If policies (E3-1) set the rules and actions (E3-2) describe the work, then targets define the destination. ESRS E3-3 asks undertakings to disclose the specific, measurable goals they have set regarding water consumption, withdrawals, discharges, and the protection of marine resources.

This disclosure provides the benchmark for accountability. Because water is often a localized resource, vague global ambitions are no longer sufficient. E3-3 requires you to translate high-level water stewardship commitments into trackable, location-specific numbers.

I will briefly explain the requirements for disclosing water-related targets.

More elaborate articles are, or will become available, which can be found on: Sustainability Simplified.

2. What are water targets?

Water targets are measurable, time-bound objectives designed to manage an undertaking’s material water impacts or risks.

According to the cross-cutting standards, targets regarding material impacts must be outcome-oriented. This means they must focus on the actual environmental result (e.g., cubic meters of water saved) rather than just an internal process (e.g., conduct three water audits).

Typical examples include:

• Withdrawal: Reduce absolute freshwater withdrawal by 40% by 2030 against a 2022 baseline.

• Discharge/Quality: Achieve 100% zero-liquid discharge at all manufacturing sites by 2028.

• Efficiency: Increase the proportion of recycled/reused water in operations to 60% by 2026.

• Marine: Ensure 100% of procured seafood is certified by the Marine Stewardship Council (MSC) by 2025.

The ESRSes define targets as follows:

“Measurable, outcome-oriented and time-bound goals that the undertaking aims to achieve in relation to material impacts, risks or opportunities. They may be set voluntarily by the undertaking or derive from legal requirements on the undertaking.”

3. ESRS E3-3 at a glance

E3-3 requires that “the undertaking shall disclose its water-related targets in accordance with the provisions of ESRS 2 GDR-T“.

However, the Application Requirements for E3-3 (AR 3) explicitly adds that undertakings shall, where relevant, express water-related targets with reference to specific geographic areas, such as areas with water stress. A global target to reduce water use by 10% means very little if all the savings happen in rainy regions while operations in drought-stricken areas continue business as usual.

If the undertaking has not set any measurable outcome-oriented targets for a material water topic, it shall disclose this fact and explain how it tracks progress instead.

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4. How E3-3 links to the rest of ESRS E3

Targets provide the necessary context to evaluate your raw data:

• E3-1 (Policy): Establishes the commitment to reduce freshwater reliance in vulnerable regions.

• E3-2 (Action): Details the €2M investment in a closed-loop cooling system at a specific Spanish facility.

• E3-3 (Target): Sets the goal. For example, reduce freshwater withdrawal at the Spanish facility by 50% by 2028.

• E3-4 (Metric): Provides the actual cubic meters withdrawn this year. Without the target in E3-3, the metric in E3-4 is just an isolated number; the target tells users whether that number represents success or failure.

5. Bottom line

E3-3 demands precision and localized context. To report effectively:

• Ditch the global average: Move away from aggregate global water intensity targets. Investors and stakeholders want to see targets specifically mapped to the river basins where water stress is highest.

• Define the baseline clearly: A water reduction target is impossible to verify if you do not explicitly state your starting point (baseline year and volume).

• Look to context-based targets: The gold standard for E3-3 is setting targets grounded in local ecological thresholds. A 10% reduction might be ambitious in one basin, but entirely inadequate to prevent water depletion in another. Ground your targets in the reality of the local watershed.

Relevant Standards

ESRS E3

November 2025 ESRS E3

If policies (E3-1) are the blueprint, actions and resources are the construction phase. ESRS E3-2 asks undertakings to describe the concrete steps they are taking—and the money they are spending—to manage their material water impacts and protect marine ecosystems.

This disclosure helps you demonstrate that your water policy is more than a document by showing the operational projects and financial investments that support it.

I will briefly explain the requirements for disclosing water-related actions and resources.

More elaborate articles are, or will become available, which can be found on: Sustainability Simplified.

2. What are water actions?

Water actions are the specific operational initiatives, projects, or changes in practice designed to achieve the objectives of your water policy. Resources refer to the financial capital (OpEx and CapEx) or workforce personnel dedicated to implementing those actions.

Because water is mostly a local issue, these actions are usually highly specific to the facilities or supply chain nodes where water risks are most acute.

