CSRD and ESRS E4: your guide to biodiversity reporting

The CSRD (Corporate Sustainability Reporting Directive) aims to strengthen and standardise the extra-financial reporting by companies, in order to provide a common language for sustainability issues across different business sectors. To achieve this objective, the standards issued by EFRAG, the ESRS standards, identify 12 sustainability topics, of which 2 are general, 5 are environmental, 4 are social and 1 is governance. The ESRS E4 is the standard dedicated to "Biodiversity and Ecosystems", which through the CSRD requires companies to analyse and disclose information on biodiversity impacts, risks and opportunities. Specifically, it explains how to act to mitigate their impacts and manage risks (physical, transitional, systemic) and opportunities, and illustrates the company's biodiversity policy, objectives and actions taken.

Companies subject to the CSRD directive that identify biodiversity as a material issue will be required to report on it through a set of standards called ESRS. Among these, the E4 Biodiversity and Ecosystems Standard is proposed as a guide for companies obliged to report on biodiversity issues. The E4 standard is structured into six 'disclosure requirements', i.e. six areas of reporting that companies will need to address: corporate biodiversity strategy; management of impacts, risks and opportunities; and related metrics and targets. This demonstrates how, at the European level, biodiversity is now fully integrated into corporate non-financial reporting through the introduction of mandatory standards that standardise practices across the EU.

In order to limit the impact of biodiversity loss, the services and commodities identified as responsible for the impact on biodiversity have been identified in the High Impact Commodity List (HICL) developed by the Science-Based Targets Network (SBTN), as part of the SBT for Nature methodology. There are 47 identified commodities (e.g. agricultural, metals, chemicals, minerals, etc.). Companies in these sectors can view and download the full list here: High Impact Commodity List v1 (used in Step 1a of the SBTN methodologies). It is important to correctly identify whether at least one of the HICL raw materials is present throughout the value chain or within the company. If at least one raw material is present, the ESRS E4 standard can set the right course for achieving sustainable goals.

One of the key elements that distinguishes the ESRS and makes it particularly relevant is the consideration of double materiality, as described in the CSRD Directive. Indeed, it requires an approach based on the consideration of both a company's impacts and dependencies on biodiversity. This analysis must be multi-dimensional, covering the 4 sub-themes defined by ESRS E4 (erosion drivers, impacts on species and ecosystems, impacts and dependencies on ecosystem services). It must also be broad, covering the entire value chain, time horizons and geographical areas, and taking into account the various stakeholders. Although complex, these practices are essential to achieve relevant, robust and objective results on biodiversity.

A company's impacts and dependencies on biodiversity are thus the two themes of double materiality. On the one hand, corporate activities can have a significant impact on biodiversity, as in the case of the food sector, which draws its raw materials par excellence from biodiversity, and which is responsible for changes in land use and the release of pollutants.Or the logistics sector, which can be responsible for the introduction of alien species or increased CO2 emissions. On the other hand, companies themselves are heavily dependent on biodiversity and the ecosystem services it provides, such as pollination for the agricultural sector. The decline of such services can lead to significant economic and financial risks for companies.

Looking at the details of the ESRS E4 Biodiversity disclosure requirements, companies need to demonstrate how their business model and strategy can evolve towards a greater focus on biodiversity and ecosystem issues, all applied to the assessment of dependencies, impacts, risks and opportunities at the company's location and value chain level. Another relevant aspect concerns the actions that companies should take in their biodiversity strategy. The concept of a hierarchy of actions (avoid - reduce - restore - offset) emerges, with particular reference to offsetting negative impacts. Companies must report on their policies for identifying, assessing, managing and offsetting their impacts on biodiversity, and link these policies to appropriate actions, strategic objectives and resources.

Company targets need to be aligned with international policies such as the Convention on Biological Diversity or the European Green Deal. The geographical scope of such targets needs to be clarified, as the impact on biodiversity depends on the context. A specific feature of ESRS E4 is the double materiality approach, which requires consideration of both the company's impact on biodiversity (impact materiality) and the financial and environmental risks that biodiversity loss may pose to the company (financial materiality).

The five environmental thematic standards of the CSRD provide for interaction with the other thematic areas. For example, the ESRS E2 (Pollution) standard requires the reporting of material impacts, risks and opportunities related to water, air and soil pollution. This standard explicitly requires that the impacts of such pollution on biodiversity and ecosystems be addressed in ESRS E4 - Biodiversity and Ecosystems. Similarly, the other environmental standards - ESRS E1 (Climate Change), ESRS E2 Pollution, ESRS E3 (Water and Marine Resources), ESRS E5 (Resources and Circular Economy) and ESRS S3 (Affected Communities) - provide for interaction with the ESRS E4 standard on Biodiversity. This interaction between the standards demonstrates the central role of ESRS E4.

In this context, the 3Bee Biodiversity Monitoring Platform is an integrated and scientifically validated solution that allows companies, municipalities and nature parks to identify and close their nature, climate and biodiversity gaps by monitoring four key risk indices in a simple and rapid way. This is done in accordance with international standards - like ESRS E4 and the CSRD Directive - and by identifying an appropriate climate and biodiversity strategy, based on the identified impacts and dependencies on the ecosystem services directly involved. The 3Bee platform uses advanced technologies that combine satellite data, field technology and public databases. After an initial assessment phase, a Biodiversity Strategist, a technical member of the 3Bee team who is trained to assist partners in defining a tailor-made biodiversity restoration and conservation strategy, steps in.