

European Bank for Reconstruction and

EBRD SFDR Sustainable Finance Disclosure Regulation
Development

European Financial Reporting Advisory

EFRAG SMEs Small Medium Enterprises
Group

ESG Environmental, Social and Governance TCFD Task Force on Climate-related Financial Disclosures

EU European Union TNFD Task Force on Nature-related Financial Disclosures

European Sustainability Reporting

ESRS TSC Technical Screening Criteria
Standards

GHG Greenhouse gases RTS Regulatory Technical Standards

GRI Global Reporting Initiative UN United Nations

International Financial Reporting

IFRS VRF Value Reporting Foundation
Standards

IR Integrated Reporting WSE Warsaw Stock Exchange (GPW)

ESG Reporting Guidelines 5



Foreword by the WSE

The shift to sustainable investing has accelerated sharply over The GPW Group’s ESG Strategy 2025 announced in December
the past two years. It has been driven by growing investor 2021 defines GPW’s long-term commitment to promoting
awareness of the benefits of integrating ESG factors into business sustainable development and implementing ESG initiatives.
strategies combined with regulatory pressure on asset managers As a public company, GPW can be a beacon for change for
and companies to disclose climate and sustainability-related other public companies. The objectives enshrined in the ESG
information so as to ensure reliable sustainable finance reporting. Strategy guide the GPW Group’s activities in three key pillars:
The experience has prompted the Warsaw Stock Exchange Environmental, Social, and Governance, and focus on achieving
and the European Bank for Reconstruction and Development to the following UN Sustainable Development Goals: Quality
update the 2021 ESG Reporting Guidelines. Guide for Companies education, Gender equality, Decent work and economic growth,
Listed on GPW. Responsible consumption and production, Climate action, and
Partnerships for the goals.
Stock exchanges are an important part of the capital market
infrastructure, in particular as regards good sustainable The current version of the ESG Reporting Guidelines. Guide for
investment practices including sustainability and climate Companies Listed on GPW has been produced in cooperation
disclosures, as well as reporting incentives and requirements. with partners: the European Bank for Reconstruction and
Stock exchanges can play a strategic role in developing the Development as well as Steward Redqueen, a consultancy
necessary tools and guidelines to educate and prepare issuers specialising in sustainability. Once again, this publication can
and investors in adapting to non-financial reporting. provide practical tools to support issuers in ESG disclosures
depending on the needs of the investors. In particular, it can
This trend is followed by the Warsaw Stock Exchange which has address the requirements of the CSRD, which will soon cover
for more than 20 years worked to develop corporate governance nearly four thousand entities in Poland, in the preparation for the
practices of listed companies on the capital market and broadly reporting of ESRS (European Sustainability Reporting Standards)
supported the integration of sustainability factors into the indicators. The Guidelines provide recommendations for a list of
business operations of companies. This includes the publication key ESG indicators expected by global stock market investors.
of the Best Practice for GPW-Listed Companies in force since The document’s chapters cover ESG definitions, the regulatory
2002, as well as the RESPECT index introduced in 2009 to environment, the approach to reporting, and the stages of
promote socially responsible business, replaced by WIG-ESG drafting a sustainability report. The appendix provides a list of
in 2019. In June 2023, GPW opened the Warsaw Sustainable indicators expected by the investors. As such, the Guidelines can
Segment, a dedicated section on the Catalyst website providing be a useful tool for issuers and investors in the adaptation to new
information about bonds issued by companies and public challenges in sustainable finance.
administration bodies to raise funding for sustainability projects.
On behalf of the Warsaw Stock Exchange, I would like to thank
In view of the growing educational needs and challenges in all issuers, investors, advisors, private and public institutions
the area of sustainable finance, GPW has decided to support that have been involved in the preparation of the ESG Reporting
companies even more strongly. These efforts include the ESG Guidelines for Companies Listed on GPW. In particular, we would
Leaders competition which rewards companies in categories like to thank our partners in the project: the entire team at the
such as ESG Strategy, ESG Innovation, and Educational Project. European Bank for Reconstruction and Development as well
The GPW Foundation and the Cracow University of Economics as Steward Redqueen. Thanks to their joint efforts, backed by
have launched a postgraduate programme “ESG Manager” in expertise, many years of experience and in-depth analysis, this
2023, while GPW Growth has launched the GPW Growth – ESG set of complementary information can be a useful resource for
in Practice programme. both reporting companies and report users.

Izabela Olszewska
Member of the Management Board, Warsaw Stock Exchange

ESG Reporting Guidelines 6



Foreword by EBRD

The global market shift to financing green and sustainable assets 2022, more than two-thirds of our investment in Poland were
has accelerated in the last few years. A combination of growing green. As part of our country policy engagement, the EBRD
awareness of the severity and urgency of the world’s sustainability is pleased to have supported our partner, the Warsaw Stock
crisis and consequent government policy, stakeholder pressure Exchange (WSE) in publishing its well-received sustainability
and increased scrutiny from institutional investors is driving reporting guidelines in 2021. Due to dynamic policy and
global financial flows towards sustainable investment. The recent regulatory developments in the EU and internationally, we have
regulatory developments in the European Union (EU) and the supported the 2023 update to respond to market needs, help
launch of the International Financial Reporting Standards (IFRS) businesses navigate the information requirements, and in this way
sustainability standards have fast-tracked the sustainability and facilitate the green transition in Poland.
transparency agenda.
The main objectives of the guidelines are to support issuers in
Environmentally sound investment and sustainable development their efforts to identify and manage ESG risks and opportunities
lie at the heart of our mandate, underpinned at project level by and guide the development of their ESG reporting practices.
our Environmental and Social Policy. In 2021 we published our The guidelines have been developed in line with the EU reporting
Green Economy Transition approach (2021-2025) through which requirements, including those under the Taxonomy Regulation,
we committed to increase green financing to at least 50 per cent the Sustainable Finance Disclosure Regulation and the Corporate
of its annual business volume by 2025 and to achieve cumulative Sustainability Reporting Directive (as well as the related reporting
greenhouse gas emissions reduction of 25 to 40 million tonnes standards), while also considering the national context and
per year by 2025. Our green investment in both 2021 and 2022 current level of sustainability reporting.
already reached 50 percent of total financing, representing an
early achievement of our targets. The WSE has a powerful role to play in facilitating the ESG data
flow between companies and investors by fostering transparency
When it comes to sustainability and climate ambition, we strongly and providing guidance to clients and wider stakeholders on the
believe in leading by example. EBRD was the first multilateral importance of harmonised and comparable ESG data reporting.
development bank to support the Task Force for Climate-related
Financial Disclosures in 2018, and since 2019 have published We hope that these guidelines will contribute to the development
four stand-alone TCFD-aligned reports. And we were one of the of a well-functioning and more resilient market, steering
first international financial institution to align its activities with the investment towards climate and sustainable development
goals of the Paris Agreement starting from 1 January 2023. priorities. We are confident that this work will provide companies,
investors, and other market participants in Poland with a clear
We are committed to supporting Poland in its transition to a and practical guide on their journey to a more sustainable
low-carbon and climate-resilient economy, in line with the EU economy.
sustainable finance agenda and international best practice. In

Jürgen Rigterink
EBRD’s First Vice President and Head of Client Services Group

ESG Reporting Guidelines 7



Part 1
What is ESG and why
should a company
report on it?

ESG Reporting Guidelines 8

1 Introduction

1 Introduction
In this chapter you will learn:

• What is the purpose of the Guidelines and how they should be used
• What has changed in the updated Guidelines
• How sustainability reporting has evolved in Poland over time

1.1 What is the purpose of the Guidelines?

These Guidelines set out the what, the why, and the how of European Sustainability Reporting Standards (ESRS), the
sustainability reporting. They identify key building blocks for Sustainable Finance Disclosure Regulation (SFDR) and the EU
effective communication on ESG issues and offer practical Taxonomy are covered extensively, and further guidance have
guidance for implementation. been provided to facilitate practical implementation.

The Guidelines have been developed with the following objectives It is important to stipulate that the Guidelines do not replace those
in mind: international developments nor do they pretend to be exhaustive
on the matters discussed therein. Rather, they aim to equip the
1) To support companies listed on the WSE in better, users with necessary knowledge to navigate the rapidly evolving
investor-oriented ESG reporting sustainability reporting landscape which is becoming more and
more demanding.
The Guidelines aim to contribute to better, more consistent,
comparable and reliable sustainability reporting that meets local 3) To strengthen development of sustainable finance in
and global market needs. They are a roadmap that builds on the Poland
internationally accepted reporting standards and frameworks and
sustainability reporting best practices, and provides companies On a macro-level, the Guidelines will further strengthen the
with a practical tool for setting up a focused reporting capacity. Polish capital market and business community on the global
arena. International investors are demanding more clarity from
2) To help companies prepare for the increasing regulatory companies on their ESG performance. The dialogue between
requirements investors and companies will intensify and the quality of ESG
reporting will impact access to capital to a greater extent.
The Guidelines offer a comprehensive overview of the latest
Thus, the Guidelines will inform the transition towards a more
regulatory developments around sustainability reporting. The
sustainable economy and raise the investment attractiveness of
Corporate Sustainability Reporting Directive (CSRD), the
the region.

1.2. How should the Guidelines be used?

The Guidelines have been developed to support companies It is important to emphasize, that the Guidelines are not a new
listed on the WSE. However, non-listed companies that aspire to standard, they do not replace legal obligations, nor do they
improve their sustainability reporting practices may also find them introduce new reporting requirements. Rather they are intended
relevant as the Guidelines content is centred around the CSRD to be used by the companies voluntarily to enhance their ESG
and the ESRS which will apply to certain non-listed undertakings. reporting capabilities.
Companies with little or no experience in ESG reporting will
appreciate the Guidelines introductory approach. They may also
use the minimum recommended disclosure metrics listed in
Chapter 8 as a starting point for their disclosures.

ESG Reporting Guidelines 9

1 Introduction

1.3. What has changed in the updated Guidelines?

The ESG Reporting Guidelines were first published in May 2021.1 the economy and the increasing need for companies to provide
This reviewed and updated version was produced to ensure transparency on how they identify, assess and manage material
alignment with regulatory developments around sustainability climate-related impacts, risks and opportunities, a new chapter
reporting. The update was informed by extensive analytical work dedicated to climate change was added. It covers the Task Force
as well as consultations with various WSE stakeholders, including on Climate-related Financial Disclosures (TCFD) framework as well
listed companies, fund managers and public administration. as climate-related disclosure requirements under the ESRS.

As a result, significant parts of the original text of the Guidelines Finally, it is worth noting that in the Appendices section the
were updated and expanded to ensure Guidelines’ continued Reporting Template (Appendix D) was added to facilitate reporting
relevance and accuracy. Regulatory developments around of the Guidelines’ minimum recommended disclosure metrics
sustainability reporting – notably, the CSRD and supplementing in a standardised format and allow them to be easily found by
it ESRS – will have a major impact on companies’ reporting investors and other users of sustainability reporting.
obligations in the EU. To help companies navigate this quickly
evolving landscape, the Guidelines discuss extensively key The Guidelines are tailored to specific needs of the Polish capital
reporting concepts under the CSRD (including double materiality market and business community. There is a consensus that ESG
principle, value chain approach, and sustainability due diligence) reporting is part of a broader drive towards more sustainable
as well as disclosure requirements covered by the ESRS. They economy. To inform their investment decisions, investors are
also highlight important information and offer useful tips to looking for robust data on material ESG impacts, risks and
facilitate first time implementation. opportunities. They want companies to be responsible and
accountable as they increasingly recognise that effective ESG
In addition to the CSRD and ESRS, the Guidelines consider other management reflects operational excellence. Consistent and
relevant regulatory measures such as the EU Taxonomy, SFDR and effective ESG reporting helps to build the sustainability profile
Corporate Sustainable Due Diligence Directive (CSDDD). They also of the company. The sustainability business case that drives
discuss the International Sustainability Standards Board (ISSB) operational choices and target-setting is a process of continuous
sustainability reporting standards that are being developed at the improvement that is reflected in the ESG reporting. By updating
global level, and offer a comparison table illustrating key difference these Guidelines, the WSE position itself at the forefront of
between the ESRS, the ISSB and the Global Reporting Initiative (GRI). regulatory developments among other stock exchanges around
the world that have published ESG reporting guidance for their
Given the wide ranging, systemic impacts of climate change on issuers.

1.4 Sustainability reporting in Poland

The international business community is increasingly addressing requirements have further strengthened companies reporting
environmental, social and governance issues to meet practices.
sustainability challenges. This is in part driven by regulations,
changing shareholder demands, a broader shift among capital While the ESG reporting has been improving in Poland, the
providers, societal pressures, and reputational concerns. breadth, depth and consistency of reported information continues
However, it is also driven by new business opportunities that to vary. To bridge those gaps and help companies to further
are emerging, such as alternative products and markets, better enhance their sustainability reporting capabilities, in 2021 the
access to talent and anticipation of changes in consumer WSE published its ESG Reporting Guidelines and subsequently
behaviour. revised and updated them to ensure their continued relevance
and accuracy. Additionally, issuers are expected to address
In Poland the sustainability agenda is gaining momentum as specific aspects of governance and accountability in line with the
well, and many companies have been reporting sustainability WSE code of corporate governance – Best Practice for GPW
information for a long time already. Figure 1 summarises how the listed companies 2021.
concept of sustainability reporting has evolved over time in line
with emerging regulations and companies’ increasing awareness At the same time, the WSE has been promoting transparency
of ESG risks and opportunities. on the Polish capital market and encouraging listed companies
to consistently improve their sustainability reporting practices,
The introduction of the Non-Financial Reporting Directive (NFRD) not least through the introduction of the RESPECT Index in 2009
and its transposition into the Polish legislation was a watershed – the first sustainability index in Central and Eastern Europe. In
moment for sustainability reporting in Poland. It helped to anchor 2019, the index was replaced by the WIG-ESG index, which
ESG reporting and increase the amount of ESG information became an underlying instrument for investment products.
published by the companies. The new and expanded regulatory

1 Warsaw Stock Exchange, ESG ESG Reporting Guidelines. Guide for issuers (Publ. May 2021).
https://www.gpw.pl/pub/GPW/ESG/ESG_Reporting_Guidelines.pdf

ESG Reporting Guidelines 10

1 Introduction

CSR ERA
—— Disclosure focused on good practices
—— Unclear how sustainability issues are integrated into the
2009 companies’ business strategy and risk management
Launch of the
RESPECT index —— Limited disclosure on material ESG risks and opportunities
—— Lack of visible progress over time

TRANSITION PERIOD
2017 Companies in scope of the NFRD had to report non-financial
Transposition of NFRD information for the first time in 2018.
into the Polish law

EMERGENCE OF ESG REPORTING

2019 —— Introduction of new regulatory measures aimed at strengthening
Launch of the
WIG-ESG index companies disclosures around material ESG issues
—— Increased integration of ESG considerations into business
strategy and financial planning
2021
Publication of the ESG —— Improved reporting on climate change
Reporting Guidelines
—— More quantitative ESG metrics and data are being disclosed

2022
Adoption of the CSRD

2023
Update of the ESG
Reporting Guidelines

Figure 1 - Evolution of sustainability reporting in Poland

ESG Reporting Guidelines 11

2 ESG – what it is and why it is important

2 ESG – what it is and why it is

important
In this chapter you will learn:

• What ESG means

• How governance fits in the context of broader ESG topics
• What are the benefits of improved ESG management and disclosure

It is in every company’s interest to adequately address material their operations and that are transparent and accountable to
ESG impacts, risks and opportunities. ESG risks just like their stakeholders are better positioned for a long-term success.
any other corporate risks may become detrimental to the Furthermore, companies face increasing pressure to report
company value. The cost to repair damages can be higher than on ESG matters driven by shareholder demands, regulation,
preventative measures and proactive management. Evidence reputational concerns and other factors.
shows that companies that fully integrate ESG consideration in

2.1 ESG – what does it mean?

ESG refers to a broad range of environmental, social and perspective (how the company operations impact the
governance factors that are used to evaluate how companies are environment and the society at large) or an outside-in perspective
managing their sustainability impacts, risks and opportunities. (how ESG issues can affect the company’s positions). Figure 2
These factors can be either considered from the inside-out provides examples of different ESG issues.

ENVIRONMENTAL SOCIAL GOVERNANCE

—— Climate change mitigation and —— Working conditions —— Corporate governance

adaptation —— Occupational health and safety —— Corporate culture and
—— Energy —— Employee diversity and responsible business conduct
—— Pollution and waste inclusion —— Bribery and corruption
—— Water and marine resources —— Development and training —— Political influence and lobbying
—— Biodiversity and ecosystems —— Human rights activities

—— Resource use and circular —— Community relations —— Relationships with suppliers

economy —— Impacts on consumers and —— Privacy and data security
end-users

Figure 2 - Examples of ESG issues

ESG Reporting Guidelines 12

2 ESG – what it is and why it isimportant

Environmental factors include issues that stem from or adequacy of those terms, because they imply that the information
affect the environment. They include but are not limited to in question has no financial relevance. Whereas ESG issues in fact
company impact on climate change (through GHG emissions); may have direct implications for the company financial performance.
its management of climate related risks and opportunities; the For example, a company with weak governance practices can
use of energy, water and other resources; pollution and waste face substantial regulatory fines and legal costs if it gets embroiled
management; and impact of its business activities on biodiversity in a related scandal. Similarly, mismanagement of environmental
and natural environment. and social issues can have a bearing on the company bottom line
through revenue loss, lower profitability and compliance costs,
Social factors refer to how the company affects humans among others.
it interacts with – its employees, clients, suppliers, local
communities and other stakeholders – and how they in turn can ESG, sustainability and CSR
affect the company. They include but are not limited to issues
such as treatment of workers in own operations and in the supply While the term ESG is more commonly used among investors, the
chain; employees’ health and safety; diversity and inclusion; term sustainability tends to be more common among companies.
respect for human rights; as well as impacts on local communities Although subtle nuances exist, both terms are used in the Guidelines
and users of company’s products and services. interchangeably as they refer to the same concept. On the other
hand, the term Corporate Social Responsibility (CSR) has been
Governance refers to a system of internal practices, controls and avoided, as it has somewhat different meaning. Firstly, CSR tends
procedures that a company adopts in order to govern itself, make to refer to the social dimension of ESG, placing less emphasis on
effective decisions, comply with the law, and meet the needs of the environmental and governance aspects. Secondly, CSR tends
its stakeholders. For further details, please refer to section 2.2 to be focused on the company external environment, whereas ESG
Governance in ESG. has a much broader scope by looking at the company internal and
external impacts, risks and opportunities. Finally, CSR is often used
ESG factors are sometimes referred to as “non-financial” or “extra- in relation to philanthropic activities or activities that are not related to
financial”. However, there has been some scepticism around the the company core business.

2.2 Governance in ESG

Governance encompasses a system by which a company is provisions, outlining best practices in relation to corporate
managed, operated and held to account. Its primary objective is to governance and investor communication. The DPSN were first
help build the environment of trust, transparency and accountability published in 2002 and are regularly updated to ensure their
that is key to ensure stability and encourage long-term investments. relevance and alignment with regulatory developments.