Typical examples include:

• Infrastructure upgrades: Allocating €2M in CapEx to install closed-loop water recycling systems at a manufacturing plant.

• Process changes: Transitioning to dry-cleaning methods for production lines to eliminate wastewater discharge.

• Value chain initiatives: Investing in training programs for upstream agricultural suppliers to adopt drip irrigation techniques.

• Marine protection: Funding the restoration of a local coastal mangrove ecosystem to compensate for operational impacts on marine resources.

The ESRS defines actions as follows:

“Actions refer to:

i. actions and action plans (including transition plans) that are undertaken to ensure that the undertaking delivers against targets set and through which the undertaking seeks to address material impacts, risks and opportunities; and
ii. decisions to support these with financial, human or technological resources.

Actions can be individual actions, taken only by the undertaking, or collective actions, this is, collaborative efforts by a group of stakeholders - such as undertakings, governments, civil society, or communities - to address shared challenges or achieve common goals, particularly when those goals cannot be effectively achieved by any single actor working alone.”

3. ESRS E3-2 at a glance

E3-2 requires that the company disclose its water-related actions and the resources allocated to their implementation using the framework provided by ESRS 2 GDR-A.

However, ESRS E3 adds a very specific, strict topical requirement:

You shall explicitly specify which key actions and resources are related to areas with water stress. You cannot simply report a global summary of water initiatives; you must isolate and highlight what you are doing in the most vulnerable geographic locations.

To comply with ESRS E3-2, the disclosure must include:

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4. How E3-2 links to the rest of ESRS E3

E3-2 is the execution phase of your water strategy:

• E3-1 (Policy): Establishes the commitment to prioritize water efficiency in vulnerable regions.

• E3-2 (Action): The execution. Upgrading the cooling towers at the Spanish facility (an area with high water stress) at a cost of €500,000.

• E3-3 (Target): Sets the goal to reduce that specific site’s water withdrawal by 25% by 2028.

• E3-4 (Metric): Reports the actual cubic meters of water consumed, verifying whether the new cooling towers (E3-2) actually achieved the target (E3-3)

5. Bottom line

E3-2 is where companies must open their wallets to prove their commitments. To report effectively:

• Map actions to stress: Generic, company-wide water initiatives are good, but the standard specifically hunts for localized action. You must map your initiatives and spending directly to the river basins experiencing water stress.

• Follow the money: If your materiality assessment flags water as a highly material risk, but E3-2 shows zero CapEx or OpEx allocated to mitigate it, stakeholders and auditors will immediately notice the disconnect.

• Context is everything: Saving 10,000 cubic meters of water in a region with abundant rainfall is a minor efficiency win. Saving the exact same amount in a drought-stricken region is a critical risk mitigation effort. E3-2 requires you to highlight that context.

Relevant Standards

ESRS E3

November 2025 ESRS E3

While targets and metrics measure the output of a company’s environmental impact, policies provide the governance framework that dictates how those results are achieved. ESRS E3-1 asks companies to describe the official rules, principles, and commitments they have established to manage their impact on water and marine resources.

This disclosure serves as the foundation of the Water standard. It connects your high-level sustainability governance (ESRS 2) to the tangible actions (E3-2) and targets (E3-3) aimed at reducing your water footprint and protecting marine ecosystems.

I will briefly explain the requirements for companies to disclose their policies in relation to water consumption, withdrawals, discharges, and marine resources.

More elaborate articles are, or will become available, which can be found on: Sustainability Simplified.

2. What is a water policy?

A water policy is a framework that outlines how an undertaking manages its interactions with water systems and marine environments. It addresses the sustainable sourcing, consumption, and discharge of water, as well as the protection of aquatic ecosystems.

Context-specific considerations are incredibly important here, as water impacts are mostly local and tied to specific geographies.

Typical examples include:

• Water efficiency commitments: Strategies to reduce absolute water consumption or improve water recycling rates in manufacturing processes.

• Water stress management: Strict rules governing water withdrawal and discharge specifically tailored for operations located in highly water-stressed regions.

• Marine resources: Commitments regarding the sustainable sourcing of marine resources (e.g., certified sustainable fishing) or preventing damage to marine ecosystems.

