🌍 ESRS 1: The Compass for High-Quality Sustainability Reporting
The ESRS 1 principle represents the fundamental framework for sustainability reporting by companies.
This standard outlines the structure of ESRS, editorial conventions, key concepts, and general obligations that companies must follow in preparing their sustainability reports.
ESRS 1 serves as an essential guide to ensure that the disclosed information is relevant, reliable, and comparable.
📊 Governance, Strategy, Risk Management, and Metrics: The Pillars of Reporting
ESRS 1 defines four areas of sustainability reporting: governance, strategy, management of impacts, risks, and opportunities (IRO), and metrics and objectives.
Governance refers to the implementation of adequate processes, procedures, and controls to manage sustainability issues. Strategy concerns how IRO interacts with business strategy and the business model.
The management of IRO focuses on the process of continuous evaluation and monitoring, while metrics and objectives track and measure the company's results and progress toward sustainability.
📝 Evaluation Process and Qualitative Information Requirements
Before drafting the sustainability statement, companies must conduct an evaluation process to determine the information to be shared.
This information must be relevant and meet specific qualitative requirements defined in Section 2 of ESRS 1, including all information related to reporting areas (DB).
The fundamental qualitative characteristics are relevance and faithful representation, while supporting characteristics include comparability, verifiability, and understandability.
♻️ Double Materiality: A 360-Degree Lens on Sustainability
A distinctive element of the ESRS is the introduction of the concept of "double materiality."
According to this principle, companies must communicate sustainability information considering both the impact of their activities on people and the environment, and the influence of environmental and social issues on their financial results and market position.
This 360-degree perspective allows for a holistic evaluation of sustainability, highlighting the interconnections between impact materiality and financial materiality.
🔄 Interconnection Between Impacts and Financial Materiality
The relevance of impact refers to the company's impacts, which can be negative or positive, actual or potential, and involve people or the environment in the short, medium, or long term.
Financial materiality, on the other hand, concerns risks and opportunities that can have significant financial effects on the company.
It is essential to consider the interdependencies between these two aspects for a complete sustainability assessment.
📈 Value Chain and Stakeholder Engagement: Key Elements for Effective Reporting
The concept of the value chain is fundamental in the context of sustainability reporting. Companies must extend their information to include relevant impacts, risks, and opportunities associated with their value chain, thus ensuring the qualitative characteristics of the information.
Additionally, stakeholder engagement is a central element of the materiality assessment process and the due diligence procedure outlined in ESRS 1. Companies must actively identify and engage stakeholders, i.e., those who can influence or be influenced by business activities.
🌐 Toward Complete and Transparent Sustainability Reporting
The ESRS 1 principle represents a significant advancement in sustainability reporting, requiring companies to adopt a transparent and comprehensive approach. By implementing these standards, companies can not only improve their transparency but also optimize their sustainability strategy, significantly contributing to the well-being of the environment and society.
ESRS 1 lays the foundations for rigorous sustainability reporting, stakeholder-oriented and aligned with international best practices, promoting greater responsibility and sustainable growth in the long term.
What is ESRS 1 and what is its main purpose? ESRS 1 is the cornerstone principle of the European Sustainability Reporting Standards (ESRS), the new European framework for corporate sustainability reporting. Its main purpose is to define the structure, key concepts, requirements, and best practices that companies must follow to produce complete, accurate, and comparable sustainability reports. ESRS 1 guides companies in transparently communicating their commitment to sustainability, demonstrating their responsibility to society and the environment. By following this standard, companies can provide relevant and reliable information on their impacts, risks, and opportunities related to sustainability, aligning with stakeholder expectations and European regulations.
What is the "double materiality" introduced by ESRS 1 and why is it important? Double materiality is a key concept introduced by ESRS 1, according to which companies must communicate sustainability information considering both the impact of their activities on people and the environment, and the influence of environmental and social issues on their financial results and market position. This 360-degree perspective allows for a holistic evaluation of sustainability, highlighting the interconnections between impact materiality and financial materiality. Double materiality is important because it enables companies to identify and manage risks and opportunities related to sustainability, improving their resilience and capacity to create value in the long term. Additionally, double materiality meets the growing expectations of investors, consumers, and other stakeholders, who demand greater transparency and corporate responsibility regarding sustainability performance and impacts on society and the environment.
What are the main reporting areas defined by ESRS 1 and why are they relevant? ESRS 1 defines four main areas of sustainability reporting: governance, strategy, management of impacts, risks, and opportunities (IRO), and metrics and objectives. Governance refers to the implementation of adequate processes, procedures, and controls to manage sustainability issues. Strategy concerns how IRO interacts with business strategy and the business model. The management of IRO focuses on the process of continuous evaluation and monitoring, while metrics and objectives track and measure the company's performance and progress toward sustainability.