In the context of a broader range of ESG issues, governance can It should be noted, that DPSN2021 cover certain ESG aspects.
be broken down into two main areas: corporate governance and Specifically, sections 1.3 and 1.4 recommend that companies
business ethics (or responsible business conduct). The first one consider ESG issues as part of their business strategy and
covers issues such as: ownership structure; board composition, planning and provide disclosure on their climate risks and related
independence and compensation; approach to risk management KPIs. Companies are also asked to disclose employee pay gap
and internal controls; shareholder rights; and communication with ratio and inform whether actions have been taken to eliminate
shareholders. Business ethics on the other hand, refers to values, gender inequalities. Sections 2.1 and 2.2 address diversity on
standards and principles a company adopts to govern itself in corporate bodies.
a responsible way, in line with applicable laws and regulations,
and commonly accepted norms. It includes issues such as anti- The Guidelines integrate the DPSN2021 recommendations
corruption, whistle blowing, and political lobbying, among others. related to broader ESG aspects. However, they do not discuss
corporate governance aspects in great detail. As such, those two
The importance of governance for listed companies documents while complementary, should be read separately.

Governance is a fundamental component of the company ability

to create and maintain value in short, medium and long term.
Moreover, companies with well-functioning corporate governance
systems tend to be preferred as a long-term investments by
institutional investors. Useful resources:

In Poland, many traditional aspects of the corporate governance,

1. Best Practice for GPW listed companies 2021 (link)
such as board composition or remuneration policy are covered by
relevant regulations. Additionally, to foster transparency and good 2. Guidelines to the Best Practice 2021 (link)
governance practices, companies listed on the WSE are required concerning the application of the principles of the
to follow Best Practice for GPW listed companies 2021 („Dobre Best Practice for GPW Listed Companies 2021
Praktyki Spółek Notowanych na GPW 2021” or DPSN2021). 3. Best Practice Scanner (link)
The document serves as a complement to legal or regulatory

ESG Reporting Guidelines 13

2 ESG – what it is and why it isimportant

2.3 The business case for ESG

Investors (and other stakeholders) increasingly demand companies to be transparent on how they address material ESG issues. Figure 3
summarises how effective ESG management (or lack of thereof) can affect the company business operations.

PRO-ACTIVE ESG MANAGEMENT WEAK ESG MANAGEMENT

—— Compliance costs, regulatory fines and

—— Improved preparedness to manage risks penalties
—— Better long-term financial planning —— Higher risks of ESG-related incidents or
scandals
RISK MANAGEMENT

—— Higher costs resulting from inefficient

—— Cost savings resulting from more efficient
processes and inefficient use of resources
use of energy and other resources
—— High employee turnover and lower
—— Improved employee retention and
productivity (affecting recruitment costs)
productivity
OPERATIONAL —— Risk of labour unrest and work stoppages
PERFORMANCE

—— B2B opportunities (as ESG criteria are

increasingly part of the procurement
—— Loss of potential business contracts due to
requirements)
inability to meet ESG requirements
—— Gaining customers as a result of adding
—— Weaker competitive position
BUSINESS new and/or expanding existing sustainable
OPPORTUNITIES products and services

—— Improved access to capital (both debt and

—— Higher financing costs due to ESG risk
equity financing) including from long-term
premium
institutional investors
—— Loss of financing (incl. divestment)
ACCESS TO CAPITAL —— Lower pricing/better financing terms
AND FINANCING

—— Improved brand value

—— Loss of customers as a result of weak ESG
—— Being perceived as reputable employer practices or ESG-related incidents
affecting company ability to acquire and
—— Difficulty to attract talent
retain talent
—— Pressure from NGOs
REPUTATION —— Improved customer loyalty

—— Better understanding of stakeholders needs —— Risks of community opposition

and expectations —— Weak ESG rating affecting investors’ view of
—— Improved investor relations the company performance
STAKEHOLDER
ENGAGEMENT

 Figure 3 – Benefits of improved ESG management and disclosure

ESG Reporting Guidelines 14

2 ESG – what it is and why it isimportant

2.4 Attracting capital – ESG in the financial sector

Over the last decade, sustainability has gained importance in the and the way in which these risks are managed can increase or
financial sector. The sector is shifting away from a short-term decrease the cost of capital or impact access to it. For example,
investment approach that maximises financial returns towards increasing in popularity sustainability-linked bonds and loans
a long-term value creation model that optimises financial, social link the company’s borrowing cost to its performance on the
and environmental value subject to risk. Investors, lenders, predetermined ESG indicators or targets. This gives investors
insurers and other financial players alike are becoming aware an opportunity to support companies that are in transition, while
that corporate financial statements alone are not necessarily allowing companies in question to receive discount on the interest
sufficient in determining the company’s risk profile and potential. paid if the ESG KPIs are achieved. Another example are debt
It is acknowledged that both a company’s balance sheet and instruments that use the proceeds to fund projects with positive
profit and loss account can be impacted by ESG factors. Good environmental or social outcomes, such as green bonds or social
ESG management reflects operational excellence. Investors bonds. The need for issuers to respond to this demand for ESG
and other providers of financial services have recognised that information is clear. By disclosing data that investors seek, issuers
ESG has a significant impact on the (present and future) value can provide reassurance that they are effectively managing
creation of an organisation. The ESG risks a company may face, business risks and identifying opportunities.2

The UN Principles for Responsible Investment (PRI)

The PRI is the world’s leading proponent of responsible investment. It was established by 100 investment institutions in 2006, and
provides a list of six voluntary and aspirational investment principles outlining possible actions investors can take to incorporate ESG
issues into investment practice.

PRINCIPLE 1 Incorporate ESG issues into investment analysis and decision-making processes

PRINCIPLE 2 Be active owners and incorporate ESG issues into ownership policies and practices

PRINCIPLE 3 Seek appropriate disclosure on ESG issues by the entities in which we invest

PRINCIPLE 4 Promote acceptance and implementation of the Principles within the investment industry

PRINCIPLE 5 Work together to enhance effectiveness in implementing the Principles

PRINCIPLE 6 Report on activities and progress towards implementing the Principles.

Since its establishment PRI has been consistently growing. In 2010 it had over 700 signatories with USD 21 trillion AUM. As of
2021, the collective AUM represented by PRI signatories increased by 480% to US$121.3 trillion, and the number of signatories
increased to a total of 3,826 signatories2. From an issuer perspective, good ESG reporting is thus an advantage in attracting capital
from these investors.

For further information on the relevance of the Guidelines for investors please refer to Appendix C.

2 PRI website, accessed Feb 2023, https://www.unpri.org/about-us/about-the-pri

ESG Reporting Guidelines 15

2 ESG – what it is and why it isimportant

Part 2
EU ESG regulatory
framework

ESG Reporting Guidelines 16

3 Regulatory landscape

3 Regulatory landscape
In this chapter you will learn:

• What will be expected from the companies under the CSRD

• How to navigate the ESRS

• What is the link between CSRD and other regulations i.e. EU Taxonomy, SFDR and CSDDD

• How SFDR will impact listed companies

3.1 The EU Sustainable Finance Action Plan

The Sustainable Finance Action Plan3 was first introduced in • The CSRD and supplementing it ESRS;
March 2018 with the aim to channel more investment into • The EU Taxonomy setting forth a common classification
environmentally sustainable economic activities. Notably, those system to identify environmentally sustainable economic
that can accelerate transition to carbon-neutral and climate- activities; and
resilient economy by 2050. The plan is a part of larger sustainable
• The SFDR targeting financial market participants and
finance agenda supported by a broad set of new and amended
financial advisors, and aimed at increasing transparency on
legislations demanding greater transparency from companies
sustainability aspects in the financial sector.
and financial institutions on their sustainability impacts and the
way they are managing related risks. These regulations include,
among others:

EU SUSTAINABLE FINANCE AGENDA

SFDR EU TAXONOMY CSRD

To increase transparency on To create a common To increase the amount of high

GOAL sustainability aspects in the classification framework for quality ESG information and
financial industry environmentally sustainable data disclosed by companies.
and prevent greenwashing. economic activities.

Sustainable Finance Corporate Sustainability

Taxonomy Regulation
Disclosure Regulation Reporting Directive
LEVEL 1
Regulation (EU) 2020/852
Regulation (EU) 2019/2088 Directive (EU) 2022/2464

Climate Delegated Act

Regulatory Technical European Sustainability
LEVEL 2 Standards Environmental Delegated Act
Reporting Standards
Disclosures Delegated Act

Applicable to companies

Applicable to investors

Figure 4 – Overview of the key policy measures under of the EU sustainable finance agenda

3 https://finance.ec.europa.eu/publications/renewed-sustainable-finance-strategy-and-implementation-action-plan-financing-sustainable-growth_en

ESG Reporting Guidelines 17

3 Regulatory landscape

As presented in Figure 4, regulatory measures introduced as part • Level 2 measures that are adopted as Delegated Acts,
of the EU sustainable finance agenda consist of: and supplement Level 1 regulations by providing technical
guidance on how certain aspects should be implemented in
• Level 1 measures (regulations and directives) setting forth practice.
general framework governing certain issue, and

3.2 Corporate Sustainability Reporting Directive (CSRD)

What are the main changes introduced by the CSRD? banks, insurance providers, etc. – or PIEs being a parent
company of large groups exceeding 500 employees were
The CSRD (Directive 2022/2464)4 entered into force in January required to publish an annual non-financial statement containing
2023. It amends reporting requirements of the NFRD (Directive information and KPIs related to environmental, social and
2014/95/EU)5, which was adopted in 2014 and entered into force employee matters, respect for human rights, and actions to
in 2017, following the transposition into the Polish Accounting prevent bribery and corruption.
Act6.
The CSRD extends the scope of the NFRD and introduces
The NFRD was the first legal act requiring certain companies more detailed and ambitious reporting requirements for affected
across the EU to report on sustainability matters. Accordingly, companies. Some of the major changes include:
large public-interest entities (PIEs) – such as listed companies,

DOUBLE MATERIALITY EUROPEAN SUSTAINABILITY

INCREASED SCOPE
PERSPECTIVE REPORTING STANDARDS
CSRD extends the scope of the Companies will have to report on the Companies will be required to use
reporting obligations to all large financial impact of ESG issues on their mandatory European Sustainability
companies (listed and not listed) and businesses as well as on the impacts Reporting Standards (ESRS) to prepare
the SMEs listed on the EU regulated they operations have on people and the their sustainability disclosures.
markets (except micro enterprises) planet.
as well as (indirectly) certain non-EU
companies

TRANSPARENCY ON VALUE CHAIN LINKS TO BUSINESS MODEL AND

THIRD-PARTY ASSURANCE
IMPACTS STRATEGY
Companies reporting will need to cover Companies will have to explain how Companies will be subject to limited
their direct operations but also material material ESG issues impact (positively assurance by accredited auditors and
impacts, risks and opportunities in and negatively) their strategy and will likely be subject to more rigorous
upstream and downstream value chain. business model and whether any reasonable assurance in the future.
adjustments will be made to mitigate
negative sustainability impacts.

GOOD TO KNOW
Why there was a need to revise the NFRD?

The NFRD undoubtedly helped to improve the availability of ESG information among the companies in the EU. However,
many stakeholders (including investors) have been raising concerns that the disclosures provided by the companies
are insufficient and difficult to compare due to the lack of common unified sustainability reporting standard. Moreover,
it was necessary to align the NFRD requirements with the regulations introduced at the later stage as part of the EU
sustainable finance agenda, i.e. the EU Taxonomy and the SFDR.

4 Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No 537/2014, Directive
2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting (Publ. 14 December 2022). https://eur-lex.
europa.eu/legal-content/EN/TXT/?uri=CELEX:32022L2464
5 Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of
non-financial and diversity information by certain large undertakings and groups (Publ. 22 October 2014). https://eur-lex.europa.eu/legal-content/EN/
TXT/?uri=CELEX%3A32014L0095
6 Polish Accounting Act (Publ. 29 September 1994). https://isap.sejm.gov.pl/isap.nsf/download.xsp/WDU19941210591/U/D19940591Lj.pdf

ESG Reporting Guidelines 18

3 Regulatory landscape

Who is in scope of the CSRD? – name and registered office of the parent company that is
reporting sustainability information at the group level;
The CSRD will apply to the following entities:
– link to the consolidated management report;
• all companies listed on the EU regulated market, including – reference of this exemption in their own management report.
SMEs (except micro-enterprises)
When will the CSRD start to apply?
• all large companies exceeding two of the three following
criteria (as per the Accounting Directive 2013/34/EU):
CSRD provisions will become applicable in phases in line with the
– more than 250 employees timeline presented in Figure 5.
– net turnover exceeding EUR 40 million
From 2025 (reports covering FY2024), CSRD will start to apply
– balance sheet exceeding EUR 20 million
to companies already in scope of the NFRD (as transposed in
• (indirectly) non-EU companies operating in the EU meeting the Polish Accounting Act) as well as those which will become in
the following criteria: scope of the NFRD for 2024 as a result of exceeding associated
– net turnover generated in the EU exceeding EUR 150 thresholds.
million and a subsidiary in the EU that is in scope of the
CSRD From 2026 (reports covering FY2025) new requirements will be
extended to all large companies (as specified above).
– net turnover generated in the EU exceeding EUR 150
million and EU branch with an annual net turnover From 2027 (reports covering FY2026) new rules will apply
exceeding €40 million. to small and medium-sized enterprises (SMEs) listed on the
Subsidiaries will be exempted from publishing sustainability regulated markets (except micro-enterprises). However, they
statements if they have been included in the parent company will have the possibility of voluntary opt-out until 2029 (reports
consolidated management report that was prepared in covering FY2028), and will be able to report according to a
accordance with the CSRD requirements, or in the consolidated separate, proportionate standards that are being developed. This
sustainability reporting of the third-country parent company means that SMEs will be able to omit the sustainability information
prepared in accordance with the ESRS or other standard in their management reports for the first two years, but will
recognised as equivalent. The exemption is not available to large have to explain in the report why they have not provided such
listed companies. information.

Exempted subsidiaries must include in their management report From 2029 (reports covering FY2028) the new requirements will
the following information: also (indirectly) apply to certain non-EU companies.

Companies in scope of the NFRD

FY 2024
Large public interest entities or parent companies of large groups exceeding 500 employees and
(Reporting in 2025)
meeting one of the following criteria: net turnover > EUR 40 million and total assets > EUR 20 million

Large companies (listed and not listed) or parent companies of large groups
FY 2025
Meeting two of the following criteria: more than 250 employees, net turnover > EUR 40 million and
(Reporting in 2026)
total assets > EUR 20 million

SMEs listed on regulated markets

FY 2026
Meeting two of the following criteria: more than 10 employees, net turnover > EUR 700 thousands
(Reporting in 2027)
and total assets > EUR 350 thousands (possible “opt-out” clause until FY2028)

Certain non-EU companies (indirectly)

FY 2028
Generating net turnover > EUR 150 million in the EU and having an EU branch office with a net
(Reporting in 2029)
turnover of at least EUR 40 million, or EU subsidiary in scope of the CSRD

Figure 5 – CSRD implementation timeline

ESG Reporting Guidelines 19

3 Regulatory landscape

3.3 European Sustainability Reporting Standards (ESRS)

In line with the CSRD provisions, all companies subject to the provides technical assistance to the European Commission.
CSRD are required to use mandatory regulatory sustainability
reporting standards as a basis for preparing their sustainability Link to other regulations and sustainability reporting
disclosures. Those standards are referred to as European initiatives
Sustainability Reporting Standards (ESRS)7 and are adopted as
The ESRS consider European law and initiatives under the EU
Delegated Acts supplementing the CSRD.
sustainable finance agenda, EU Taxonomy, SFDR, proposal of
The first set of standards was adopted in July 2023 and contains the CSDDD, as well as sustainability reporting initiatives such as
12 sector agnostic standards. The standards architecture also ISSB, TCFD and GRI to ensure standards interoperability.
anticipates the adoption of sector-specific standards as well as
proportionate standards for SMEs and non-EU companies.
For a comprehensive overview of the ESRS
The standards are being developed by the European Financial please refer to Chapter 4.
Reporting Advisory Group (EFRAG) – a private organization that

3.4 EU Taxonomy

The EU Taxonomy (Regulation (EU) 2020/852)8 establishes a What are the EU Taxonomy classification criteria?
common classification system to help identify environmentally
sustainable economic activities. It applies to: To be classified as environmentally sustainable, an economic
activity must make substantial contribution to at least one of
• Companies in scope of the NFRD/CSRD, and the six environmental objectives outlined in Figure 6 whilst
• Financial market participants offering financial products in the not significantly harming any of the others. It must also comply
EU in scope of the SFDR. Notably, those offering products with the Minimum Safeguards such as OECD Guidelines, UN
with sustainability objectives or promoting characteristics Principles and ILO core conventions.
(SFDR Article 8 and 9 funds).

To be aligned with the EU Taxonomy, an economic activity must:

Substantially contribute 1 Climate change mitigation

to at least one of the
six environmental objectives 2 Climate change adaptation

3 Sustainable use and protection of water and marine resources

Do no significant harm
to any other objective 4 Transition to a circular economy

5 Pollution prevention and control

Comply with
Minimum Safeguards 6 Protection and restoration of biodiversity and ecosystems

Figure 6 - EU Taxonomy objectives and classification criteria

7 https://finance.ec.europa.eu/regulation-and-supervision/financial-services-legislation/implementing-and-delegated-acts/corporate-sustainability-reporting-
directive_en
8 Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable
investment, and amending Regulation (EU) 2019/2088 (Publ. 18 June 2020). https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32020R0852

ESG Reporting Guidelines 20

3 Regulatory landscape

The assessment whether an activity contributes to or The Disclosures Delegated Act (Delegated Regulation (EU)
harms the environmental objectives is made based on the 2021/2178)12 supplementing Art. 8 of the Taxonomy Regulation
harmonized performance thresholds, also called the Technical specifies the reporting timelines as well as the content,
Screening Criteria (TSC). They are outlined in the EU Taxonomy methodology and presentation of information to be disclosed
Delegated Acts9, which provide technical guidance on practical by financial and non-financial companies in scope of the NFRD/
implementation of the Taxonomy Regulation. Notably: CSRD, concerning the proportion of environmentally sustainable
economic activities in their business, investments or lending
• The Climate Delegated Act (Delegated Regulation (EU) activities.
2021/2139)10 and a the Complementary Climate Delegated
Act (Delegated Regulation (EU) 2022/121411, providing Accordingly, non-financial companies subject to NFRD/CSRD are
technical screening criteria for activities that can make a required to report the following KPIs:
substantial contribution to climate change mitigation and
climate change adaptation, and • proportion (%) of turnover derived from products or services
associated with environmentally sustainable economic
• The Environmental Delegated Act, providing technical
activities;
screening criteria for activities that can make a substantial
contribution to the remaining four environmental objectives. • proportion (%) of capital expenditures (CAPEX) related
to assets or processes associated with environmentally
What has to be reported under the EU Taxonomy? sustainable economic activities;
• proportion (%) of operating expenditures (OPEX) related
Although the EU Taxonomy is not intended to be a reporting
to assets or processes associated with environmentally
framework, it introduces certain reporting obligations on
sustainable economic activities.
companies and financial actors it applies to. Those obligations
differ depending on the type of entity and the underlying regulation Financial companies in scope of the NFRD/CSRD have to report
that is applicable to it. Figure 7 provides details on the timelines corresponding KPIs. Specifically, credit institutions have to
and disclosure requirements for different types of organisations. disclose Green Asset Ratio (GAR) which shows the proportion of
Taxonomy-aligned on-balance-sheet exposure in relation to the
total assets.