• Value chain guidelines: Supplier criteria requiring minimum water efficiency standards or zero-liquid discharge for water-intensive raw materials (like cotton or agriculture).

The ESRS 2 General Disclosures (GDR-P) provides the framing for this requirement. It states that the objective is to enable an understanding of the policies the company has in place to manage the prevention, mitigation, or remediation of material actual and potential negative impacts, as well as to manage material risks and pursue material opportunities or positive impacts. The ESRS defines a policy as follows:

“A set or framework of general objectives and management principles that the undertaking uses for decision-making. A policy implements the undertaking’s strategy or management decisions related to a material sustainability topic. Each policy is under the responsibility of defined person(s), specifies its perimeter of application, and includes one or more objectives (linked when applicable to measurable targets). A policy is validated and reviewed following the undertakings’ applicable governance rules. A policy is implemented through actions or action plans.”

3. ESRS E3-1 at a glance

E3-1 specifically requires that “the undertaking shall disclose its water-related policies in accordance with the provisions of ESRS 2 GDR-P”.

To comply with ESRS E3-1, the disclosure must include:

If a company has not adopted policies regarding water despite it being a material topic, it must explicitly disclose this fact.

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4. How E3-1 links to the rest of ESRS E3

• E3-1 (policies) sets the rules and strategic direction for water and marine resource management.

• E3-2 (actions and resources) describes the key actions taken to implement those policies and the financial resources allocated to them.

• E3-3 (targets) defines the measurable goals the company aims to achieve.

• E3-4 (metrics) provides the data on for example actual water consumption, withdrawal, and discharges to track performance against the policy.

For example, a policy to minimize freshwater use in vulnerable regions (E3-1) would be implemented by investing in closed-loop cooling systems (E3-2), tracked against a target to reduce freshwater withdrawal by 30% by 2030 (E3-3), and reported via the absolute cubic meters of water consumed in areas with water stress (E3-4).

5. Bottom line

E3-1 is your opportunity to demonstrate that your organization’s approach to water is systematic and highly localized, rather than a generic global statement. To comply and communicate effectively:

• Define the scope clearly: Be highly specific about geography. A water policy is most effective if it specifically addresses operations and supply chains located in areas with high water stress.

• Address the full spectrum: Ensure policies cover not just the volume of water consumed, but also the quality of water discharged and any material impacts on marine ecosystems.

• Link to frameworks: Where relevant, show how your policies align with frameworks, such as the EU Water Framework Directive.

A robust water policy is the starting point for credible reporting on how an undertaking respects and preserves local aquatic environments and marine ecosystems.

Relevant Standards

ESRS E3

November 2025 ESRS E3

In Article 1, we built the Sustainability Flywheel: a mechanism to turn data and decisions into compounding value. In Article 2, we designed the Loonshot Engine: a protected space to nurture the fragile innovations that fuel that flywheel.

Now, we face the most difficult hurdle in achieving profitable sustainability: the execution gap.

Companies excel at setting 2050 targets. They are less proficient at knowing what to do the next day to hit them. We see this gap in the data: a recent study found that nearly 40% of companies that set climate targets ending in 2020 missed them or quietly abandoned them.

The problem is the translation: “Net Zero by 2050” is a vision, not a work plan. When a vision is that distant, it creates no urgency for the procurement manager negotiating a contract today, or the logistics coordinator booking freight for next month.

To bridge this gap, organizations can adapt the Objectives and Key Results (OKR) framework—famously codified by Andy Grove and John Doerr—specifically for the nuances of ESG.

In this article, you will learn:

✅The fundamental difference between KPIs and the change-driven engine of OKRs.

✅ How to distinguish between Committed OKRs for operational efficiency and Aspirational OKRs for high-risk innovation.

✅ Real-world applications of OKRs at companies like Yves Rocher and Zalando to solve siloization and Scope 3 challenges.

✅ A seven-step guide to start using OKRs and avoiding common failures like the Moses Trap.

✅How OKRs integrate into the broader Profitable Sustainability framework of flywheels and loonshot engines.

By the end, you’ll understand how to deploy the OKR framework as the steering mechanism that makes profitable sustainability a repeatable quarterly habit.

