Overview of the ESRS 2 Principle
The ESRS 2 principle is crucial for businesses as it establishes non-sector-specific and cross-cutting disclosure obligations valid for all companies.
This principle covers various reporting areas, including governance, strategy, management of impacts, risks, and opportunities, as well as metrics and targets.
ESRS 2 aims to ensure that companies provide comprehensive and comparable information on their sustainability performance, enabling stakeholders to assess the commitment and progress of businesses in this crucial area.
Criteria for the Sustainability Statement
General Criteria (ESRS 2 BP-1)
Companies must adopt general criteria for drafting the sustainability statement, including information on the consolidation area, the corporate value chain, and the application of information omission possibilities on intellectual property and know-how.
These criteria are essential to ensure transparency and consistency in the disclosed information.
Specific Disclosure (ESRS 2 BP-2)
Additionally, the principle requires informative obligations regarding specific circumstances, detailing governance procedures and controls, as well as the role of administrative and control bodies, including their composition, diversity, roles, and responsibilities.
Governance and Incentives
Governance Processes (ESRS 2 GOV 1-5)
Companies must describe how the governance bodies receive and manage information on sustainability issues, including sustainability-related remuneration policies and incentive systems for the members of the administrative bodies.
This includes a detailed mapping of information to provide a comprehensive picture of the actual practices adopted.
Due Diligence Process
Companies must illustrate the due diligence process, describing the internal control systems and the management of concentration risk. This is essential to ensure effective and responsible management of sustainability issues.
Strategy and Business Model
Corporate Strategy (ESRS 2 SBM 1-3)
Companies must describe the key elements of their strategy related to sustainability, including the business model and the value chain.
They must provide a mapping of significant activities, an accurate description of product/service groups and their respective target markets.
Stakeholder Engagement
Stakeholder engagement is fundamental in the relevance assessment process.
Companies must provide information on the engagement methods used, indicating the impact of the business model and the value chain.
Management of Impacts, Risks, and Opportunities
Methodologies and Assumptions (ESRS 2 IRO1-2)
Companies must describe the methodologies used to identify, evaluate, and monitor impacts on the environment and people, prioritizing them through due diligence procedures for sustainability.
Policies and Actions (ESRS 2 Policies MDR-P and Actions MDR-A)
Companies must detail the policies undertaken and the planned actions to prevent, mitigate, and correct impacts and risks, or to pursue opportunities related to sustainability.
Metrics and Targets
Metrics Used (ESRS 2 Metrics MDR-M)
Companies must communicate the metrics used to evaluate the performance and effectiveness of their sustainable actions.
They must constantly monitor the effectiveness of the actions taken and communicate the result-oriented measurable targets.
Measurable Objectives
If measurable objectives are not available, the company must disclose the expected realization terms or the reasons why they have not been set, still verifying the effectiveness of the policies and actions undertaken.
Towards Complete and Comparable Sustainability Reporting
In summary, ESRS 2 represents a significant step towards more complete, transparent, and comparable sustainability reporting.
By requiring companies to disclose detailed information on governance, strategy, management of impacts, risks, and opportunities, as well as metrics and targets, this principle aims to promote greater accountability and commitment of businesses towards sustainability.
The adoption of ESRS 2 will help create a clearer and more comprehensive picture of companies' sustainability performance, enabling stakeholders to make informed decisions and assess the progress of companies in achieving sustainable development goals.
As companies adapt to these new reporting requirements, it is essential that they engage in continuous dialogue with stakeholders, fully integrate sustainability into their business strategies, and focus on the continuous improvement of their performance in this crucial area.
Only through genuine and transparent commitment to sustainability can companies contribute to building a more equitable, resilient, and prosperous future for all.
What is the ESRS 2 Principle and Why is it Important for Businesses?
The ESRS 2 principle establishes disclosure obligations on sustainability that are cross-cutting and non-sector-specific, applicable to all businesses.
This principle covers fundamental aspects such as governance, strategy, management of impacts, risks, and opportunities, as well as metrics and targets.
It is crucial because it ensures that companies provide comprehensive and comparable information on their sustainability performance, enabling stakeholders to assess the commitment and progress of businesses in this crucial area.
What are the Main Criteria for the Sustainability Statement According to ESRS 2?
ESRS 2 requires companies to adopt general criteria for drafting the sustainability statement, including:
Information on the consolidation area
Corporate value chain
Application of information omission possibilities on intellectual property and know-how
Additionally, they must comply with specific disclosure obligations regarding governance, remuneration policies, and incentive systems.
How Should Companies Manage Impacts, Risks, and Opportunities According to ESRS 2?
Companies must describe the methodologies used to identify, evaluate, and monitor impacts on the environment and people, prioritizing them based on due diligence procedures for sustainability.
They must also detail the policies undertaken and the planned actions to prevent, mitigate, and correct impacts and risks, or to pursue opportunities related to sustainability.
By adopting ESRS 2, companies can demonstrate their commitment to sustainability, improve the transparency and comparability of the information provided, and strengthen stakeholder trust.
This principle represents a fundamental step towards more complete and effective sustainability reporting.
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