January 2022 (FY 2021) January 2023 (FY 2022) January 2024 (FY 2024)

Non-financial companies
Eligibility Alignment
(NFRD/CSRD)

Financial companies
(NFRD/CSRD) Eligibility Alignment

Financial market
Alignment (on the best effort basis) Alignment
participants (SFDR)

Figure 7 – EU Taxonomy reporting timeline

9 https://finance.ec.europa.eu/regulation-and-supervision/financial-services-legislation/implementing-and-delegated-acts/taxonomy-regulation_en
10 Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of
the Council by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing
substantially to climate change mitigation or climate change adaptation and for determining whether that economic activity causes no significant harm to
any of the other environmental objectives (Publ. 4 June 2021). https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32021R2139
11 Commission Delegated Regulation (EU) 2022/1214 of 9 March 2022 amending Delegated Regulation (EU) 2021/2139 as regards economic activities in
certain energy sectors and Delegated Regulation (EU) 2021/2178 as regards specific public disclosures for those economic activities (Publ. 9 March 2022).
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32022R1214
12 Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the
Council by specifying the content and presentation of information to be disclosed by undertakings subject to Articles 19a or 29a of Directive 2013/34/EU
concerning environmentally sustainable economic activities, and specifying the methodology to comply with that disclosure obligation (Publ. 6 July 2021).
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32021R2178

ESG Reporting Guidelines 21

3 Regulatory landscape

On the other hand, financial market participants who are subject If an economic activity is not included in the EU Taxonomy, it does
to the SFDR are required to provide product-level disclosures (in not mean that it has negative environmental impact. It simply
case of SFDR Article 8 and Article 9 funds) in line with the Art. means that it was not classified either because it has negligible
5 and 6 of the Taxonomy Regulation. The details on how this positive impact or is considered neutral.
information should be presented in pre-contractual disclosures
and periodic reports, including a mandatory template is specified The eligibility assessment is the first step of a full Taxonomy-
by the Regulatory Technical Standards (RTS) supplementing alignment analysis. The remaining four conditions have to be met
SFDR. to support the alignment conclusion. These are:

• Making a substantial contribution to at least one

environmental objective
Section 3.5 below provides
further information on SFDR. • Do no significant harm (DNSH) in relation to the other
environmental objectives
• Compliance with Minimum Safeguards to ensure that
What is the difference between the Taxonomy eligibility companies engaging in the sustainable activities meet certain
and alignment? social and business ethics standards
• Compliance with the technical screening criteria set out in the
The EU Taxonomy provides a list of business activities that Taxonomy Delegated Acts
have a potential to contribute to outlined therein environmental
objectives. For those activities, technical screening criteria were
developed to evaluate whether an economic activity can be For more information on the Minimum
considered environmentally sustainable. Those activities fall in Safeguards please also refer
scope of the EU Taxonomy (in other words they are Taxonomy- to Section 4.3.2 in Chapter 4
eligible).

Useful resources:

1. Taxonomy Regulation (link) 3. Environmental Delegated Act (link)

2. Climate Delegated Act (link) and a Complementary 4. Disclosures Delegated Act supplementing Article 8 of the
Climate Delegated Act including specific nuclear and gas Taxonomy Regulation (link)
energy activities in the list of economic activities covered 5. EU Taxonomy Navigator, including EU Taxonomy
by the EU Taxonomy (link) Compass and EU Taxonomy Calculator (link)

3.5 Sustainable Finance Disclosure Regulations (SFDR)

The SFDR (Regulation (EU) 2019/2088)13 was introduced in 2019 To provide end-investors with a better overview of the
and came into effect in March 2021. It imposes mandatory ESG sustainability profile of investment products, SFDR also requires
disclosure obligations on two types of financial entities: fund managers to classify their funds into the following categories:

• financial markets participants that manufacture and sell • Article 6 Funds – funds that have no specific ESG focus
financial products and perform portfolio management services • Article 8 Funds – funds that promote environmental or social
(i.e., asset managers, pension fund providers, banks and characteristics
insurers), and
• Article 9 Funds – funds that have sustainable investment as
• financial advisors. their objective

What is the objective of the SFDR? What must be disclosed under the SFDR?

The SFDR aims to increase transparency on the European capital Under the SFDR, financial actors must make a number of entity-
markets by requiring financial actors to report more accurately level and product-level disclosures in relation to sustainability
about their ESG risks and integration of sustainability aspects in risks and consideration of adverse sustainability impacts in their
the investment processes. investment processes, among other things. They must also
disclose sustainability-related information with respect to the

13 Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability related disclosures in the financial
services sector (publ. 27 November 2019), https://eur-lex.europa.eu/eli/reg/2019/2088/oj

ESG Reporting Guidelines 22

3 Regulatory landscape

financial products they offer. Products that promote environmental What will be the impact of the SFDR on the listed
or social characteristics or have a sustainable investment companies?
objective (so called Article 8 and Article 9 funds) are subject to
stricter disclosure rules. Required information must be disclosed While SFDR is applicable to financial actors, it will impact
through different channels: on the company website, in pre- companies indirectly through increased demand for ESG data
contractual documents and in periodic reporting. from investors as they will be seeking to fulfil their reporting
obligations.
Content, methodologies and presentation of the sustainability-
related disclosures required under SFDR is further specified in Listed companies should specifically take notice of the Principal
the Regulatory Technical Standards (RTS),14 which have been Adverse Impact (PAI) indicators, that fund managers subject
adopted in April 2022 and started to apply from 1 January 2023. to the SFRD are required to report across their investments
in a given period. PAI indicators are divided into mandatory
and voluntary ones and have been established for corporate,
sovereign, and real estate holdings. Mandatory PAI indicators for
corporate investments are outlined in Figure 8.

SFDR Mandatory PAIs applicable to corporate investments

1 GHG emissions Scope 1 GHG emissions15

Scope 2 GHG emissions
Scope 3 GHG emissions
Total GHG emissions

2 Carbon footprint Carbon footprint

3 GHG intensity of investee companies GHG intensity of investee companies

4 Exposure to companies active in the fossil Share of investments in companies active in the fossil fuel sector.
fuel sector

5 Share of non-renewable energy Share of non-renewable energy consumption and non-renewable energy production
consumption and production of investee companies from non-renewable energy sources compared to renewable
energy sources, expressed as a percentage.

6 Energy consumption intensity per high Energy consumption in GWh per million EUR of revenue of investee companies, per
impact climate sector high impact climate sector.

7 Activities negatively affecting biodiversity- Share of investments in investee companies with sites/operations located in or
sensitive areas near to biodiversity-sensitive areas where activities of those investee companies
negatively affect those areas.

8 Emissions to water Tonnes of emissions to water generated by investee companies per million EUR
invested, expressed as a weighted average.

9 Hazardous waste and radioactive waste Tonnes of hazardous waste and radioactive waste generated by investee companies
ratio per million EUR invested, expressed as a weighted average.

10 Violations of UN Global Compact principles Share of investments in investee companies that have been involved in violations of
and OECD Guidelines for Multinational the UNGC principles or OECD Guidelines for Multinational Enterprises.
Enterprises

11 Lack of processes and compliance Share of investments in investee companies without policies to monitor compliance
mechanisms to monitor compliance with with the UNGC principles or OECD Guidelines for Multinational Enterprises or
UN Global Compact principles and OECD grievance /complaints handling mechanisms to address violations of the UNGC
Guidelines for Multinational Enterprises principles or OECD Guidelines for Multinational Enterprises.

12 Unadjusted gender pay gap Average unadjusted gender pay gap of investee companies.

14 Commission Delegated Regulation (EU) 2022/1288 (Publ. April 2022), https://eur-lex.europa.eu/legal-content/EN/

TXT/?uri=CELEX%3A02022R1288-20230220
15 Definition of Scope 1, 2 and 3 GHG emissions are provided in Section 6.2

ESG Reporting Guidelines 23

3 Regulatory landscape

SFDR Mandatory PAIs applicable to corporate investments

13 Board gender diversity Average ratio of female to male board members in investee companies, expressed
as a percentage of all board member.

14 Exposure to controversial weapons Share of investments in investee companies involved in the manufacture orselling of
(anti-personnel mines, cluster munitions, controversial weapons.
chemical weapons and biological weapons)

Figure 8 – Mandatory PAIs applicable to corporate investments

Useful resources:

1. Sustainable Finance Disclosure Regulation (link)

2. Regulatory Technical Standards (link)

3.6 Corporate Sustainability Due Diligence Directive (CSDDD)

Beyond on-going developments related to the CSRD, the ESRS, When enforced, the directive will require companies to perform
the EU Taxonomy and the SFDR, the EU Commission proposed the following due diligence activities:
also other regulations further specifying companies’ obligations
around management of sustainability issues. • include due diligence in relevant policies;
• identify and mitigate any potential adverse environmental or
Specifically, in February 2022, European Commission proposed human rights impacts;
the Corporate Sustainability Directive (CSDDD)16, which will
• bring to an end or minimise actual impacts;
increase companies’ accountability for the negative environmental
and human rights impact across their value chain. The new • establish and maintain a complaints procedure;
directive is closely linked to the CSRD and the minimum • monitor the effectiveness of the due diligence policy and
safeguards included in the EU Taxonomy. actions;
• publicly disclose on due diligence.
The directive will require companies to identify and mitigate
(based on the severity and likelihood) any potential adverse
In terms of human rights due diligence, the CSDDD proposal is
impacts in their own operations, their subsidiaries and other
aligned with existing international standards. such as the UN’s
entities in their value chains with which they have direct and
Guiding Principles on Business and Human Rights, the OECD
indirect business relationships. These include issues such as
Guidelines for Multinational Enterprises, and the OECD Due
child and forced labour, abusive labour practices, unsafe working
Diligence Guidance for Responsible Business Conduct.
conditions, impacts on biodiversity, pollution, etc.

For more information on the sustainability due diligence please refer to Section 4.3.2 in Chapter 4

16 European Commission, Proposal for a directive on sustainability due diligence (Published Feb 2023),
https://commission.europa.eu/publications/proposal-directive-corporate-sustainability-due-diligence-and-annex_en

ESG Reporting Guidelines 24

4 Zoom-in on the ESRS

4 Zoom-in on the ESRS

In this chapter you will learn:

• How the ESRS are structured

• What elements are covered under cross-cutting and topical standards
• What does double materiality mean
• What are the due diligence requirements under the ESRS
• How the value chain approach will affect companies reporting obligations

4.1 ESRS structure

The ESRS will be published in phase over 2023 and 2024. The architecture also anticipates the adoption of sector-specific
first set of the ESRS has been already published and is comprised standards as well as proportionate standards for SMEs and non-
of 2 cross-cutting standards and 10 topical standards covering EU companies.
environmental, social and governance matters. The standards

Already published Coming later

CROSS-CUTTING STANDARDS SECTOR-SPECIFIC

STANDRDS
(coming later)
ESRS 1 ESRS 2
General requirements General disclosures
PROPORTIONATE
STANDARDS FOR SMEs
TOPICAL SECTOR-AGNOSTIC STANDARDS (coming later)

ESRS E1 ESRS E2 ESRS E3 ESRS E4 ESRS E5

E Climate
Pollution
Water and
marine
Biodiversity
and
Resource use
and circular
change
resources ecosystems economy

ESRS S1 ESRS S2 ESRS S3 ESRS S4

S Own workforce Workers in the
value chain
Affected
communities
Consumers
& end-users

ESRS G1
G Business
conduct

Figure 9 – ESRS architecture

ESG Reporting Guidelines 25

4 Zoom-in on the ESRS

4.1.1 Cross-cutting standards

ESRS 1 (General Requirements) and ESRS 2 (General Disclosures) set out general requirements that companies should comply with when
preparing their sustainability reporting. They are cross-cutting and apply at a general level to all sustainability matters.

ESRS Name Covered aspects Nr of DRs

ESRS 1 General requirements General guidance on key reporting principles and concepts -

General disclosure requirements around: 12

—— reporting issues
ESRS 2 General disclosures —— governance
—— business model and strategy
—— materiality assessment process

Figure 10 – Cross-cutting standards

ESRS 1 outlines general requirements that companies reporting according to the ESRS need to follow. Unlike the rest of the standards,
ESRS 1 does not include any specific disclosure requirements (DRs). Instead, it provides a conceptual framework explaining key reporting
principles and concepts. It also specifies how sustainability information should be presented. Figure 11 outlines the content of ESRS 1.

Content of ESRS 1

Ch. 1 Categories of ESRS Standards, reporting areas and drafting conventions

Ch. 2 Qualitative characteristics of information

Ch. 3 Double materiality as the basis for sustainability disclosures

Ch. 4 Due diligence

Ch. 5 Value chain

Ch. 6 Time horizons

Ch. 7 Preparation and presentation of sustainability information

Ch. 8 Structure of sustainability statements

Ch. 9 Linkages with other parts of corporate reporting and connected information

Ch. 10 Transitional provisions

Figure 11 – Content of the ESRS 1

For more information on specific aspects covered in ESRS 1 please go to the following sections of the Guidelines:

− Section 4.3.1 – Double materiality

− Section 4.3.2 – Sustainability due diligence
− Section 4.3.3 – Value chain approach
− Section 4.2 – Transitional provisions
− Section 5.1 – Presentation of sustainability information

ESG Reporting Guidelines 26

4 Zoom-in on the ESRS

ESRS 2 outlines the cross-cutting disclosure requirements. This includes general characteristics of the company, an overview of its
business model, strategy and governance structure as well as materiality assessment of sustainability impacts, risks and opportunities, and
sustainability due diligence process.

Disclosure requirements in ESRS 2 (as well as in the topical standards) are structured around the following areas:

• governance (GOV),
• strategy (SBM),
• impact, risk and opportunity (IRO) management, and
• metrics and targets.

The structure is aligned with the one of the TCFD and ISSB to ensure standards interoperability.

1 2 3 4
GOVERNANCE METRICS AND
STRATEGY (SBM) IRO MANAGEMENT
(GOV) TARGETS

Governance process in How the company How sustainability How the company
place to manage and strategy and business impacts, risks and is measuring its
monitor sustainability model interacts with opportunities (IRO) are performance on
impacts, risks and material sustainability identified, assessed sustainability matters,
opportunities. impacts, risks and and managed through including progress
opportunities, including policies and actions. towards targets.
the strategy to address
them.

Figure 12 – Structure of ESRS 2

Figure 13 specifies disclosure requirements under ESRS 2.

Disclosure requirements

Basis for preparation BP-1 – General basis for preparation of the sustainability statements
(BP) BP-2 – Disclosures in relation to specific circumstances

GOV-1 - The role of the administrative, management and supervisory bodies

GOV-2 – Information provided to and sustainability matters addressed by the undertaking’s administrative,
management and supervisory bodies
Governance
GOV-3 - Integration of sustainability-related performance in incentive schemes
GOV-4 - Statement on due diligence
GOV-5 - Risk management and internal controls over sustainability reporting

SBM-1 – Strategy, business model and value chain

Strategy SBM-2 – Interests and views of stakeholders
SBM-3 - Material impacts, risks and opportunities and their interaction with strategy and business model(s)

Materiality assessment
IRO-1 - Description of the processes to identify and assess material impacts, risks and opportunities
IRO-2 – Disclosure Requirements in ESRS covered by the undertaking’s sustainability statements
IRO management
Minimum disclosure requirements on policies and actions
MDR-P – Policies adopted to manage material sustainability matters
MDR-A – Actions and resources in relation to material sustainability matters

Minimum Disclosure Requirements on metrics and targets

Metrics and targets MDR -M – Metrics in relation to material sustainability matters
MDR-T – Tracking effectiveness of policies and action plans through targets

Figure 13 – Disclosure Requirements of ESRS 2

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4 Zoom-in on the ESRS

It should be noted that ESRS 2 has to be applied jointly with the topical ESRS. Appendix D in ESRS 2 outlines the requirements in the
topical ESRS that need to be taken into account when reporting against Disclosure Requirements in ESRS 2.

4.1.2 Topical standards

Topical standards are divided into environmental, social, and governance standards. Disclosure requirements contained herein are sector-
agnostic, meaning they are applicable to all companies independent of the sector(s) they operate in. All topical standards follow the same
four-pillar approach as ESRS 2 in terms of structure and content.

ENVIRONMENTAL STANDARDS

ESRS Name Covered aspects

• Climate change mitigation

ESRS E1 Climate change • Climate change adaptation
• Energy
• Pollution of air, water, soil, living organisms and food resources
ESRS E2 Pollution • Substances of concern and very high concern
• Microplastics
• Water consumption and withdrawal
ESRS E3 Water and marine resources • Water discharges
• Use of marine resources
• Biodiversity loss
ESRS E4 Biodiversity and ecosystems • Impacts on the state of species
• Impacts on the ecosystems

Resource use and circular • Resource use

ESRS E5
economy • Waste

SOCIAL STANDARDS

ESRS Name Covered aspects

• Employees
ESRS S1 Own workforce • Non-employees (e.g. independent contractors, temporary workers, people
provided by companies primarily engaged in “employment activities”)

• All other non-employees not included in ESRS S1

• Upstream value chain
ESRS S2 Workers in the value chain • Downstream value chain
• Joint ventures or special purpose vehicles
• Other workers particularly vulnerable to negative impacts

• Local communities
ESRS S3 Affected communities
• Indigenous people

• Privacy
• Product quality and safety
ESRS S4 Consumers and end-suers
• Responsible marketing practices
• Access to products and services

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4 Zoom-in on the ESRS

GOVERNANCE STANDARDS

ESRS Name Covered aspects

• Corporate culture and responsible business conduct

• Bribery and corruption
ESRS G1 Business Conduct • Political influence and lobbying activities
• Relationships with suppliers
• Payment practices

GOOD TO KNOW
It is important to note that not all topical standards will be applicable to all companies. Companies’ disclosures will be
subject to the materiality assessment. Only topics determined to be material should be covered in the sustainability
statements. For the topics that have been assessed as not material the company should only explain how it has
concluded that the topic is not material.

4.2 Transitional provisions

To facilitate first time application of the ESRS, a number of emissions (1-year phase-in)
transitional provisions have been included delaying application of – Disclosure requirements in ESRS S1 “Own workforce”
certain reporting requirements. Specifically: (1-year phase-in)

• All companies, regardless of their size, may omit information – Disclosure requirements in ESRS E4 “Biodiversity and
related to: ecosystems” (2-year phase-in)

– Their value chain for the first three years of reporting (if – Disclosure requirements in ESRS S2 “Value-chain
they are unable to obtain necessary data) workers” (2-year phase-in)

– Anticipated financial impacts related to risks from – Disclosure requirements in ESRS S3 “Affected
environmental issues (1-year phase-in) communities” (2-year phase-in)

– Certain data points related to their own workforce (social – Disclosure requirements in ESRS S4 “Consumers and
protection, people with disabilities, work-related illness, end-users” (2-year phase-in)
and work-life balance) (1-year phase-in)
The full list of phased-in disclosure requirements is specified in
• Companies or groups with less than 750 employees may also
the Appendix C of ESRS 1. Chapter 10 of ESRS 1 provide further
omit:
information on the transitional provisions.
– Disclosure of Scope 3 GHG emissions and total GHG

4.3 Key reporting principles under ESRS

4.3.1 Double materiality

Companies subject to the CSRD are required to describe the process of identifying material ESG issues using double
materiality principle. The outcome of the materiality assessment should not only inform the company business strategy
but is necessary to determine which ESG topics should be discussed in its sustainability statements.