What OKRs mean for sustainability

OKRs stand for Objectives and Key Results, a collaborative goal-setting protocol used by companies, teams, and individuals. Originating from Andy Grove’s management systems at Intel, the framework is built on the philosophy that “Ideas are easy. Execution is everything”. OKRs act as a precision communication tool to ensure that everyone in an organization aligns their efforts toward the same important issues.

The system consists of two components:

• The Objective (the what): This is simply what is to be achieved. An objective provides clear direction and should be significant, concrete, action-oriented, and ideally inspirational.

• The Key Results (the how): These benchmark and monitor how you actually reach the objective. Effective key results must be specific, time-bound, aggressive yet realistic, and, most importantly, measurable and verifiable. As former Google executive Marissa Mayer noted, “It’s not a key result unless it has a number”. Furthermore, key results must describe true outcomes rather than just activities.

OKRs are not the same as targets and KPIs

Think of KPIs as your business’s vital signs, the health check that answers, “Are we performing well right now?” They are steady-state metrics, like a car’s speedometer, that tell you if you are running smoothly.

A target is simply the specific number or milestone you want those metrics to hit, defining, “What exact level do we need to hit?” (such as a destination speed of 65 mph).

OKRs are the engine for bold change, providing a strategy for growth that answers, “Where do we want to go, and how will we know we’re there?” They combine an inspiring goal (the Objective) with measurable markers (Key Results) to push you toward something new.

Together, they create a complete system: if a KPI shows you are slowing down, you set an OKR to build a new engine, using a specific target to prove your new strategy succeeded.

How the system works in practice

OKRs are meant to be black-and-white. At the end of a goal cycle, typically a quarter, you evaluate whether you met the key result or not, leaving no room for gray areas or subjective judgment. Many companies score them on a mathematical scale. Google, for example, uses a 0.0 to 1.0 scale:

• 0.7 to 1.0 (Green): You delivered on the goal.

• 0.4 to 0.6 (Yellow): You made progress but fell short of completion.

• 0.0 to 0.3 (Red): You failed to make real progress.

A crucial rule of the framework is that the successful completion of all key results must guarantee that the objective is achieved. If you can score a 1.0 on all your key results but still haven’t accomplished the overarching objective, the OKR was poorly designed.

To get the most out of OKRs, organizations make them entirely public, meaning the most junior staff can look up the goals of everyone else, all the way up to the CEO. These transparent goals act as neon-lit road signs that demolish corporate silos and empower employees to see exactly how their day-to-day work connects to the company’s broader mission.

Types of OKRs

OKRs are divided into two main categories: committed OKRs and aspirational (or stretch) OKRs. It is critical to differentiate between the two, as confusing them can lead to misallocated resources or defensive teams.

• Committed OKRs: These are operational goals tied to core company metrics, such as product releases, sales, bookings, and hiring. They represent priorities that the organization agrees must be achieved, meaning teams are expected to adjust their schedules and resources to ensure they are delivered. Because they are commitments, they are expected to be achieved in full (100 percent, or a score of 1.0) within a set time frame. If a committed OKR falls short of a 1.0 score, it requires a postmortem or explanation to understand what went wrong in the planning or execution.

• Aspirational OKRs: Also known as stretch goals, these reflect bigger-picture, higher-risk, and more future-tilting ideas. They express how you want the world to look, even if you do not yet have a clear idea of how to get there or lack the resources necessary to deliver the outcome. Because they are designed to mobilize the organization and push people past their limits, they are inherently challenging, and a failure rate of around 40 percent is considered normal. The expected average score for an aspirational OKR is 0.7 (or 70 percent attainment).

Linking this back to the sustainability innovation engine and the sustainability flywheel discussed in the previous two articles:

• Committed OKRs are for the Soldiers. They ensure the core business (the Flywheel) stays healthy and efficient.

• Aspirational OKRs are for the Artists. These are the Loonshots. Because these OKRs expect a 40% failure rate, they provide the psychological safety for teams to try crazy things without fear of punishment.

When a Loonshot (aspirational OKR) finally shows a value signal (success), use the OKR framework to help transition that idea into a committed OKR to make the idea scale.