While certain ESG topics are relevant to all companies, in general identify and prioritise ESG issues according to their relevance to
companies’ exposure to different ESG issues will vary depending the company and the impact they may have on its ability to create
on their sector of operations, company-specific circumstances, value in short, medium, and long term.
and other contextual factors. Materiality assessment helps to

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4 Zoom-in on the ESRS

Materiality – what does it mean? Double materiality is a union of the financial and impact
materiality. An ESG topic is considered material from a double
The concept of materiality is commonly used in the context materiality perspective if:
of financial accounting and disclosure, where information is
considered material if omitting, misstating or obscuring it could 1) it is material from the financial materiality perspective, or
influence the economic decisions of the users of financial 2) if it is material from the impact materiality perspective, or
statements. In other words, materiality determines whether
3) if it is material from both perspectives.
specific information should be included in the corporate financial
disclosures.
MATERIAL
UBLE ITY
In the context sustainability disclosure, materiality is somewhat DO
more complex, and can be divided into two components: financial IMPACT
materiality and impact materiality. MATERIALITY

Financial materiality refers to actual and potential ESG risks

and opportunities that may have material implications for the
company’s financial positions and operational performance. An
ESG topic is considered material form the financial materiality
perspective, if it triggers financial impacts on the company Company impact on the environment and society
(i.e. it affects its revenues, costs, assets or liabilities).
Sustainability risks and opportunities
Impact materiality refers to actual and potential adverse impact
of the company activities on the environment and society at large.
An ESG topic is considered material from the impact materiality
perspective, if a company can be linked to negative environmental
and social impacts either through its direct business activities or
indirectly through its value chain. FINANCIAL
MATERIALITY
Impact assessment should be based on the following factors:

• scale of the impact (how severe is the impact),

• scope of the impact (how widespread is the impact), and
Figure 14 – Double materiality perspective
• its irremediable character (whether and to what extend the
negative impacts can be remediated).
• and its likelihood (in case of potential impacts).

GOOD TO KNOW
Different sustainability reporting frameworks and standards use their own definition of materiality, which depends on
the type of audiences they are serving. For example, the SASB Standards and the IR framework (which in 2021 have
been consolidated by the IFRS/ISSB and serve as a basis for development of the ISSB global sustainability reporting
standards) follow the financial materiality perspective as their goal is to facilitate disclosure to investors and other
financial stakeholders. On the other hand, the GRI Standards are more closely aligned with the impact materiality
perspective.

Sustainability reporting frameworks and standards are discussed in more detail in Section 5.2.

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4 Zoom-in on the ESRS

4.3.2. Sustainability due diligence

The ESRS require companies to provide a description of the sustainability due diligence process implemented with regard to the
sustainability matters. The outcome of that process should be used to inform the company materiality assessment.

Sustainability due diligence is a process by which a company ESRS 1 discusses broadly the sustainability due diligence process
identifies, prevents, mitigates and accounts for how it addresses and provides a list of core elements of sustainability due diligence
its actual and potential negative impacts on the environment which were developed based on the international references
and people throughout its value chain. Those impacts could be (i.e. the UN Guiding Principles on Business and Human Rights,
caused or contributed to by the company itself or its value chain, and the OECD Guidelines for Multinational Enterprises). Figure
including through its products or services, as well as through its 15 presents the main steps of the sustainability due diligence
business relationships. outlined in the ESRS and related Disclosure Requirements.

SUSTAINABILITY DUE DILIGENCE STEPS REFERENCE TO DR

Embedding sustainability due diligence in governance,

0 ESRS 2 GOV-2, GOV-3, SBM-3
strategy and business model

1 Engaging with affected stakeholders ESRS 2 GOV-2, SBM-2, IRO-1, MDR-P + topical standards

Identifying and assessing negative impacts on people

2 and the environment ESRS 2 IRO-1, SBM-3

Taking action to address negative impacts on people a

3 ESRS 2 MDR-A + topical standards
nd the environment

4 Tracking the effectiveness of these efforts and communicating ESRS 2 MDR-M, MDR-T + topical standards

Figure 15 – Core elements of the sustainability due diligence

In line with the disclosure requirement GOV-4 in ESRS 2, companies’ approach to sustainability due diligence has to be described in the
statement on due diligence.

TIPS
It is important to note that, while the topic of sustainability due diligence is broadly covered in ESRS 1, the standard does
not impose specific requirements on how the process should be performed. Rather, it refers to the guidance provided by
international instruments such as: the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for
Multinational Enterprises.
More detailed requirements related to the sustainable due diligence process in the value chain will be established by the
Corporate Sustainability Due Diligence Directive (CSDDD), which is currently under development. Accordingly,
certain large companies will have to report how they address actual and potential negative impacts that their operations
have on people and the environment.

The CSDDD is discussed in more detail in Section 3.6.

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4 Zoom-in on the ESRS

TIPS
Companies are encouraged to consult the OECD Due Diligence Guidance for Responsible Business Conduct which
provides practical, clear explanations of how to implement due diligence as recommended in the OECD Guidelines
for Multinational Enterprises. The Guidance includes explanations, tips and illustrative examples of the due diligence,
and builds on the approaches specified in the sector-specific due diligence guidance that were published earlier by the
OECD.

Sustainability due diligence should be an on-going exercise that responds to the company changing business
circumstances and context. Companies should regularly evaluate the effectiveness of their management systems and
processes as well as potential changes to their risk exposure to be able to mitigate and address adverse impacts. If all
identified impacts cannot be addressed at once, companies can prioritise them based on their severity and likelihood.

Sustainability due diligence provisions in the EU Taxonomy • The OECD Guidelines for Multinational Enterprises17
and the SFDR – which provide a set of recommendations for responsible
business conduct. They cover all key areas of business
Elements of the sustainability due diligence process are also responsibility, including human rights, labour rights,
embedded in the EU Taxonomy and the SFDR. environment, bribery, consumer interests, as well as
information disclosure, science and technology, competition,
To be classified as environmentally sustainable under the EU
and taxation.
Taxonomy, economic activity must comply with Minimum
Safeguards. This is to ensure that companies engaging in the • The UN Guiding Principles on Business and Human
sustainable activities meet certain social and business ethics Rights (UNGPs)18 – which provide actionable steps for
standards in the area of: human rights and labour rights, bribery companies to prevent, address and remedy human rights
and corruption, taxation, and fair competition. abuses in their operations.
• The eight fundamental conventions of the International
Accordingly, to be classified as Taxonomy-aligned companies Labour Organisation on Fundamental Principles and Rights
need to demonstrate that they meet the criteria for responsible at Work19
business conduct outlined in the following documents:
• The International Bill of Human Rights20 – covering five
core human rights treaties of the United Nations.

GOOD TO KNOW
The EU Platform on Sustainable Finance Report on Minimum Safeguards provides additional guidance and clarification
on the matter of minimum safeguards and how companies should approach it in practical terms.

The SFDR also includes elements of sustainability due diligence. participants have to provide extensive disclosure on the
Notably, they have been incorporated under the Principal consideration of PAIs of their investments, including a statement
Adverse Impacts (PAIs). The SFDR provides a list of adverse on their due diligence policies and a principal adverse impacts
impacts spanning across environmental and social themes report.
along with quantifiable indicators. Accordingly, financial market

17 OECD, OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. (Publ. 2023) https://www.oecd-ilibrary.org/finance-and-
investment/oecd-guidelines-for-multinational-enterprises-on-responsible-business-conduct_81f92357-en
18 United Nations, Human Rights – Office of the High Commissioner, Guiding principle on business and human rights. (Publ. 2011) https://www.ohchr.org/
documents/publications/guidingprinciplesbusinesshr_en.pdf
19 ILO, Fundamental Conventions. https://www.ilo.org/global/standards/introduction-to-international-labour-standards/conventions-and-recommendations/
lang--en/index.htm
20 United Nations, Human Rights – Office of the High Commissioner. The international bill of human rights. (Publ. 10 December 1948).
https://www.ohchr.org/documents/publications/compilation1.1en.pdf

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4 Zoom-in on the ESRS

4.3.3 Value chain approach

The ESRS require companies to follow the value chain approach when preparing their sustainability disclosures. Accordingly,
companies have to be much more familiar with activities and processes they rely on to create their products and services (from their
conception to delivery, consumption and end-of-life).

In line with the ESRS provisions, the scope of the company and relies on to create its products or services (e.g. suppliers).
sustainability statement should be consistent with the scope of Downstream value chain includes activities and entities that a
its financial statements but extended to include information on company relies on or interacts with as it provides its products
material impacts, risks and opportunities connected to its direct or services (e.g. distributors, customers). Figure 16 depicts an
and indirect business relationships in the value chain. This doesn’t example of a value chain broken down into different stages.
mean that companies are required to report on all entities in their
value chain. Only material value chain information should be Reporting on material value chain impacts, risks and opportunities
included. should be

Assessment of material impacts, risks and opportunities should • informed by the outcome of the sustainability due diligence
be performed along the value chain. To do that companies process and the materiality assessment;
need to map out their upstream and downstream impacts, in • consistent with specific requirements of the topical ESRS (if
addition to impacts in its direct operations. Upstream value chain such exist).
includes activities, resources and relationships the company uses

UPSTREAM OWN OPERATIONS DOWNSTREAM

Sourcing
of materials Production Distribution User phase After-use

Figure 16 – Example of a company value chain

GOOD TO KNOW
The ESRS recognise that it might be challenging for companies to obtain information from partners in their upstream
and downstream value chain. To address that issue, section 10.2 of ESRS 1 contains transitional provision related to
value chain reporting. Accordingly, for the first three years of the reporting under ESRS, a company may be exempted
from reporting value chain information if such information is not available. Nonetheless, it should explain:
• the efforts made to obtain relevant value chain information,
• the reasons why this information could not be obtained, and
• plans to obtain such information in the future.

In such case, the ESRS allow companies to estimate the information to be reported using indirect sources such as
sector-average data and other proxies.

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4 Zoom-in on the ESRS

Part 3
Reporting on ESG

ESG Reporting Guidelines 34

5 Reporting process – key considerations

5 Reporting process – key

considerations
In this chapter you will learn:

• Where the sustainability information should be presented

• How the ESRS interact with other sustainability reporting standards and frameworks
• What are the audit requirements under the CSRD

5.1 Format and location of sustainability disclosures under ESRS

Companies subject to the CSRD should follow requirements outlined in ESRS 1 with regard to the location and
presentation of sustainability disclosures.

Location and presentation of sustainability disclosures

Companies in scope of the CSRD have to publish their sustainability information in a dedicated section of the management report called
sustainability statements. Sustainability statements have to be structured into four parts:

ESRS 2 General Disclosures:

• Specific topical disclosure requirements from topical ESRS
GENERAL
1 • Additional disclosure requirements from sector specific ESRS
INFORMATION
• List of disclosure requirements complied with
• Table of all the datapoints deriving from other EU legislation

Disclosures pursuant to Article 8 of the Taxonomy Regulation

ESRS E1 Climate change (if relevant)
• Impact, risk and opportunity management and Metrics and targets disclosure requirements from ESRS E1
ENVIRONMENTAL
2 • Additional disclosure requirements from sector specific ESRS
INFORMATION
• Potential additional entity specific information
↓
Next material topic (if relevant)

ESRS S1 Own workforce (if relevant)

• Impact, risk and opportunity management and Metrics and targets disclosure requirements from ESRS S1
SOCIAL • Additional disclosure requirements from sector specific ESRS
3
INFORMATION • Potential additional entity specific information
↓
Next material topic (if relevant)

ESRS G1 Business Conduct (if relevant)

GOVERNANCE • Impact, risk and opportunity management and Metrics and targets disclosure requirements from ESRS G1
4
INFORMATION • Additional disclosure requirements from sector specific ESRS
• Potential additional entity specific information

Figure 17 - Example of a structure of sustainability statement under ESRS

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5 Reporting process – key considerations

Content index and datapoints deriving from other EU administrators and financial institutions for their own reporting
legislation purposes. If a company concludes that a datapoint is not
material, it will have to explicitly state that.
To help users navigate their sustainability disclosures, companies
will have to provide a list of all disclosure requirements they have Format of sustainability disclosures
complied with as well as the page number and/or paragraphs
where the related disclosures are located in the sustainability The management report has to be prepared in the XHTML format.
statements. All sustainability disclosures, including key performance indicators
required under Article 8 of the Taxonomy Regulation, have to be
Additionally, companies should provide a table with all datapoints digitally ‘tagged’ to make them machine readable as they will
listed in the Appendix B of ESRS 2 indicating where they can feed into the European Single Access Point (ESAP) that will be
be found in their sustainability statement. These datapoints introduced in the future.
are needed by the financial market participants, benchmark

5.2 ESRS vs other sustainability reporting standards

Companies all over the world are increasingly expected to and comparable reporting. Some of the key developments
communicate their ESG risks, opportunities and impacts. At the include adoption of the ESRS and publication of the ISSB
same time efforts have been undertaken to harmonise existing sustainability disclosure standards. In this section we will explore
sustainability reporting standards and frameworks with the goal the differences between the ESRS, the ISSB, and the GRI – the
to provide users of sustainability information with more consistent oldest voluntary sustainability reporting framework out there.

ESRS ISSB Standards GRI Standards

The ISSB standards were

The ESRS are regulatory designed to provide a unified
standards applicable to certain set of global rules for reporting
GRI provides a comprehensive set
companies in the EU. Companies sustainability information.
Voluntary vs of global voluntary standards that
subject to the CSRD are required The ISSB standards are not
Mandatory companies can use to disclose
to use the ESRS as a basis for mandatory. National authorities will
sustainability information.
preparing their sustainability decide whether or not companies
disclosures. in Poland will be required to use
them.

The ESRS so far include 12

The ISSB so far published two
standards – two cross-cutting
standards: The GRI Standards 2021 cover a
standards and 10 sector-
• IFRS S1 - General wide range of sustainability topics.
agnostic topical standards
Requirements for Disclosure Alongside, GRI also provide
covering environment, social and
of Sustainability-related sector-specific standards. In the
Coverage governance issues.
Financial Information, and long-term, GRI expects to develop
The set of standards will be
• IFRS S2 - Climate-related 40 sector standards, starting
expanded in the near future,
Disclosures with those sectors that have the
including sector-specific
More standards are expected to highest impact.
standards and proportioned
be released in the future.
standards for SMEs.

The ISSB standards focus on

The GRI standards follow an
financial materiality only. This
impact materiality approach by
Approach to The ESRS require companies to means that they prioritise issues
focusing on matters that affect
materiality use double materiality perspective that are most relevant to financial
the economy, environment, and
performance and decision-
people.
making.

Main
Multiple stakeholders Financial stakeholders Multiple stakeholders
audience

Figure 18 – ESRS vs other sustainability reporting standards

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5 Reporting process – key considerations

ESRS The ISSB goal is to develop global sustainability disclosure

standards that offer companies a unified set of requirements
The ESRS provide a harmonised set of reporting requirements for for reporting sustainability information. The standards have
companies subject to the CSRD, which is one of the key building an exclusive focus on financial materiality as they have been
blocks of the European Union’s sustainable finance agenda. designed for an investor-based audience.

The ESRS were designed to meet the needs of different users of The ISSB consolidated several existing sustainability reporting
sustainability information while considering existing EU legislative frameworks such as the Value Reporting Foundation (VRF) –
requirements (including the SFRD, the EU Taxonomy, etc.) housing the SASB Standards and the Integrated Reporting
One of the key principles under the ESRS is double materiality Framework – and the Climate Disclosure Standards Board
perspective which is defined as the “union of impact materiality (CDSB), and used them as a starting point for developing its own
and financial materiality.” standards.

ISSB sustainability disclosure standards In 2023, the ISSB published its first standards21 covering general
requirements and climate-related disclosures:
In 2021, the International Financial Reporting Standards (IFRS)
Foundation created the International Sustainability Standards • IFRS S1 - General Requirements for Disclosure of
Board (ISSB) which has emerged as a crucial standard-setting Sustainability-related Financial Information, and
body at the global level.
• IFRS S2 - Climate-related Disclosures

More standards are expected to be released in the future.

GOOD TO KNOW
ISSB standards build upon existing sustainability reporting standards and frameworks described below.

Sustainability Accounting Standards Board (SASB) was founded in 2011 to develop sustainability accounting
standards to help companies in the US disclose financially material sustainability information in the mainstream
financial reporting. The SASB Standards are industry-based (specific guidance is provided for 77 industries) and have
been designed to respond to the needs of investors. Although historically, SASB Standards were mainly used by the
companies in North America, nowadays they are increasingly adopted in Europe and other regions.

Integrated Reporting Framework was established in 2013 and revised in 2021 to help companies explain how
they create value in the short, medium and long-term in financial and non-financial terms through integrated reporting.
The framework was designed to support concise, investor-oriented disclosure based on the concept of six capitals
essential to the value creation process: financial, manufactured, intellectual, human, social and relationship and natural.

In June 2021, SASB and IR Framework have merged into one organisation – the Value Reporting Foundation, which
was subsequently consolidated into the IFRS Foundations. Despite this events SASB Standards and IR Framework will
remain available to the companies to use.

Climate Disclosure Standards Board (CDSB) was established in 2007 to offer companies a framework for
disclosing environmental and climate change information in their annual and integrated reports with the same rigor as
financial information. The CDSB framework was subsequently used to inform the TCFD recommendations. In 2022, the
CDSB consolidated into the IFRS Foundation.

Taskforce on Climate-related Financial Disclosures (TCFD) was created by the Financial Stability Board in
2015 to help companies disclose information on their approach for managing climate-related risks and opportunities.
In 2017, TCFD published its recommendations within four areas: governance, strategy, risk management, and metrics
and targets. TCFD recommendations emerged to be a leading global framework for disclosure of climate-related
information. They have been integrated into various voluntary and regulatory sustainability reporting initiatives. From
2024, the IFRS Foundation will take over the monitoring of the progress on companies’ climate-related disclosures from
the TCFD.

21 https://www.ifrs.org/issued-standards/ifrs-sustainability-standards-navigator

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5 Reporting process – key considerations

The ISSB and the EU authorities are working together to create sustainability information. Established in 1997, it offers standards
an interoperability mapping table to highlight the intersection i.e. to help companies communicate their impact on the economy,
a subset of the requirements that would be aligned sufficiently environment and the society to a broad range of stakeholders.
such that applying one standard would satisfy the other. At the The GRI Standards were revised in 2021 to ensure greater
moment, it is possible to compare IFRS S1 with ESRS 1 and alignment with on-going regulatory developments such as the
ESRS 2 as well as IFRS S2 with the ESRS E1. CSRD and the ISSB sustainability reporting standards.

GRI Standards GRI worked closely with EFRAG on the development of the
ESRS. As such companies already using GRI Standards are well
The Global Reporting Initiative (GRI) was one of the first positioned to meet the requirements of the ESRS.
organisations to provide companies with guidance on reporting

5.3 Assurance requirements under the CSRD

Demand for reliable, high-quality ESG information is on the negative manner to alert the reader to the lower level of assurance
rise. Investors and other financial actors need confidence being provided. For example: „based on the limited assurance
in the sustainability data disclosed by the companies as procedures performed, nothing has come to our attention that
they incorporate it into their own sustainability reporting and causes us to believe that the subject matter information was not
investment decision-making. In recognition of that need, the properly prepared.”
CSRD has introduced the requirement for limited assurance on
sustainability information. What are the CSRD requirements in terms of assurance
process?
What does external assurance mean?
Companies in scope of the CSRD are required to engage
The main objective of the assurance process is to confirm the independent assurance provider to provide limited level of
credibility of the reported information. It involves engaging a third- assurance on the following elements:
party (i.e. statutory auditor or accredited professional assurance
provider) to perform assessment of that information, and issue an • compliance with the CSRD reporting rules, including with the
independent opinion on whether it is reliable or not, in exchange adopted ESRS;
for a fee. Typically, such assessment is done in accordance with a • process undertaken to identify material information to be
recognized standard. The final conclusion is presented in the form reported based on the double materiality principle;
of assurance report. • compliance with the reporting obligations under the EU
Taxonomy (Article 8);
Companies that decide to undergo independent assurance
voluntarily can specify the subject matter of the assurance • compliance with the requirement to mark-up sustainability
engagement themselves. While more mature companies can go reporting in accordance with Article 29d (digital tagging).
as far as assuring entire sustainability reports, other companies
In order to satisfy the audit requirements imposed by the
may focus on specific ESG aspects and/or key performance
CSRD, companies will have to establish a clear audit trail
indicators.
and documentation of processes and controls to support the
What are the different types of assurance? disclosures provided.

External assurance can be provided either at a reasonable or It is expected that in the future a reasonable level of assurance
limited level. The level of assurance reflects the extent and depth might be required.
of the assurance process. Reasonable assurance requires a more
At the moment there are no legal requirements to use specific
comprehensive process that can be compared to a financial
standards and procedures to conduct an assurance engagement.
statement audit. Whereas procedures performed in a limited
Auditors often follow the International Standard on Assurance
assurance engagement vary in nature, and are less detailed.
Engagements (ISAE) 3000 Revised (ISAE 3000). However, other
As such limited level of assurance provides a lower degree
(national) assurance standards or requirements can be used.
of confidence. Additionally, the conclusion from a reasonable
assurance is presented in a positive manner. For example, In the future, the European Commission will adopt legislation
„based on the reasonable assurance procedures performed, in to provide for limited assurance standards, as well as further
our opinion, the subject matter information is properly prepared.” legislation to provide for reasonable assurance standards.
On the other hand, limited assurance conclusion is framed in a

ESG Reporting Guidelines 38

6 Reporting on climate change

6 Reporting on climate change

In this chapter you will learn:

• Why it is vital for companies to report climate-related information

• How can the TCFD framework guide companies’ climate-related reporting

• What climate-related risks companies may be faced with

• What disclosure requirements are covered in ESRS E1- Climate Change

Climate change impacts almost all sectors and geographies, investors are looking into the carbon footprint of their portfolios
and immediate actions are needed to tackle the climate crisis. At and potential climate-related risks they might be exposed to
the same time, greater transparency is needed from companies through their investments, it is critical that companies provide
and financial market participants on how they identify, evaluate them with consistent and complete disclosures that can support
and manage climate-related impacts, risks and opportunities. As investment decisions.

Why it is important to start preparing now?

• Climate science shows22 that climate crisis is real and urgent actions are needed.
• The number of companies subject to the EU regulations requiring reporting on climate change (i.e. the CSRD and the EU
Taxonomy) is going to significantly increase.
• Much more comprehensive reporting will be required than is currently provided by most companies.

6.1 Taskforce on Climate-related Financial Disclosures (TCFD)

The TCFD recommendations can be used by the companies and 2022, 3,960 organizations, with a market cap of USD26 trillion,
investors to develop effective climate-related disclosures, and to including over 1,500 financial institutions, responsible for assets of
evaluate and manage exposure to climate risks and opportunities. USD 220 trillion, have expressed support for the TCFD. The TCFD
The framework is structured around four pillars: governance, recommendations have been used by governments, regulators
strategy, risk management, targets and metrics, supported by 11 and stock exchanges (fully, or in part) to inform law, rules, or
disclosure recommendations outlined in Figure 19. guidance on climate-related financial disclosures.23 They have
been also incorporated into sustainability reporting standards,
TCFD recommendations emerged to be a leading global including the ESRS and the ISSB standards.
framework for disclosure of climate-related information. As of

22 IPCC website, https://www.ipcc.ch/reports/

23 Task Force on Climate-related Financial Disclosures, 2022 Status Report (Publ. October 2022), p.98-104, https://assets.bbhub.io/company/
sites/60/2022/10/2022-TCFD-Status-Report.pdf

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6 Reporting on climate change

GOVERNANCE a. Describe the organisation’s governance around climate-related risks and

Disclose the organisation’s governance opportunities.
around climate-related risks and b. Describe management’s role in assessing and managing climate-related risks and
opportunities. opportunities.

STRATEGY a. Describe the climate-related risks and opportunities the organisation has identified
Disclose the actual and potential over the short, medium, and long term.
impacts of climate-related risks and b. Describe the impact of climate-related risks and opportunities on the organisation’s
opportunities on the organisation’s businesses, strategy, and financial planning.
businesses, strategy, and financial
c. Describe the resilience of the organisation’s strategy, taking into consideration
planning where such information is
different climate-related scenarios, including a 2°C or lower scenario.
material.

a. Describe the organisation’s processes for identifying and assessing climate-related

RISK MANAGEMENT
risks.
Disclose how the organisation identifies,
b. Describe the organisation’s processes for managing climate-related risks.
assesses, and manages climate-related
c. Describe how processes for identifying, assessing, and managing climate-related
risks.
risks are integrated into the organisation’s overall risk management.

a. Disclose the metrics used by the organisation to assess climate-related risks and
METRICS AND TARGETS
opportunities in line with its strategy and risk management process.
Disclose the metrics and targets used
b. Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG)
to assess and manage relevant climate-
emissions and the related risks.
related risks and opportunities where
c. Describe the targets used by the organisation to manage climate-related risks and
such information is material.
opportunities and performance against targets.

Figure 19 – TCFD recommendations

TCFD recommendations in ESRS E1 Climate Change Nonetheless, while the ESRS align strongly with the TCFD
recommendations, they are much more prescriptive and detailed
Disclosure requirements under ESRS E1 Climate Change in nature. They also introduce additional disclosure requirements.
have been largely informed by the TCFD framework. As such, Those additional requirements stem among other things from the
companies that have been already using TCFD recommendations double materiality approach mandated by the ESRS.
to guide their climate-related reporting should be well positioned
to onboard more stringent ESRS provisions.

GOOD TO KNOW
Following the publication of the ISSB standards which fully incorporate the TCFD recommendations, the Financial
Stability Board announced that TCFD work has been completed. From 2024, the IFRS Foundation will take over the
monitoring of the progress on companies’ climate-related disclosures from the TCFD.

6.2 ESRS E1 Climate Change: what companies need to know

ESRS E1 Climate Change specifies what information companies As show in Figure 20, there are nine topical disclosure
should report with regard to climate change. Similarly to ESRS requirements (E1-1 to E1-9) and three requirements from ESRS
2 and other topical standards, disclosure requirements are 2 (GOV-3, SBM-3, and IRO-1). When preparing climate-related
structured around four core elements: governance (GOV); disclosures, companies should use ESRS E1 in conjunction with
strategy (SBM); impact, risk and opportunity (IRO) management; ESRS 2.
and metrics and targets.

ESG Reporting Guidelines 40

6 Reporting on climate change

1 2 3 4
GOVERNANCE METRICS AND
STRATEGY (SBM) IRO MANAGEMENT
(GOV) TARGETS

ESRS 2 GOV-3 Integration E1-1 – Transition plan for ESRS 2 IRO-1 – Description E1-4 – Targets related to
of sustainability-related climate change mitigation of the processes to identify climate change mitigation
performance in incentive and assess material climate- and adaptation
schemes. ESRS 2 SBM-3 – Material related impacts, risks and
impacts, risks and opportunities E1-5 – Energy consumption
opportunities and their and mix
interaction with strategy and E1-2 – Policies related to
business model. climate change mitigation E1-6 – Gross Scopes 1, 2, 3
and adaptation and Total GHG emissions

E1-3 – Actions and E1-7 – GHG removals and

resources in relation to GHG mitigation projects
climate change policies financed through carbon
credits

E1-8 – Internal carbon

pricing

E1-9 – Anticipated financial

effects from material physical
and transition risks and
potential climate-related
opportunities.

Figure 20 – ESRS E1 Climate Change

Where to start?24
1. Identify material impacts, risks and opportunities associated with climate change

Before any disclosures can be made, companies need to develop Climate-related risks can be divided into risks associated with
a comprehensive understanding of climate-related risk and the transition to low carbon economy (transitional risks) and risks
opportunities they may be exposed to and impacts they may be related to the physical impacts of climate change (physical risks).
causing (i.e. through their emission of greenhouse gases).

TRANSITIONAL RISKS PHYSICAL RISKS

Risks associated with the transition to a low carbon, climate-

Risks resulting from the physical impacts of climate change
resilient economy

• policy and legal risks such as risks stemming from current • acute risks (driven by extreme weather events, such as
and emerging regulations (e.g. increasing price for GHG storms, floods, fires or heatwaves)
emissions); litigation risks • chronic risks (resulting from long-term shifts in climate
• technology risks (e.g. costs related to investments in climate- patterns, such temperature changes, rising sea levels, water
friendly technology) stress, etc.)
• market risks (e.g. changing consumer behaviour, increased
cost of raw materials)
• reputational risks (negative stakeholder perception of a
company)

Figure 21 – Examples of climate risks

24 The Guidelines are not a technical document and should not be used as a substitute for the ESRS text. The guidance provided below is merely to familirise
companies with key reporting requirements under ESRS E1.

ESG Reporting Guidelines 41

6 Reporting on climate change

Both physical and transitional risks can affect the company’s • development of innovative technologies
financial positions (i.e. asset, liabilities, revenues and costs) as well
as access to capital and financing. Climate-related impacts refer to company contribution to
climate change through its GHG emissions.
Climate-related opportunities, on the other hand, are
understood as any potential positive impacts resulting from ESRS E1 requires companies to describe the process for
climate change. Climate-related opportunities will vary depending identifying and assessing climate change impacts (i.e. GHG
on the region, market, and industry. Examples may include: emissions), transitional risks and opportunities, and physical
risks. Additionally, companies should also disclose if they used
• potential efficiency gains and cost-savings scenario analysis to understand resilience of its organization.
• development of new products or services

SCENARIO ANALYSIS
Scenario analysis is a forward-looking exercise that allows company to understand how different climate-related risks and possible
future developments may affect its strategy, business model and financial performance over time. The insights from such analysis
can be used to inform strategic planning and fine-tune overall strategy – thus reducing exposure to climate-related risks. It is
recommended that companies consider a range of different scenarios, including a 2°C or lower scenario in line with the 2015 Paris
Agreement.

Scenario analysis can be quantitative, qualitative, or a mixture of both. Qualitative scenario analysis looks at industry trends (e.g.
policy changes, technological developments, etc.). Whereas quantitative scenario analysis relies on numerical data and models to
assess how different plausible scenarios can affect companies’ assets and operations. The latter is suitable for climate risk that can
be expressed with numbers, such as possible changes in weather patterns or transition-related impacts (e.g. carbon price).

Companies are encouraged to consult TCFD resources for further guidance on scenario analysis.

2. Explain how identified impacts, risks and opportunities interact with the company strategy and business model

Once the company identifies its climate-related IROs, it can start strategy and business model to both physical and transition risks
integrating them into its strategy and risks management. and opportunities. Additionally they are expected to disclose
whether they have developed a transition plan for climate
In line with ESRS E1, companies should explain resilience of their change mitigation.

TRANSITION PLAN
Transition plan details company strategy to transform existing assets, operations, and business models to transition towards
achieving net zero by 2050. It should include time-bound measurable GHG reduction target (e.g., a net zero target) and actionable
steps the company plans to take to reduce its GHG emissions. The company should also explain how the transition will impact its
strategy and business model and disclose associated investments. Companies that have not yet developed transition plan should
explain whether and when they plan to prepare one.

3. Explain how climate-related IROs are integrated into governance structure and process

Proper governance process is key to ensure that material climate- • Does your board of directors consider climate-related issues
related impacts, risks and opportunities receive appropriate board when reviewing/approving strategies, budgets, and major
and management attention. plans?
• To what extent does the company board have a robust
Here are some important questions to consider:
knowledge and understanding of climate change and how it
• Does your board of directors (or board committee or board may impact the company?
member) have assigned responsibility for overseeing climate- • Are there remuneration-linked incentive schemes in place
related issues? linked to performance on climate-related KPIs or targets?
• Is climate change regularly discussed in board meetings? • What is the management role in assessing and managing
climate-related IROs?

ESG Reporting Guidelines 42

6 Reporting on climate change

4. Explain what measures have been implemented to manage climate-related IROs

Inform investors (and other stakeholders) how you manage identified climate-related impacts, risks and opportunities through relevant
policies, action plans and targets. Figure 22 provides some key elements that should be considered.

Has the company adopted policies to manage its material impacts, risks and opportunities related to
climate change?
What aspects are covered by the policies (e.g. climate change mitigation, climate change adaptation, energy
efficiency, use of renewable energy, other)?
Minimum Disclosure Requirements from ESRS 2 MDR-P must be applied when providing disclosures on
POLICIES
relevant policies.

What actions has the company taken (and plans to take) to manage its material impacts, risks and
opportunities related to climate change?
What are the anticipated results of actions taken?
What were the monetary amounts of CapEx and OpEx required to implement actions taken (as well as those
planned for the future)?
ACTIONS Minimum Disclosure Requirements from ESRS 2 MDR-A must be applied when providing disclosures on
relevant actions.

What targets has the company set to support implemented policies and actions?
Has the company set GHG emissions reduction target?
Is the target science-based and compatible with limiting global warming to 1.5°C?
Has the company set other climate targets (e.g. related to renewable energy, energy efficiency, climate change
adaptation, etc.)?
 Companies interested in exploring science-based target setting can consult Science Based Targets initiative
TARGETS (SBTi) website for further details.
Minimum Disclosure Requirements from ESRS 2 MDR-T must be applied when providing disclosures on
relevant targets.

Figure 22 – Climate-related policies, actions and targets

5. Disclose relevant KPIs

Reduction of GHG emissions is a critical component of climate • Scope 3 Emissions – other indirect emissions that occur
change mitigation efforts. in the value chain both upstream and downstream of its
operations. Scope 3 GHG emissions can be further broken
To calculate GHG emission companies should use GHG down into Scope 3 categories. GHG Protocol Corporate
accounting standards defined in the Greenhouse Gas Protocol’s Standard identifies 15 categories of Scope 3 emissions.25
Corporate Accounting and Reporting Standard. It is also possible
to use the GHG accounting methodology of ISO 14064-1:2018. Beyond GHG emission ESRS E1 requires companies to disclose
other metrics listed below:
Accordingly, GHG emission should be broken down into Scope 1,
2 and 3 GHG emission as follows: – Energy consumption and mix
– GHG removals and GHG mitigation projects financed through
• Scope 1 Emissions – direct emissions from owned or
carbon credits
controlled sources, including: stationery combustion (fuels
and heating sources), mobile combustion (vehicles), fugitive – Internal carbon pricing
emissions (resulting from refrigeration or air conditioning – Anticipated financial effects from material physical and
leakages), and process emissions from industrial processes. transition risks and potential climate-related opportunities
• Scope 2 Emissions – indirect emissions from purchased or
acquired electricity, heat or steam.

25 https://ghgprotocol.org/scope-3-calculation-guidance-2

ESG Reporting Guidelines 43

6 Reporting on climate change

GOOD TO KNOW
While all topical disclosures (including those related to climate change) are subject to materiality assessment, for most
companies it will be rather difficult to prove that risks and impacts associated with climate change are not material to
their operations, and thus omit completely disclosure requirements of ESRS E1. Climate change has wide-ranging,
systemic impacts across the economy and vast majority of companies already face (or might face) climate-related risks
or contribute to climate change through their GHG emissions.

However, if a company concludes that climate change is not material to its operations, it has to provide a detailed
explanation of the conclusions of its materiality assessment with regard to climate change.

ESG Reporting Guidelines 44

7 Step-by-step approach to report on ESG

7 Step-by-step approach to report

on ESG
In this chapter you will learn:

• What elements should be included in your sustainability report

• How to perform the double materiality analysis
• What are the ESRS requirements in terms of policies, action plans and targets

Chapter 7 presents a step-by-step approach companies can use to report on relevant sustainability issues. The process was largely
informed by the ESRS provisions, notably the cross-cutting standards ESRS 1 and ESRS 2.

DOUBLE MATERIALITY ASSESSMENT

• Determine material ESG impacts, risks and opportunities using double materiality
1 perspective.
• Identify and address negative sustainability impacts.
• Engage with relevant stakeholders.

SUSTAINABILITY GOVERNANCE
ESRS 1
2 • Explain how sustainability matters are governed in your organisation.
ESRS 2
• Describe board and management responsibilities with regard to sustainability matters.

STRATEGY AND BUSINESS MODEL

3 • Provide context on your business activities by describing your business model and
strategy and linking it to material sustainability issues.

POLICIES AND ACTION PLANS

4 • Describe implemented policies and action plans as well as resources allocated to manage
material ESG impacts, risks and opportunities
ESRS 2
+
Topical
TARGETS AND METRICS ESRS
• Describe targets set in relation to material sustainability issues and progress achieved
5
against them.
• Disclose relevant metrics and KPIs.

ESG Reporting Guidelines 45

7 Step-by-step approach to report on ESG

The guidance provided below can be used as a starting point for chapter is to draw companies’ attention to some key reporting
preparing ESRS-aligned disclosures. However, it should be noted, requirements under ESRS 2 and help them conduct the
that these Guidelines are not a technical document and should materiality assessment process. Specifically:
not be used as a substitute for the ESRS text. All companies
subject to the CSRD must use the ESRS as a basis for preparing • Step 1 provides some practical tips for conducting a double
their sustainability disclosures. materiality assessment.
• Step 2 and Step 3 cover some key elements companies
ESRS 2 sets out disclosure requirements that apply to all should consider when disclosing information related to
companies and are structured around four areas: governance; governance and strategy on the entity-level.
strategy; impact risk and opportunity (IRO) management; and
• Step 4 and Step 5 specify what information should be
targets and metrics. Some of these disclosure requirements
disclosed with regard to identified material impacts, risks and
should be applied at the entity level, whereas others specify
opportunities when it comes to policies, actions, targets and
information that should be disclosed on the topical level (for
metrics.
issues that have been identified as material). The aim of this

For more details on the ESRS 2 and a full list of Disclosure Requirements see Section 4.1.1

7.1 Step 1: Perform double materiality assessment

Before any disclosures can be made, companies need to identify 3) Evaluate identified ESG issues from the perspective
their material impacts, risks and opportunities. of your business model and company-specific
circumstances. Company business strategy, goals and
Materiality of a topic is specific to the company, its context and values as well as principal risks and impacts within its value
stakeholders. When deciding which ESG issues are material, chain are important factors to consider when performing
companies may consider using the following steps: materiality analysis.

1) Review sustainability topics outlined in the ESRS. Begin 4) Take into account stakeholder needs and expectations.
the materiality assessment by reviewing a list of sustainability Proactive stakeholder engagement can help to better
topics covered in the topical ESRS provided in the Appendix understand their interests and needs.
A of ESRS 1. It is recommended to seek feedback from different groups of
2) Use available resources to determine which ESG stakeholders as part of the materiality assessment process
issues are considered material in your industry. You to make sure that both the views of the company and its
can also consider industry standards and tools to determine stakeholders are considered.
which ESG issues are considered material in your industry.
Finally, it should be emphasized that materiality assessment is a
Companies from the same industry are likely to face similar
dynamic process. Companies’ business environment is constantly
ESG risks and opportunities. Benchmarking against peers
evolving and so are the expectations of their stakeholders.
and competitors can help to identify relevant issues. Tools
Therefore, it is recommended to regularly review identified material
such as SASB Materiality Finder and Materiality Map can also
ESG issues to ensure they continued relevance, and to check if
help to identifying financially material sustainability topics26
new issues have emerged as material since the last materiality
that may be relevant to your organisation.
assessment.