Companies applying OKRs for sustainability

Yves Rocher: Integrating committed products into revenue

For many companies, sustainability is a side project handled by a specialized team, while the rest of the company focuses on selling products. Yves Rocher uses OKRs to break down this wall (siloization). They integrate green goals directly into the company’s core success metrics.

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The ocean is often viewed as a vast, static body of water, but it is actually a dynamic and highly interconnected engine that regulates the Earth’s climate, supports global biodiversity, and underpins the international economy. From the wind-driven currents at the surface to the slow-moving “conveyor belt” in the abyssal depths, ocean circulation moves heat, carbon, and nutrients across the globe in a delicate balance.

However, as the planet warms, these fundamental systems are shifting. For businesses, ocean circulation is a material factor in supply chain resilience, regulatory compliance, and long-term strategic planning. Whether it is the Gulf Stream influencing European weather patterns or upwelling zones providing half of the world’s fish catch, the movement of the sea directly affects how companies operate, what they spend, and how they report their environmental impact.

In this article, you will learn:

✅The mechanics of movement: How wind, the Earth’s rotation, and water density drive surface and deep-ocean currents.

✅Vertical dynamics: The vital roles of upwelling and downwelling in supporting marine life and cooling the planet.

✅Business implications: Why shifts in these currents present physical, regulatory, and reputational risks to sectors ranging from shipping to finance.

✅The path forward: How frameworks like the LEAP approach help firms build resilience in a changing oceanic landscape.

By understanding the why and how of ocean circulation, you can better navigate the emerging risks and opportunities caused by ocean circulation.

This is a simplified view of how the ocean flows:

The ocean's movement is organized into two primary systems: surface circulation and deep-ocean circulation.

While they operate at different depths and speeds, they are inextricably linked by vertical movements—the rising and sinking of water—that connect the two into one global machine. To understand how this system functions, we will first examine the engine of the surface ocean.

2. Surface ocean circulation

The upper few hundred meters of the ocean are predominantly driven by global wind systems, such as the tropical easterlies and mid-latitude westerlies, combined with the Earth’s rotation. As wind blows across the ocean, it transfers momentum to the surface water via friction. However, because the Earth rotates, the Coriolis effect deflects these moving waters to the right in the Northern Hemisphere and to the left in the Southern Hemisphere.

The Coriolis effect is the “curve” that happens because the Earth is spinning while things are moving over it.

Imagine you are standing in the center of a spinning merry-go-round and you try to throw a ball straight to a friend standing on the outer edge.

• The curve: As the ball flies through the air, the merry-go-round keeps spinning. By the time the ball reaches the edge, your friend has moved. To you, it looks like the ball curved away from them, even though you threw it straight.

• Earth is the merry-go-round: Our planet is spinning just like that ride. Because different parts of the Earth move at different speeds (the equator spins much faster than the poles), anything traveling long distances, like wind or ocean water, gets left behind or pushed ahead.

• The result: Instead of moving in a straight line, the wind is forced to veer off course. This creates the massive circular swirls we see in hurricanes and ocean currents.

The simple rule to remember:

• Northern Hemisphere: Things curve to the right.

• Southern Hemisphere: Things curve to the left.

This deflection caused by the Coriolis effect creates a pattern known as the Ekman spiral, where each successive deeper layer of water moves slower and turns further away from the wind’s original direction. The net result of this spiraling motion is Ekman transport, which describes the overall movement of the upper water column at a 90-degree angle to the wind. So:

• The wind pushes the surface water.

• The Coriolis effect turns that surface water slightly.

• That top layer drags the layer beneath it, which turns even further and moves even slower.

• The final result is Ekman transport: the total volume of water ends up moving at a 90-degree angle to the direction the wind is blowing.

If you are interested, you can learn more about Ekman transport in this video:

Because the wind is pushing water at an angle, it eventually piles up in the middle of the ocean, creating hills of water up to two meters high.

Gravity tries to pull this water downhill, but the Coriolis effect keeps pushing it back toward the center. This tug-of-war creates a balanced, circular flow called a Subtropical Gyre (named for their location in the “subtropics” and their circular “gyrating” shape). There are five gyres:

The currents on the western side of the ocean are much stronger and warmer than those on the eastern side. Because the Earth rotates from West to East, it squashes the ocean’s hills of water against the western coastlines.