GOOD TO KNOW
EFRAG will periodically publish additional resources to assist companies in practical implementation of the CSRD and
ESRS provisions. The non-binding technical implementation guidance for the double materiality assessment is expected
to be published soon.

26 SASB uses financial materility as a guiding principle for its standards. As such, companies will still need to carry out the impact materiality assessment to
complete a double materiality assessment.

ESG Reporting Guidelines 46

7 Step-by-step approach to report on ESG

Engagement with stakeholders

The company’s ability to generate value over the long term is Companies can use different tools to engage with different groups
increasingly dependent on its relationship with stakeholders. of stakeholders and gather their feedback. Some common
It is thus of critical importance that the company identifies its examples include:
main stakeholders and establishes a process which allows for
a two-way communication and engagement on a regular basis. • Organizing stakeholder consultation panels
Furthermore, the insights gathered through regular dialogue with • Collecting feedback through surveys (e.g. employee
stakeholders are an important input for the company materiality satisfaction survey, customer satisfaction survey)
assessment. • Engagements with suppliers as part of the procurement
process
The ESRS define stakeholders as those who can affect or be
affected by the company’s decisions and actions. It further breaks • Interviews with experts
them down into two groups: • Engagement with investors and analysts (direct engagement,
investors events)
• affected stakeholders – individuals or groups who have
interest in the company or can be affected positively and The information gathered through the stakeholder engagement
negatively) by its operations, and activities should be evaluated by the company and communicated
• users of sustainability reporting – investors, financial both internally to the leadership team and externally as part of the
institutions, business partners, analysts, etc. sustainability reporting.

7.2 Step 2: Describe your sustainability governance

Assigning roles and responsibilities for sustainability matters ESRS 2 include a number of Disclosure Requirements to allow
is paramount for effective implementation of sustainability users of sustainability information understand what governance
policies, action plans and targets as well as the day-to-day processes the company has in place to monitor, manage and
management of material sustainability matters. It also helps to oversee sustainability matters. These are broadly summarised
increase accountability and can serve as a yardstick by which the below.
leadership commitment to sustainability is measured.

WHAT SHOULD BE DISCLOSED

Composition • Composition and diversity of their administrative, management and supervisory bodies as well as their role
of governance in oversight and management of material sustainability impacts, risks and opportunities.
bodies

• Which administrative, management and supervisory body (e.g. board of directors, board committee or
similar) or individual(s) within a body are responsible for oversight of material sustainability impacts, risks
Roles and
and opportunities.
responsibilities
• How each body’s or individual’s responsibilities are reflected in the company’s terms of reference, board
mandates and other related policies.

Skills and • Whether administrative, management and supervisory bodies are equipped with relevant expertise and
expertise skills with regard to sustainability or otherwise have access to such expertise and skills.

• How the administrative, management and supervisory bodies are informed about sustainability matters
Information flow
and how these matters were addressed during the reporting period

Incentive • Whether incentive schemes are offered to members of the administrative, management and supervisory
schemes bodies that are linked to sustainability matters

ESG Reporting Guidelines 47

7 Step-by-step approach to report on ESG

7.3 Step 3: Describe your strategy and business model

To give context to its sustainability disclosures, companies should Companies should further explain how material sustainability
briefly describe the following elements: impacts, risk and opportunities interact with its strategy and
business model.
• Business model and value chain
• Sector(s) of activity (including breakdown of total revenue By disclosing how sustainability considerations are integrated into
from that sectors) strategy, business model and financial planning companies can
show where priorities are in the organisation and which direction
• Key products and services offered
it is heading.
• Markets of operations
• Key drivers of value creation

7.4 Step 4: Report on implemented policies and action plans

Policies and action plans allow companies to demonstrate their commitment to manage material sustainability areas as well as
measures adopted to translate that commitment into practice.

ESRS 2 includes Minimum Disclosure Requirements with regard to policies (MDR-P) and action (MDR-A). Those disclosure
requirements should be applied jointly with the corresponding disclosure requirements in topical and sector-specific standards.

Disclosure on relevant sustainability policies 3) Responsibilities

The policy should specify the most senior individual
In line with the ESRS provisions, companies should describe if
responsible and accountable for the implementation of the
they have adopted policies to prevent, mitigate and remediate
policy.
actual and potential impacts, to address risks and to pursue
opportunities. 4) Reference to relevant standards and initiatives
If relevant, the policy should provide a reference to relevant
Policy is a document formalising company commitment to third-party standards or initiatives the company commits to
manage specific sustainability area. It may be a standalone policy respect through its implementation.
focused on one specific topic (e.g. climate change policy) or an
5) Consideration of stakeholders
integrated policy which addresses more than one sustainability
area (e.g. environmental policy). If relevant, the policy should describe whether interest of
stakeholders have been taken into consideration when
Policy should be approved by the representative of the senior developing the policy, and how the policy is made available to
management and dated. It is recommended to review and update potentially affected stakeholders or stakeholders that need to
policies periodically to ensure their continued relevance and implement it.
alignment with the company strategy and evolving sustainability
Disclosure on action plans
context.
Similarly to disclosure on adopted policies, the ESRS require
In line with ESRS 2 disclosure with regard to the company policies
companies to describe actions taken to prevent, mitigate and
should include the following elements:
remediate actual and potential impacts, and to address risks and
1) Description of the policy subject and its key objectives opportunities, and where applicable to achieve the objectives and
targets of related policies.
A policy should clearly articulate which material impacts, risks
or opportunities it covers, including general objectives and the Disclosure with regard to the company actions should include the
process for monitoring of performance. following elements:
2) Description of the scope of the policy
• list of key actions undertaken in a reporting year (as well as
It is important to determine the scope of the policy in terms
those planned for the future), their expected outcomes, and
of company activities, upstream and/or downstream value
where relevant, how their implementation contributes to the
chain, geographies and if relevant, affected stakeholder
achievement of policy objectives and targets;
groups. The policy should also inform if there are any areas
that have been excluded. • scope of the key actions (i.e., in terms of activities, upstream
and/or downstream value chain, geographies and, where
applicable, affected stakeholder groups);

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7 Step-by-step approach to report on ESG

• time horizons under which the company plans to complete If implementation of an action plan requires significant operation
each key action; expenditures (OpEx) and/or capital expenditures (CapEx)
• if applicable, key actions taken (along with results) to address companies should specify the following:
and remedy actual material adverse impacts;
• type of current and future financial (and other) resources
• if applicable, quantitative and qualitative information regarding allocated to the action plan;
the progress of actions or action plans disclosed in prior
• amount of current financial resources and how they
periods.
relate to the most relevant amounts presented in the financial
statements;
• amount of future financial resources.

GOOD TO KNOW
Referencing policy that covers several material sustainability areas

Some sustainability areas are interconnected and thus may be covered by the same policy or actions. In such instance,
the company may disclose required information in its reporting under one topical ESRS and cross reference to it in its
reporting under other topical ESRS.

Lack of policies on material sustainability topics

If the company cannot disclose required information because it has not yet adopted respective policies or action plans,
it should disclose this to be the case. Furthermore, it may specify the timeframe in which it aims to have these in place.

7.4 Step 5: Report relevant metrics and targets

Setting Key Performance Indicators (KPIs) and targets allow company to track effectiveness of its actions and measure progress over
time.

ESRS 2 includes Minimum Disclosure Requirements with regard to metrics (MDR-M) and targets (MDR-T). Those disclosure
requirements should be applied jointly with the corresponding disclosure requirements in topical and sector-specific standards.

Disclosure on metrics Disclosure on targets

In line with the ESRS, companies should disclose all metrics used In line with the ESRS, companies should specify if they adopted
to evaluate performance in relation to material sustainability areas. measurable time-bound outcome-oriented targets with regard
These include metrics defined in the ESRS as well as metrics to material sustainability aspect. The goal is to allow the users
identified on an entity-specific basis, whether taken from other of sustainability information understand if a company tracks
sources or developed by the company itself. effectiveness of its actions and measures the progress in
achieving its policy objectives.
Disclosure with regard to the company metrics should include the
following elements: For each target, the disclosure should include the following
information:
• methodologies (including their limitations) and significant
assumptions used to calculate the metric; • description of the relationship of the target to the policy
• information whether the measurement of the metric is objectives;
validated by an external body other than the assurance • defined target level to be achieved, including, where
provider (and if so, which body); applicable, whether the target is absolute or relative and in
• clear description of the metric; which unit it is measured;

• if the metric is stated in monetary terms, the company • scope of the target, including the undertaking’s activities
should use the same currency as the currency of its financial and/or its upstream and/or downstream value chain where
statements. applicable and geographical boundaries;

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7 Step-by-step approach to report on ESG

• baseline value and base year from which progress is • any changes in targets and corresponding metrics
measured; or underlying measurement methodologies, significant
• period to which the target applies and if applicable, any assumptions, limitations, sources and processes to collect
milestones or interim targets; data adopted within the defined time horizon.

• methodologies and significant assumptions used to define • performance against disclosed targets, including information
targets on how the target is monitored and reviewed and the metrics
used, whether the progress is in line with what had been
• whether the targets related to environmental matters are
initially planned, and an analysis of trends or significant
based on conclusive scientific evidence (so called science-
changes in the performance of the undertaking towards
based targets)
achieving the target.
• whether and how stakeholders have been involved in the
target setting process

GOOD TO KNOW
Lack of targets on material sustainability topics

If the company cannot disclose required information because it has not set measurable outcome-oriented targets with
respect to its material sustainability impact, risk and opportunities, it should disclose this to be the case, and provide
reasons for not having adopted such targets. Additionally, the company should disclose whether it nevertheless tracks
the effectiveness of its policies and actions on material sustainability aspects, and if so provide details on the process
it uses to do so, what it plans to accomplish as well as qualitative and quantitative indicators that are used to evaluate
progress.

Furthermore, it may disclose whether its plans to set those targets in the future (indicating anticipated timeframe for
adoption), or the reason why it does not plan to set them.

ESG Reporting Guidelines 50

8 Recommended ESG disclosure metrics

8 Recommended ESG disclosure

metrics

Chapter 8 provides a list of recommended disclosure metrics that the mandatory PAI indicators for corporate investments required
companies can use to start communicating on the ESG issues. by the SFDR (see mapping in the Appendix C). References
The metrics have been divided into four categories: General have been added below each section to other frameworks and
information, Environmental disclosures, Social disclosures and resources that companies may also consider.
Governance disclosures. Each category contains recommended
disclosure metrics (both qualitative and quantitative) that have It should be emphasized that the Guidelines do not provide an
been marked either as minimum disclosures (relevant to all exhaustive list of indicators and topics. Rather they aim to offer
companies) or additional disclosures (that might not be relevant to less advanced companies a minimum set of carefully selected
all companies). disclosure metrics that will help them to prepare for the upcoming
requirements stemming from the CSRD and the ESRS and better
The selection of recommended disclosure metrics has been respond to investors’ ESG data needs. Companies in scope of
informed by relevant regulatory initiatives i.e. the CSRD and the the CSRD should use the ESRS to prepare their disclosures on
ESRS as well as the WSE DPNS2021. Moreover, to address material sustainability topics.
increasing investors’ data needs, they have been also aligned with

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8 Recommended ESG disclosure metrics

Alignment with the EU Alignment with other

Disclosure metric Type regulations frameworks

ESRS SFDR (PAI) GRI DPNS

General information
I-M1 Business model Description ✓ ✓ ✓
I-M2 Sustainability integration Description ✓ - ✓ ✓
I-M3 Sustainability governance Description ✓ - ✓
I-M4 Material impacts, risks and
Description ✓ - ✓
opportunities
I-M5 Stakeholder engagement Description ✓ - ✓
Environmental disclosures
Climate change
E-M1 Climate change management Description ✓ - ✓ ✓
E-M2 GHG emissions Tons CO2 eq ✓ ✓ ✓
E-M3 GHG emissions intensity Tons CO2 eq / rev ✓ ✓ ✓
E-M4 Energy consumption and mix MWh ✓ ✓ ✓
Other environmental issues
E-M5 Environmental policy Policy ✓ - ✓
E-A1 Water consumption m3 ✓ - ✓
E-A2 Water management Description ✓ - ✓
E-A3 Biodiversity impacts Description ✓ ✓ ✓
E-A4 Waste management Description, # ✓ ✓
Social disclosures
Working conditions
S-M1 Diversity policy Policy ✓ - ✓
S-M2 Employment policy Policy -
S-M3 Work-life balance policy Policy -
S-M4 Reintegration policy Policy -
S-M5 Gender pay gap ratio # ✓ ✓ ✓ ✓
S-M6 Employee turnover % ✓ - ✓
S-M7 Freedom of association and
% ✓ - ✓
collective bargaining
S-A1 Employee health and safety Description, # ✓ - ✓
Human rights
S-M8 Human rights policy Policy ✓ ✓ ✓
S-M9 Human rights due diligence Description ✓ ✓ ✓
Governance disclosures
Corporate Governance
G-M1 Board composition Description ✓ - ✓
G-M2 Board independence % ✓ - ✓
G-M3 Board diversity % ✓ ✓ ✓ ✓
Business ethics
G-M4 Code of ethics Policy ✓ ✓ ✓
G-M5 Anti-Corruption Policy Policy ✓ ✓ ✓
G-M6 Whistle-Blower Procedure Description ✓ ✓ ✓
Data security and privacy
G-A1 Data Security Policy Policy - ✓

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8 Recommended ESG disclosure metrics

8.1 General information

General information metrics provide essential context to understand the company business activities and value creation model, it’s material
ESG impacts, risks and opportunities, and how it is managing them.

Recommended disclosures

EU legislation Other frameworks

Code Name Unit
ESRS SFDR (PAI) GRI Other

Minimum disclosures (applicable to all sectors)

I-M1 Business Model Description • partially •

I-M2 Sustainability Integration Description • - •

I-M3 Sustainability Governance Description • - •

Material Impacts, Risks and

I-M4 Description • - •
Opportunities

I-M5 Stakeholder Engagement Description • - •

General information
I M1
Business Model

What should be disclosed:

—— Short description of the company business model and value chain.

—— Whether the company is active in the following sectors: fossil fuel (coal, oil and gas), controversial weapons along with related revenues.

Companies may consider including the following characteristics when describing their business model: economic activities; products and
services offered; markets of operation, company size (in terms of workforce, business locations, revenue, etc.)

General information
I M2
Sustainability Integration

What should be disclosed:

—— Whether and how sustainability matters are integrated in the company strategy and business model.
—— Resilience of the company strategy and business model(s) to material sustainability risks.
—— Policies and actions adopted to manage material sustainability matters.
—— Targets related to management of sustainability matters.

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General information
I M3
Sustainability Governance

What should be disclosed:

—— Governance bodies roles and responsibilities with regard to sustainability matters (e.g. in relation to risk management, target setting,
sustainability disclosure).
—— Whether governance bodies are informed about sustainability matters, and how they are addressed by administrative and/or
management bodies.
—— Whether incentive schemes are offered to members of governance bodies that are linked to sustainability matters.

General information
I M4
Material Impacts, Risk and Opportunities

What should be disclosed:

—— The processes used to identify material impacts, risks and opportunities.

—— Sustainability due diligence process.
—— Outcome of the materiality assessment (identified material impacts, risks and opportunities).
—— How material impacts, risks and opportunities interact with the company strategy and business model.

General information
I M5
Stakeholder Engagement

What should be disclosed:

—— Description of the company main stakeholders, and how the company engages with them.
—— How the interests and views of stakeholders are taken into account by the undertaking’s strategy and business model.

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8.2 Environmental disclosures

Environmental metrics cover issues that arise from or impact the natural environment.

Climate Change
Climate change has emerged as the biggest environmental challenge of our times, posing significant risks and opportunities for businesses
and investors alike. As the momentum around necessary climate action continues to build with new regulatory measures entering into force,
the demand for climate-related information and metrics is expected to follow suit.

Relevance to investors / issuers

Investors want to understand whether companies:

• might be negatively impacted by tightening carbon regulations (i.e. carbon pricing) for example through regulatory fines or the stranded
assets risks
• consider physical risks of climate change as part of business continuity/resilience planning
• are transition-ready and have aligned their strategies and investment plans with the requirements of the Paris Agreement and the low-
carbon economy
• pursue climate-related opportunities such as investments in innovative technologies or new products or services

Recommended disclosures

EU legislation Other frameworks

Code Name Unit
ESRS SFDR (PAI) GRI Other

Minimum disclosures (applicable to all sectors)

E-M1 Climate Change Management Description • - • TCFD

E-M2 GHG Emissions Tons CO2 eq • • • TCFD

E-M3 GHG Emissions Intensity Tons CO2 eq/rev • • • TCFD

E-M4 Energy Consumption and Mix MWh • • • TCFD

Climate Change
E M1
Climate Change Management

Companies are advised to use recommendations of the TCFD, ESRS E1 - Climate change and/or IFRS S2 Climate-related Disclosures to
inform their disclosures with regard to climate governance, strategy, risk management, and targets and metrics.

Climate Change
E M2
GHG Emissions

Definition
GHG emissions are understood as total direct and indirect emissions. They should be further categorised into Scope 1, Scope 2 and Scope
3 emissions.

What should be disclosed?

—— Methods and assumptions used for calculation of the emissions.

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8 Recommended ESG disclosure metrics

—— Scope 1, Scope 2 and Scope 3 (if relevant) emissions for the last three reporting years to facilitate performance assessment over time.
—— Explanation of significant changes in performance (whether negative or positive), if relevant.

It is recommended to use internationally recognised standards for the corporate accounting and reporting of GHG emissions such as the
GHG Protocol or the ISO 14064-1:2018 standard.

Climate Change
E M2
GHG Emissions Intensity

Definition
Emission intensity is the ratio of GHG emissions per unit of economic activity.

What should be disclosed?

—— Methods and assumptions used for calculation.

—— Ratio of total GHG emissions divided by revenue

Climate Change
E M3
Energy Consumption and Mix

Definition:
Energy consumption is the total amount of energy consumed within an organisation. It comprises purchased and self-generated energy
sources.

What should be disclosed?

—— Methods and assumptions used for calculation of the energy consumption.

—— Total amount of energy consumed within the organisation (in MWh).
—— Percentage (%) of energy consumed by type of energy (i.e. renewable and non-renewable energy sources).

Additional considerations and resources

• Align your disclosures with TCFD recommendations (if possible)

• Inform your stakeholders if you have responded to the CDP questionnaire

Consult also:

—— TCFD Knowledge Hub for guidance on how to implement TCFD recommendations;

—— Science Based Target initiative (SBTi) website for resources on science-based target setting;
—— CDP resources;
—— Transition Pathway Initiative methodology and resources

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8 Recommended ESG disclosure metrics

Other Environmental Issues

Other environmental disclosures may relate to topics such as, use of natural resources, impacts on the biodiversity as well as waste and
pollution. As exposure to environmental issues may differ between companies some disclosure recommendations outlined below may not
be applicable to all issuers.