• On this western side (like the Gulf Stream near the US or the Kuroshio near Japan), the water is squeezed into a very tight space. Like water shooting out of a garden hose when you put your thumb over the end, the current becomes exceptionally fast, narrow, and deep. Because these currents move so quickly from the equator, they are carrying tropical heat thousands of miles toward the poles before the water has a chance to cool down.

• On the eastern side of the ocean (like near California or Africa), the water has plenty of room to spread out. This results in currents that are wide, shallow, and slow. These currents carry water from the cold poles back toward the equator. Because they move so slowly and are spread so thin, they don't have the energy of the western currents. Instead, they linger along the coast, keeping the nearby land much cooler and drier than it would be otherwise.

Takeaway
The upper ocean’s circulation is a sophisticated chain reaction: global winds transfer momentum to the surface, but the Coriolis effect deflects this movement, resulting in Ekman transport that moves water at a 90-degree angle to the wind. This process piles water into “hills,” forming massive circular gyres. Due to the Earth’s eastward rotation, these gyres are offset, creating Western Intensification—where western currents (like the Gulf Stream) become fast, narrow heat-conveyors, while eastern currents remain slow, shallow, and cool.

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3. Vertical movement of the ocean

This surface movement also drives vertical water motion. Diverging surface waters caused by Ekman transport lead to Ekman suction (upwelling), which draws cold, nutrient-rich deep water up to the surface. Conversely, where waters converge and pile up, Ekman pumping (downwelling) forces warm surface water down into the depths.

Ekman transport takes place within a relatively thin layer at the top of the ocean, typically extending only 100 to 150 meters deep. This is known as the Ekman layer. While Ekman transport itself is a horizontal process restricted to the Ekman layer (the top 100 to 150 meters of the ocean), it acts as a massive mechanical pump for the rest of the ocean. This surface movement drives vertical water motion.

On the left, ekman transport pushes the surface water toward the coast.

• Since the water hits the solid land and has nowhere else to go, it starts to pile up.

• This “hill” of water gets heavy, and gravity forces the warm surface water to sink downward. This carries oxygen and heat from the surface into the deeper parts of the ocean.

On the right, the Ekman transport is moving in the opposite direction, which pulls the surface water away from the coast.

• As the surface water moves out to sea, it leaves a “hole” or a gap behind. The fundamental principle of mass conservation drives this.

• To fill that space, cold, nutrient-rich water from the deep ocean is sucked upward to the surface. This is why places with upwelling (like the coast of California or Peru) have very cold water but are teeming with fish, the deep water brings up nutrients for marine life.

Why upwelling is very important:

• Deep ocean water is packed with nutrients. When upwelling pushes these to the sunlit surface, they act as a “super-fertilizer” for phytoplankton and macroalgae (seaweed).

• These plant blooms provide the primary energy source for the ocean. Without upwelling, we wouldn’t have the massive populations of fish, seabirds, and whales that thrive in these zones.

• Despite making up a tiny fraction of the ocean’s surface, upwelling zones provide nearly 40% of the world’s total fish catch, making them essential for the global economy and food supply.

• Upwelling helps cool the planet by bringing cold water to the surface and moving heat into the deep ocean. In places like the Southern Ocean, it fuels the growth of plants that absorb massive amounts of carbon dioxide.

• It can be a double-edged sword; in Antarctica, upwelling can sometimes bring slightly warmer deep water toward the coast, which may contribute to the melting of ice shelves from below.

Takeaway
Vertical water movement is driven by Ekman suction and pumping, which act as a mechanical pump for the deeper ocean. When Ekman transport pulls surface water away from a coastline or a central point, cold, nutrient-rich deep water rises to fill the gap—a process called upwelling that fuels 50% of the world’s fish catch and regulates global carbon levels. Conversely, when transport pushes water toward a coast or center, it piles up and sinks, creating downwelling that carries vital oxygen and heat into the deep ocean.

4. Deep ocean circulation

While the surface is driven by wind, the vast majority of the ocean’s volume is moved by density gradients in a process known as thermohaline circulation. Seawater density is governed by two factors: temperature (thermo) and salt content (haline).