Recommended disclosures

EU legislation Other frameworks

Code Name Unit
ESRS SFDR (PAI) GRI Other

Minimum disclosures (applicable to all sectors)

E-M6 Environmental Policy Policy • - •

Sector-specific disclosures

E-A1 Water Consumption m3 • - •

E-A2 Water Management Description • - •

E-A3 Biodiversity Impacts Description • • •

E-A4 Waste Management Description, # • • •

Other Environmental Issues

E M6
Environmental Policy

Definition:
Environmental policy is a formal document outlining the company commitments and approach in relation to managing environmental
aspects of its operations.

What should be disclosed:

—— Whether the company has adopted environmental policy.

It is recommended that the policy covers the following areas:

—— compliance with relevant environmental laws and regulations

—— commitment to protect environment
—— commitment to manage and mitigate adverse environmental impacts
—— implementation of environmental management system
—— monitoring of environmental performance
—— reporting on environmental issues
—— company’s expectations of its suppliers and business partners with respect to the management of environmental issues.

Other Environmental Issues

E a1
Water Consumption

Definition:
Water consumption is the total volume (in m3) of water consumed by the organisation.

What should be disclosed?

—— Total amount of water consumed within the organisation (in m3).

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—— Total amount of water recycled and reused as a percentage of total water withdrawn.

Other Environmental Issues

E a2
Water Management

Definition:
Water management is a process by which a company optimises its water consumption to reduce its impact on natural environment. It
includes activities to reduce water use within operations, increase water circularity (through water reuse and recycling) and preserve water
resources (through water stewardship efforts).

What should be disclosed?

—— Whether the company has adopted and implemented a water management program and what it entails.
—— Companies with operations in water-stress areas should also disclose a process for identifying and mitigating water-related risks.

Other Environmental Issues

E a3
Biodiversity Impacts

Definition:
Biodiversity has been defined by the UN Convention on Biological Diversity as “the term given to the variety of life on Earth and the natural
patterns it forms.” It includes species diversity as well as genetic and ecosystem diversity.

Biodiversity loss is considered a serious environmental challenge. It arises due to destruction and fragmentation of habitats mainly by human
activities, such as overexploitation of resources, land use changes (e.g. deforestation, urbanisation, intensive mono-culture), pollution and
climate change.

What should be disclosed?

—— Whether the company has an impact on biodiversity (both directly or indirectly through its supply chain) and what are the main drivers of
this impact.
—— What policies are in place to conserve and restore biodiversity and combat deforestation, and whether they are applicable to suppliers.
—— What process is in place to manage and mitigate impacts on biodiversity, and whether it is applicable to supply chain.

Other Environmental Issues

E a4
Waste management

Definition:
Waste management is a set of activities to monitor, manage and reduce (including reuse and recycle) waste produced by an organisation.

What should be disclosed?

—— Total amount of hazardous (and if applicable radioactive waste) and non-hazardous waste generated (in tonnes).
—— Waste by type of treatment (e.g. recycled, landfill) in percentage (%).
—— Narrative explaining what activities are undertaken to manage waste and ensure regulatory compliance.

Additional considerations and resources

—— Inform your stakeholders if you have responded to the CDP Water and/or Forest questionnaire

Consult also:

—— Taskforce for Nature-related Financial Disclosures (TNFD) for guidance on reporting on a broad range of nature-related risks and
opportunities (including risks from biodiversity loss and ecosystem degradation).

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8.3 Social disclosures

Social metrics relate to the rights, well-being and interests of people and communities.

Working Conditions
Relevance to investors / issuers
Investors are interested in companies that:

• recognise the value of its workforce and provide reasonable terms of employment;
• align with labour and certification standards;
• have a stable structure and operations;
• do not interfere or discourage workers from forming or joining workers’ organisations.

Recommended disclosures

EU legislation Other frameworks

Code Name Unit
ESRS SFDR (PAI) GRI Other

Minimum disclosures (applicable to all sectors)

S-M1 Diversity Policy Policy • - •

S-M2 Employment Policy Policy • - •

S-M3 Work-life balance Policy Policy • - •

S-M4 Reintegration Policy Policy • - •

S-M5 Gender Pay Gap Ratio Percentage (%) • • •

S-M6 Employee Turnover Percentage (%) • - •

S-M7 Freedom of Association and Percentage (%) • - •

Collective Bargaining

Sector-specific disclosures

S-A1 Employee Health and Safety Description, # • - •

Working Conditions
S M1
Diversity policy

Definition:
Diversity policy is a formal document outlining the company commitment to prevent discrimination at the workplace and ensure equal
opportunities.

What should be disclosed:

—— Whether the company has adopted a diversity policy.

It is recommended that the policy covers the following areas:

—— Commitment to eliminate discrimination, including types of discrimination the company is committed to eliminate.
—— Commitment to promote equal opportunities.
—— Reference to applicable international references, such as ILO core conventions.

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Working Conditions
S M2
Employment policy

Definition:
Employment policy is a formal document outlining the company commitment to ensure stable employment for its employees.

What should be disclosed:

• Whether the company has adopted an employment policy.

It is recommended that the policy covers the following areas:

• Commitment to eliminate unstable work contracts, incl. fixed term contracts.

• Commitment to promote stability of employment in non-contract related areas.
• Inclusion of employees regardless of gender, age, work tenure or position.

Working Conditions
S M3
Work-life balance policy

Definition:
Work-life balance policy is a formal document outlining the company commitment to ensure employment allowing better balance between
work and private life of its employees.

What should be disclosed:

—— Whether the company has adopted a work-life balance policy.

It is recommended that the policy covers the following areas:

—— Commitment to offer work in flexible working schemes, including working time and remote work.
—— Commitment to offer part-time work for current and new employees.
—— Commitment to promote equal treatment for employees using flexible working schemes or working part-time with other employees.

Working Conditions
S M4
Reintegration policy

Definition:
Reintegration policy is a formal document outlining the company commitment to ensure undisturbed return of an employee to work after
parental leave.

What should be disclosed:

—— Whether the company has adopted a reintegration policy.

It is recommended that the policy covers the following areas:

—— Commitment to retain relationship with the employee during the leave.

—— Commitment to reintroduce an employee to work after the leave ended.
—— Commitment to reduce rotation of employees returning to work after the leave.

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Working Conditions
S M5
Gender Pay Gap Ratio

Definition:
This definition is aligned with the one in the DPSN2021.

Gender pay gap ratio is a difference between the average (gross) remuneration (including bonuses and other economic incentives) of men
and women within an organisation.

What should be disclosed?

—— The gender pay gap ratio.

To calculate gender pay gap ratio:

—— Divide the total annual pay for all full-time male employees by the total number of male full-time employees (A)
—— Divide the total annual pay for all full-time female employees by the total number of female full-time employees (B)
—— Calculate the gender pay gap ratio by using the following formula: (A – B) / B x 100

The result of the formula tells how much more (or less) men earn than women on average in your organisation, and thus by how much
women’s average salary would need to be raised (lowered) to equal that of men.

Working Conditions
S M6
Employee Turnover

Definition
The employee turnover measures the proportion of employees27 that have left an organisation during the fiscal year. High employee turnover
may signal dissatisfaction with the work environment, compensation or workplace health or safety. The employee turnover rate could be:

—— voluntary (when an employee actively chooses to leave such as resignation or retirement)

—— involuntary (when an employer chooses to end a contract and dismiss an employee such as layoff, retrenchment, or non-renewal of a
contract due to an employee’s performance, behaviour or the company’s decision to downsize)

What should be disclosed

• Employee turnover rate (in percentage)

The turnover rate is calculated by dividing the number of employees that left the company during the fiscal year (voluntary or unvoluntary) by
the average number of employees within that year.

Working Conditions
S M7
Freedom of Association and Collective Bargaining

Definition
Collective bargaining and freedom of association is the right for workers to join workers’ organisations of their own choosing and to
negotiate their terms of employment.

What should be disclosed

• The percentage of the active workforce covered by collective bargaining agreements. This is calculated as the number of active
workforce employees covered by a collective bargaining agreement divided by the total number of active workforce members within the
reporting year.
• Measures taken by companies to support workers’ rights to exercise freedom of association and collective bargaining (both in their own
operations and in their supply chain).

27 Employee is an individual who is in an employment relationship with the undertaking according to national law or practice.

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Working Conditions
S a1
Employee Health and Safety

Definition
Employee health and safety is a set of activities and procedures to prevent accidents and injuries in the workplace. Company performance
on this issue is often measured by the following indicators:

—— total number of employee and contractor fatalities within a given period;

—— total number of work-related injuries within a given period;
—— lost-time incident rate (LTIR) - total number of incidents resulting in lost time from work, per measure of time (e.g. per 100,000 hours
worked).
What should be disclosed
—— Whether the company has implemented a health and safety management system, what percentage of its operations does it cover and
what elements does it include.
—— Relevant performance indicators for the last three reporting years to facilitate performance assessment over time, broken down by
fulltime and contractual employees.

Human Rights
Businesses have a responsibility to respect international human rights standards. Beyond ethical concerns, companies that do not evaluate
and manage their human rights impacts may face reputational and regulatory risks and/or lose its social licence to operate.

Relevance to investors / issuers

Investors are interested in companies that:

• understand its responsibility to respect human rights;

• embed human rights considerations into its operations and risk management process;
• actively manage human rights impacts both within own operations and supply chain.

Recommended disclosures

EU legislation Other frameworks

Code Name Unit
ESRS SFDR (PAI) GRI Other

Minimum disclosures (applicable to all sectors)

S-M8 Human Rights Policy Policy • • •

S-M9 Human Rights Due Diligence Description • • •

Human Rights
S M8
Human Rights Policy

Definition
Human rights policy is a formal document outlining the company’s position on human rights. It can have a stand-alone format or be
integrated into a wider set of company standards such as a code of ethics or an employee/supplier code of conduct.

What should be disclosed?

—— Whether the company has a human rights policy that extends to suppliers and business partners.

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It is recommended that the policy:

—— Makes reference to internationally recognised human rights standards the company commits to respect (i.e. International Bill of Human
Rights and ILO’s Declaration on Fundamental Principles and Rights at Work).
—— Sets out the company’s expectations of its employees.
—— Sets out the company’s expectations of its suppliers and business partners.
—— Describes a process for its implementation.
—— Is communicated internally and externally.

Human Rights
S M9
Human Rights Due Diligence

Definition
Human rights due diligence is a set of activities to identify, mitigate and act on actual and potential risks of human rights violations.

What should be disclosed?

—— Whether the company conducts human rights due diligence throughout its value chain to assess risk exposure to human rights issues,
including child labour and forced labour.

It is recommended that the company discloses whether its human rights due diligence includes:

—— Identification of activities within own operations at risk of human rights violations.

—— Identification or mapping of suppliers/raw materials with high exposure to human rights risk.
—— Human rights risks assessment of new suppliers.
—— Incorporation of human rights provisions into procurement contracts.
—— Audit and monitoring of suppliers’ operations.
—— Corrective action in case of identified non-compliance.

Additional considerations and resources

—— United Nations, Guiding Principles on Business and Human Rights (Polish translation)
—— United Nations Global Compact, Guide on How to Develop a Human Rights Policy
—— World Benchmarking Alliance, Corporate Human Rights Benchmark Methodology
—— United Nations, The Corporate Responsibility to Respect Human Rights. An Interpretive Guide
—— UN Guiding Principles in the Age of Technology (for companies in the technology sector)
—— Investor Alliance for Human Rights, Investor Toolkit on Human Rights

8.4 Governance disclosures

Governance metrics cover issues relating to corporate governance and business ethics standards.

Corporate Governance
Corporate governance is a system of controls and procedures by which an organisation is operated. A company with strong corporate
governance structures is defined by professional management, a well-structured board, and organised systems and processes. These in
turn reduce and mitigate risks, and ensure decisions are aligned with the company’s and the shareholders’ interests. Weak governance
performance can impact the risk exposures and the bottom line significantly, and thereby also the credit ratings, and the access to capital
over time.

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Relevance to investors / issuers

Investors favour companies that demonstrate good corporate governance, including:

• well-structured framework of policies and procedures

• protection and equitable treatment of all shareholders, including minority shareholders
• good understanding and management of stakeholders’ interests vis-à-vis the company
• defined transparency and disclosure practices
• clear responsibilities of the board addressing the role of the board, compliance matters, treatment of shareholders, the code of conduct,
and the company’s objectives
• board structure that considers balance of skills and gender, and includes independent board members
• transparent corporate governance and accounting practices

Recommended disclosures
Companies corporate governance disclosure should be consistent with the rule of law. As a complement to legal and regulatory provisions,
companies listed on WSE are required to follow “Good Practices of Companies Listed on WSE 2021” in line with the comply or explain
principle, as they relate to:

1. Information policy and communication with investors (Chapter 1)

2. Management and supervisory board (Chapter 2)
3. Internal systems and functions (Chapter 3)
4. General shareholder meeting and shareholder relations (Chapter 4)
5. Conflicts of interests and related party transactions (Chapter 5)
6. Remunerations (Chapter 6)

EU legislation Other frameworks

Code Name Unit
ESRS SFDR (PAI) GRI Other

Minimum disclosures (applicable to all sectors)

G-M1 Board Composition Description • - •

G-M2 Board Independence Percentage (%) • - •

G-M3 Board Diversity Percentage (%) • • • DPSN

Corporate Governance
G M1
Board Composition

Definition
Board composition refers to the characteristics of the company’s highest governance bodies i.e. the management board and the supervisory
board. It covers qualifications and competences (also with regard to sustainability matters) of board members, their roles and responsibilities
as well as their tenure.

What should be disclosed?

—— Short bio of each of the management and supervisory board members indicating competences, qualification and background.
—— Classification of members between executive and non-executive.

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Corporate Governance
G M2
Board Independence

What should be disclosed?

—— Percentage of independent board members in the management board and supervisory board.

Corporate Governance
G M3
Board Diversity

Definition:
Board diversity aims to measure whether an organisations’ governance bodies are represented by people with varied characteristics,
including gender, in addition to skills and experience.

What should be disclosed?

—— Percentage of female board members in the management board and supervisory board.

Additional considerations and resources

—— ICGN Global Governance Principles

—— G20 / OECD Principles of Corporate Governance
—— Women on Boards Directive aimed at increasing gender balance among directors of listed companies.

Business Ethics
Business ethics refers to organizational principles that serve as guidelines for the way a company conducts itself and its operations.
Business ethics standards define the extent to which companies conduct business ethically, and in line with applicable laws and accepted
norms. It is a critical component of long-term value creation.

Relevance to investors / issuers

Investors are interested in companies that:

• have embedded strong ethical standards in their everyday operations

• regularly assess compliance with internal standards of conduct and take corrective actions accordingly
• work to increase employee awareness of related topics and provide them with appropriate channels to raise concerns

Recommended disclosures:

EU legislation Other frameworks

Code Name Unit
ESRS SFDR (PAI) GRI Other

Minimum disclosures (applicable to all sectors)

G-M4 Code of Ethics Policy • • •

G-M5 Anti-Corruption Policy Policy • • •

G-M6 Whistle-Blower Procedure Description • • •

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8 Recommended ESG disclosure metrics

Business Ethics
G M4
Code of Ethics

Definition:
Code of ethics (also called code of conduct) is a formal document outlining standards of ethics and responsible business conduct to which
the company commits itself. The code clarifies the company’s values and principles and provides guidelines of behaviour for employees (and
third parties).

What should be disclosed?

—— Whether the company has adopted a code of ethics. The code should be accessible internally and externally.

Business Ethics
G M5
Anti-Corruption Policy

Definition:
Anti-corruption policy is a formal document outlining the company’s position on bribery and corruption. It can have a stand-alone format or
be integrated into a wider set of company standards of conduct such as a code of ethics or a code of conduct described above.

What should be disclosed?

—— Whether the company has an anti-corruption policy that extends to suppliers and business partners.

It is recommended that the policy:

—— Outlines the company position regarding bribery and corruption, conflict of interest and facilitation payments.
—— Defines what is understood by each of the terms above.
—— Provides a clear explanation and examples of what is acceptable and non-acceptable behaviour.
—— Is communicated internally and externally.

Business Ethics
G M6
Whistle-Blower Procedure

Definition:
A whistle-blower procedure (also called grievance mechanism) is a system that enables reporting of suspected or actual violations of rules or
misconduct. It can be internally operated by a company (e.g. a dedicated email) or managed by an independent third-party.

What should be disclosed?

—— Whether the company has a whistle-blower procedure in place.
—— Methods for reporting a violation or concern (e.g. dedicated email, reporting hotline, etc.).
—— Process for handling of the report.

It is recommended that the whistle-blower procedure:

—— Allows the reporting of violations anonymously and without fear of retaliation.

—— Is available to suppliers and third parties.

Additional considerations and resources

—— ISO 37001:2016 Standard outlining specifies requirements for establishing, implementing, maintaining, reviewing and improving an
anti-bribery management system.

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Data Security and Privacy

Data privacy is about the rights of individuals such as employees, customers and partners with respect to their personal information. Data
security focuses on protecting the personal data from any unauthorised third-party access.

Relevance to investors / issuers

Investors are interested in companies that:

• comply with data privacy regulations

• ensure end-customers’ and business-to-business customers’ privacy protection
• limit data security risks and protects the company from related financial losses

Recommended disclosures:

EU legislation Other frameworks

Code Name Unit
ESRS SFDR (PAI) GRI Other

Sector-specific disclosures

G-A1 Data Security Policy Policy - •

Data Security and Privacy

G a1
Data Security Policy

Definition:
Data security seeks to protect employees’, customers’ or partners’ data and prevent unauthorised access to it. Data security includes
data privacy which is related to a proper handling of data (data collection, processing, storage and usage). A data security policy aims to
implement, guide and monitor the secure handling of the company’s data.

What should be disclosed?

—— Whether the company has a cyber and data security policy in place.

A comprehensive data security policy:

—— Details the scope of data protection.

—— Describes cyber and data security risk management arrangements like protocols, roles and responsibilities (for instance cyber/
information security team), reporting and performance monitoring.
—— Outlines security protocols to ensure adequate protection from intrusions, data breaches, unauthorised access, malicious content and
other attacks.

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Appendices

Appendices

ESG Reporting Guidelines 68

Appendices

Appendix A – EU sustainability disclosure regulations

THE EUROPEAN GREEN DEAL FINANCING SUSTAINABLE GROWTH ACTION PLAN

CSRD EU Taxonomy SFDR

(Directive 2022/2464) (Regulation (EU) 2020/852) (Regulation (EU) 2019/2088)

Who: all large companies and all Who: Companies subject to NFRD/ Who: Financial market participants and
companies listed on the EU regulated CSRD and financial market participants financial advisors.
markets (except micro-enterprises) subject to SFDR. What: SFDR requires financial actors to
What: CSRD requires companies to What: EU Taxonomy establishes a provide disclosure on the sustainability
provide comprehensive sustainability common classification system to help risks and integration of sustainability
disclosure following double materiality identify environmentally sustainable aspects into investment processes.
perspective. economic activities based on six Adopted: March 2021
Aspects covered include: sustainability environmental objectives. Additionally, it
governance, integration of sustainability requires companies in scope to provide
aspects into strategy and business disclosure on the level of alignment with
model, material ESG risks, opportunities the EU Taxonomy.
and impacts, (incl. due diligence Adopted: July 2020
process), relevant policies, action plans,
targets and KPIs.
Adopted: January 2023

Level 2 measures: European Level 2 measures: Climate Delegated Level 2 measures: Regulatory
Sustainability Reporting Standards Act; Environmental Delegated Act; Technical Standards (RTS)
(ESRS) Disclosure Delegated Act

Covered topics: Covered topics: Covered topics:

Various general, environmental, social 1) Climate change mitigation and 2) Sustainability risks; Principal adverse
and governance disclosure requirements adaptation; 3) Use and protection impacts as they relate to: climate,
of water and marine resources; 4) environment, social and employment
Transition to a circular economy; 5) issues, human rights, anti-corruption &
Pollution prevention and control; 6) bribery; Green assets
Protection and restoration of biodiversity
and ecosystems

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Appendices

Appendix B – ESG ratings explained

More and more Polish companies are being evaluated and companies that do not meet their requirements.
rated on their performance on ESG risks and opportunities by
third-party ESG data and ratings providers. Investors and other Nonetheless, it is important to note that, for many investors ESG
financial actors use this information to understand companies ratings are merely a starting point of the ESG analysis. Research
exposure to material ESG issues and whether they take shows28 that investors with a more sophisticated ESG integration
appropriate actions to manage them. ESG ratings and data allow approach tend to use raw data and analytical insights rather than
investors to identify ESG leaders and laggards and screen out the final ESG ratings to inform their view of the company.

How are ESG ratings calculated?

Each ESG rating provider uses its own proprietary methodology as sustainability reports, annual reports, media sources,
for calculation of the ESG rating. However, in general, ESG ratings etc. Elements that are scored include specific policies and
are based on two pillars: exposure to material ESG issues and management programmes as well as quantitative performance
company preparedness to manage those issues. indicators. Any negative events (typically referred to as incidents
or controversies) have a discounting effect on the ESG
1) Identification of material ESG issues at a sub-industry management score as they indicate shortcomings in the company
level management approach. Typically, each evaluated ESG issue
Company exposure to material ESG issues is typically determined receive its individual ESG score.
at the sub-industry level. For each sub-industry there is a set of
material ESG issues on which companies are assessed. Those 3) Application of weights
issues have been identified based on number of resources All material ESG issues have assigned specific weight in the
including: specialised data sets from different organisations, rating. The weighting approach can be different depending on
international standards, norms, companies practices, and others. the rating provider and is rarely disclosed. However, some rating
providers29 offer details on how much different ESG issues weight
It is important to note, that corporate governance is commonly in the final rating.
considered to be material for all companies regardless of their
sector of operations. 4) Calculation of the final rating
The final rating is calculated by aggregating the management
2) Assessment of the company ESG performance
scores on material ESG issue combined with their weights.
Companies performance on material ESG risks and opportunities In other words, the ESG rating is a weighted average of the
is evaluated based on the publicly available information, such company management scores on material ESG issues.

How to understand the ESG rating?

Good ESG rating means the company is proactively managing Rating providers use different rating scales, making interpretation
its ESG risks and taking advantage of ESG opportunities relative of the results somewhat difficult. Figure 23 below provides a brief
to its peers. Bad ESG rating on the other hand means that the overview of the two most widely referenced ESG rating systems:
company has high exposure to unmanaged ESG risks. Average MSCI and Sustainalytics.
performers may manage some risk better than others or be
average across the board.

28 https://www.sustainability.com/globalassets/sustainability.com/thinking/pdfs/sustainability-ratetheraters2020-report.pdf
29 https://www.msci.com/our-solutions/esg-investing/esg-industry-materiality-map

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Appendices

MSCI Sustainalytics

Rating scale AAA – CCC 0 – 100

AAA, AA – leader Ratings are categorised into five risk levels: negligible
A, BBB, BB – average (0-10), low (10-20), medium (20-30), high (30-40), and
B, CCC - laggard severe (40+).
Explanation
The lower the rating the lower the level of unmanaged
risks, meaning that the company is effectively managing
its exposure to ESG risks.

Figure 23 – Example of rating scores

Ratings methodologies vary across different ratings providers. How can issuers interact with the ESG rating providers?
Consequently, the same company may have different ESG
rating depending on the rating provider. In fact, a recent study30 Most rating providers have established feedback mechanism to
has found that the correlation among ESG ratings of leading allow rated companies review their profile before the publication
ESG rating providers is on average only 0.61. This divergence and correct any factual errors. This gives companies a chance to
is caused by different definitions of ESG performance and verify if all relevant information were taken into account during the
approaches to measure it, affecting rating’s scope, measurement assessment and provide any additional information if appropriate.
and weighting.

30 Berg, Florian and Kölbel, Julian and Rigobon, Roberto, Aggregate Confusion: The Divergence of ESG Ratings (August 15, 2019). Available at SSRN:
https://ssrn.com/abstract=3438533

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Appendix C – Relevance of the Guidelines to investors

Context and overview

Background and investor objectives defined in the Guidelines (Chapter 8). These metrics have been
informed by the relevant UE regulations (CSRD and ESRS,
The ESG Reporting Guidelines were published to support EU Taxonomy and SFDR), WSE corporate governance code
companies listed on the Warsaw Stock Exchange in reporting (DPNS2021), as well as international sustainability reporting
high quality ESG information and data to investors and other standards and frameworks.
stakeholders. They provide clarity on various ESG topics, specific
metrics to be reported, as well as a step-by-step guide for Furthermore to facilitate the reporting process for companies and
the ESG reporting process. While the companies can benefit the ESG analysis for investors, the recommended ESG disclosure
by better identifying, understanding and managing their ESG metrics have been categorised by topic and divided into minimum
impacts, risks and opportunities investors can also derive value disclosure requirements (relevant to all companies regardless of
by better understanding the companies and their value potential. their sector of operation) and additional sector-specific disclosure
requirements.
Investors seek to have as complete and good understanding
of companies, their performance, risk exposures, and future Alignment with the SFDR PAI indicators for corporate
outlook. In addition to using financial analysis, ESG reporting can investment.
complement and improve the understanding of a company and
its long-term potential value, either where there is a direct bearing The recommended ESG disclosure metrics have been
on value at risk, or where it may be a broader reflection of general aligned with the mandatory SFDR PAI indicators for corporate
operational or managerial excellence. investment (see table below). They also should help to conduct
the assessment of good governance practices relevant for
Focus on limited number of carefully selected disclosure investments that promote environmental or social characteristics
metrics (Art. 8 funds), or that have sustainable investment as their
objective (Art. 9 funds). This will allow companies to better
The number of ESG topics can be overwhelming. To provide respond to growing investors’ ESG data needs, while at the same
guidance, structure and priority to the ESG reporting, a limited time facilitating access to such information and data for investors.
number of recommended ESG disclosure metrics have been

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Appendices

SFDR Indicators WSE Guidelines

Environmental indicators

1. GHG emissions Scope 1 GHG emissions E-M2 GHG Emissions

Scope 2 GHG emissions
Scope 3 GHG emissions
Total GHG emissions
2. Carbon footprint Carbon footprint E-M2 GHG Emissions

3. GHG intensity of investee GHG intensity of investee companies E-M3 Emissions Intensity
companies
4. Exposure to companies Share of investments in companies active in the fossil I-M1 – Business Model
active in the fossil fuel fuel sector
sector
5. Share of non-renewable Share of non-renewable energy consumption and non- E-M4 Energy Consumption and Mix
energy consumption and renewable energy production of investee companies
production from non-renewable energy sources compared to
renewable energy sources, expressed as a percentage
6. Energy consumption Energy consumption in GWh per million EUR of revenue I-M1 Business Model + E-M4 Energy
intensity per high impact of investee companies, per high impact climate sector Consumption and Mix
climate sector
7. Activities negatively Share of investments in investee companies with sites/ E-A3 Biodiversity impacts
affecting biodiversity operations located in or near to biodiversity-sensitive
-sensitive areas areas where activities of those investee companies
negatively affect those areas
8. Emissions to water Tonnes of emissions to water generated by investee -
companies per million EUR invested, expressed as a
weighted average
9. Hazardous waste and Tonnes of hazardous waste and radioactive waste E-A4 Waste Management
radioactive waste ratio generated by investee companies per million EUR
invested, expressed as a weighted average
Social indicators
10. Violations of UN Global Share of investments in investee companies that have Not applicable. Typically verified through third-
Compact principles and been involved in violations of the UNGC principles or party data.
OECD Guidelines for OECD Guidelines for Multinational Enterprises
Multinational Enterprises
11. Lack of processes and Share of investments in investee companies without G-M5 Whistle-blower Mechanism
compliance mechanisms policies to monitor compliance with the UNGC principles +
to monitor compliance or OECD Guidelines for Multinational Enterprises or G-M3 Business Ethics Standards
with UN Global grievance /complaints handling mechanisms to address G-M4 Anti-corruption Policy
Compact principles and violations of the UNGC principles or OECD Guidelines S-M8 Human Rights Policy
OECD Guidelines for for Multinational Enterprises S-M9 Human Rights Due Diligence
Multinational Enterprises E-M6 Environmental Policy
12. Unadjusted gender pay Average unadjusted gender pay gap of investee S-M5 Gender Pay Gap
gap companies
13. Board gender diversity Average ratio of female to male board members in G-M2 Board Diversity
investee companies, expressed as a percentage of all
board member
14. Exposure to controversial Share of investments in investee companies involved in I-M1 Business Model
weapons (anti-personnel the manufacture or selling of controversial weapons
mines, cluster munitions,
chemical weapons and
biological weapons)

Figure 24 – Mapping of SFDR mandatory PAI indicators for corporate investments

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Interpretation of disclosures in the same or similar sectors, and within as well as outside the
specific country or market.
First, investors should develop an understanding of which risks
they consider material for a potential investment. If a prospective Third, the Guidelines are a support for the investment process
company leaves out reporting on supposedly core ESG matters, and decision, but not a replacement for analysis and independent
that should raise questions and potentially concerns. If the thought. In a similar vein, the primary data provided by the
company on the other hand explains the reason for leaving it out, companies in their respective ESG reporting is an important
such concerns may then dissipate. source of information. However, while it complements the
investor’s data to be analysed, it neither replaces nor is replaced
Second, analysing corporate ESG reporting and performance by external ESG company specific data, ratios and information.
should be done from a comparative angle – with other companies

Benefits for investors

Asset owners and managers can have many different reasons for do not form part of financial analysis, but they do have a potential
integrating sustainability and ESG data in their investment and to impact a company’s operations, profitability and value.
portfolio management processes. For investors it is important to
understand which reasons are the most relevant for them, and to In addition, the ESG reporting from companies reveals how they
integrate this data accordingly in their operations. perceive their risk exposure – which are the material risks, how
are they managed, and how are they performing. Just like other
I. Complying with fiduciary or regulatory requirements. strategic and tactical analyses and decisions, the ESG reporting
Regulations are on the increase: the CSRD introduces more can complement an investor’s view of how well the company is
detailed and ambitious reporting requirements for affected managed.
companies and extends the scope of the NFRD. Meanwhile the
EU Taxonomy outlines disclosure obligations for financial market IV. Improving investment decisions. While some ESG factors
participants under the scope of the SFDR and companies under are difficult to quantify others are not. And regardless of whether
the scope of the NFRD/CSRD, gaining full legal application by they are quantified or not, those ESG factors that are deemed
2023. These and other developments are discussed in more material in terms of their impact on a company need to be
detail in Chapter 3. Hence, investors will need to consider and considered in investment decisions.
disclose some ESG data stipulated in these regulations.
For those factors that are either quantifiable, or whose impacts
II. Meeting client, market and other stakeholder demands. on a company may have financial repercussions could also
Many investors view ESG risk management as essential to handle impact valuations. This could happen via various channels like
broader reputational risks – to new and existing clients, to local adjusted forecast financials (revenues, operating costs, capital
communities surrounding portfolio companies, and to clients of expenditure), adjusted valuation models (discount rates, terminal
the portfolio companies’ products and services. Being aware of values), and credit risk adjustments.
the risk exposures, comfortable with how they are handled by
Furthermore, taking these factors together across a portfolio may
a company, and prepared in case a risk materialises is part of
also lead to shifting of strategic and tactical asset allocations
sound investment management.
– either by taking the risks and related valuation impacts into
In addition, communicating such awareness may provide account, or more proactively by including thematic or ESG
an advantage over other investors in attracting and retaining objective tilts.
institutional and individual clients with increasingly higher
V. Facilitating consistency and comparability across
demands on sustainability integration, such as specific climate
markets. The increased amount of ESG reporting resulting
targets, alignment with the Paris Agreement, and goals tied to the
from these Guidelines will improve data availability to investors.
Sustainable Development Goals and 2030 Agenda.
Furthermore, the alignment of the ESG indicators to be used and
III. Complementing the financial analysis with ESG analysis. the setting of core/minimum reporting requirements will make
ESG reporting can complement traditional financial analysis by reporting and performance comparisons between companies
providing a more comprehensive coverage of risk exposures. easier. This applies both to comparing companies in the Polish
Climate resilience, regulatory risks and demands, reputational market and those in other markets since the ESG indicators are
risks, supply chain operations and practices and other ESG topics aligned with broadly established and recognised international
standards.

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Appendix D – Reference list

EU legislation CDP (link)

Non-financial Reporting Directive (NFRD) Directive 2014/95/EU Climate Disclosure Standards Board (link)
(link) IFRS/ISSB Sustainability-related Disclosure Standards (link)
Corporate Sustainability Reporting Directive (CSRD) (link)
European Sustainability Reporting Standards (ESRS) (link) Good practices and other guidelines
Sustainable Finance Disclosure Regulation (SFDR) (link) General
SFDR – Technical Regulatory Standards (link) Best Practice for GPW listed companies 2021, and additional
EU Taxonomy Regulation (link) resources (link)
EU Taxonomy Delegated Acts (link) UN Guiding Principles Reporting Framework (link), in Polish
EU Whistle-blowers directive (link) OECD Guidelines for Multinational Enterprises (link)
Framework for Communication action in the field of water policy UN Global Compact (link)
Directive 2000/60/EC (link) Sustainable Development Goals (link)
Assessment of the effects of public and private projects on the
environment Directive 2011/92/EU (link) Environmental
Proposal for the Corporate Sustainability Due Diligence Directive UN Convention on Biological Diversity (link)
(link)
Transition Pathway Initiative (link)
Women on Boards directive (link)
Science-Based Targets Initiative (link)

Polish legislation/supporting document

Social
Polish Accounting Act (link)
UN Guidelines principles on business and human rights (link)
Regulation of the Minister of Finance (from May 25th, 2016) on
ILO Conventions and Recommendations (link)
current and periodic disclosures
The International Bill of Human Rights (link)
World Benchmarking Alliance, Corporate Human Rights
Reporting standards and framework
Benchmark Methodology (link)
Global Reporting Initiative (link)
United Nations Global Compact, Guide on How to Develop a
Sustainability Accounting Standards Board (link) Human Rights Policy (link)
Integrated Reporting framework (link)
Task Force on Climate-related Financial Disclosures (link) Corporate Governance
TCFD Knowledge Hub (link) G20 / OECD Principles of Corporate Governance (link)
Taskforce on Nature-related Financial Disclosures (link)
ICGN Global Governance Principles (link)

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Appendix E – Reporting template

This template was designed to allow investors and other uses of ESG information to easily find ESG information and data recommended to
be disclosed by the Guidelines. Reporting companies should fill in this template according to the instructions below.

1) Disclosure and explanatory notes: If relevant, please provide any explanations and/or additional context here. Avoid copying the
content of your sustainability statement (or sustainability report). Instead refer the reader to relevant sections of your report, where the
information can be found.
2) Disclosure references: Please provide reference to relevant documents (for example link to a specific policies or reference to the
specific page(s) in the sustainability statement (report) where recommended information is discussed.

Disclosure
Metric ID Metric name Disclosure and explanatory notes
reference

General Information
I-M1 Business model
I-M2 Sustainability integration
I-M3 Sustainability governance
I-M4 Material impacts, risks and
opportunities
I-M5 Stakeholder engagement
Environmental disclosures
Climate change
E-M1 Climate change management
E-M2 GHG emissions Scope 1 emissions:
Scope 2 emissions:
Scope 3 emissions:
E-M3 GHG emissions intensity GHG emissions intensity:
E-M4 Energy consumption andmix Total amount of energy consumed within the organisation:
Other environmental issues
E-M5 Environmental Policy Has the company adopted an environmental policy: YES/NO Link to the policy
E-A1 Water consumption
E-A2 Water management
E-A3 Biodiversity impacts
E-A4 Waste management
Social disclosures
Working conditions
S-M1 Diversity policy Has the company adopted an diversity policy: YES/NO Link to the policy
S-M2 Employment policy Has the company adopted an employment policy: YES/NO Link to the policy
S-M3 Work-life balance policy Has the company adopted a work-life balance policy: YES/NO Link to the policy
S-M4 Reintegration policy Has the company adopted a reintegration policy: YES/NO Link to the policy
S-M5 Gender pay gap ratio Gender pay gap ratio:
S-M6 Employee turnover Employee turnover::
S-M7 Freedom of association and collective Percentage of the active workforce covered by collective
bargaining bargaining agreements:
S-A1 Employee health and safety

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Disclosure
Metric ID Metric name Disclosure and explanatory notes
reference

Human rights
S-M8 Human rights policy Has the company adopted a human rights policy: YES/NO Link to the policy
Does the policy extends to suppliers and business partners:
YES/NO
S-M9 Human rights due diligence
Governance disclosures
Corporate governance
- Information regarding company compliance with the DPSN2021 Link to the
statement
G-M1 Board composition
G-M2 Board independence Percentage of independent board members in the
management board:
Percentage of independent board members in the supervisory
board:
G-M3 Board diversity Percentage of female board members in the management
board
Percentage of female board members in the supervisory
board:
Business ethics
G-M4 Code of ethics Has the company adopted code of ethics: YES/NO Link to the
Does the code extends to suppliers and business partners: policy:
YES/NO
G-M5 Anti-Corruption Policy Has the company adopted anti-corruption policy: YES/NO Link to the
Does the policy extends to suppliers and business partners: policy:
YES/NO
G-M6 Whistle-Blower Procedure Does the company have a whistle-blower procedure in place: Link to the
YES/NO procedure:
Is the procedure available to suppliers and third-parties: YES/
NO
Data security and privacy
G-A1 Data Security Policy Has the company adopted data security policy: YES/NO Link to the policy

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Project execution Acknowledgements

The ESG Reporting Guidelines were written by Magdalena The authors would like to thank Tomasz Wiśniewski (WSE), Robert
Krzysztofik with contributions from Wouter Scheepens and Adamczyk (EBRD) and Vesselina Haralampieva (EBRD) for their
Danijela Piljic of Steward Redqueen. guidance and support throughout the process.

Steward Redqueen is an independent consultancy firm that The project team would also like to extend appreciation to all
works across the globe advising organisations on impact and parties who provided valuable feedback and inputs into this work,
sustainability. Its mission is to make business work for society. including:
Key areas of work include ESG integration, private sector
development, quantifying impact and facilitating change. The —— Elena Philipova (LSEG)
company’s offices are in Amsterdam, Singapore and Washington —— Małgorzata Szewc (Stowarzyszenie Emitentów Giełdowych)
DC. The company is also represented in Spain, Canada and —— Agnieszka Skorupińska (Rymarz Zdort Maruta)
Poland. Clients of Steward Redqueen include (development)
—— Maria Krawczyńska-Kaczmarek (Forum Odpowiedzialnego
financial institutions, private equity funds and impact investors,
Biznesu)
multinational corporations, and non-profit organisations.
—— Katarzyna Szwarc (Ministerstwo Finansów)
For more information visit: www.stewardredqueen.com —— Bartłomiej Chyłek (Goldman Sachs TFI)
—— Magdalena Adrejczuk (mBank)
—— Robert Sroka (Abris Capital Partners)

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ESG Reporting Guidelines 79