In extreme polar regions, two things happen: intense cooling makes the water molecules contract and become more compact, and the formation of sea ice leaves salt behind in a process called “brine rejection.” This combination creates water that is exceptionally cold, salty, and heavy. Because it is much denser than the surrounding water, it sinks rapidly from the surface to the seafloor, serving as the primary engine driving the Global Conveyor Belt.

This sinking creates two primary deep-water masses that reach different depths:

• North Atlantic Deep Water (NADW): Formed in the subpolar North Atlantic (like the Labrador and Nordic seas), this water sinks and flows southward across the globe at depths typically ranging between 1,000 and 4,000 meters.

• Antarctic Bottom Water (AABW): Formed on the continental shelves of Antarctica, this is the densest water mass in the global ocean. It cascades down the continental slope to the abyssal plains, spreading northward beneath the NADW. AABW occupies the deepest parts of all major ocean basins, generally existing below 2,000 meters and routinely reaching extreme depths of 4,000 to 6,000 meters

This sinking motion drives the deep limb of the Meridional Overturning Circulation (MOC), a slow, global-scale circulation pattern that travels across ocean basins and takes approximately 1,000 years to complete a single circuit.

Closing the loop

To complete this massive, millennial-scale global circuit, the deep waters that sank at the poles must eventually rise back to the surface. As these deep waters slowly travel through the ocean basins, turbulent mixing gradually makes them less dense. The actual vertical return of this deep water to the surface occurs very slowly across the ocean basins and is heavily assisted by strong wind-driven upwelling in the Southern Ocean, which pulls these ancient, deep waters back up the water column.

Takeaway
The depths of the ocean are powered by thermohaline circulation, often called the Global Conveyor Belt, which is driven by differences in water density rather than wind. In polar regions, freezing sea ice leaves behind salt (brine rejection), creating water that is exceptionally cold, salty, and dense enough to sink to the abyssal floor. This sinking initiates the Meridional Overturning Circulation (MOC), a massive underwater circuit that takes roughly 1,000 years to complete, eventually returning to the surface through turbulent mixing and upwelling to redistribute heat and nutrients across the entire planet.

5. How ocean circulation affects companies

As climate change alters global ocean currents—disrupting thermal patterns and nutrient distribution—companies face mounting risks that impact their financial stability.

1. Physical risks to operations

Shifts in ocean movement directly threaten global logistics and the reliability of marine resources.

• Maritime shipping & Just-in-Time delivery: Vessels rely on predictable currents to reduce fuel burn. If currents become less predictable or intensify, ships must fight stronger head currents, increasing operational costs and GHG emissions. This disrupts Just-in-Time logistics, forcing companies to increase buffer times in their schedules, which ties up more capital in transit.

• Marine Renewable Energy: Offshore wind and tidal projects depend on stable coastal flows. Unpredictable shifts can reduce the efficiency of underwater turbines and increase maintenance costs for expensive offshore infrastructure.

• Commercial Fisheries: Ocean currents determine the location of nutrient-rich waters. Shifting patterns cause commercial fish stocks to migrate, forcing fleets to travel longer distances and threatening the seafood supply chain.

2. Regulatory & insurance risks

• Asset insurability: Ocean circulation affects sea-level rise and storm surges. As currents like the Gulf Stream shift, coastal flooding patterns change. This directly impacts the insurability of coastal assets—from real estate to ports—potentially leading to stranded assets or skyrocketing insurance premiums.

• Compliance: Increased oceanic volatility can lead to stricter international regulations. Companies may face green shipping mandates, sudden closures of traditional fishing grounds, or new penalties for agricultural runoff that creates coastal dead zones.

3. Reputational and social risks

Industries face intense scrutiny for their role in marine degradation. The creation of hypoxic dead zones—such as the 6,000-square-mile zone in the Gulf of Mexico—or emissions that threaten the AMOC conveyor belt can lead to divestment and loss of consumer trust.

6. Moving to a circular blue economy

To survive these shifts, firms are adopting a circular blue economy model that focuses on regenerating marine systems.

• Invest in blue carbon and ecosystem restoration: The deep ocean conveyor belt (thermohaline circulation) is highly vulnerable to global warming and the influx of freshwater from melting ice. To help stabilize the climate and protect this circulation, companies can invest in nature-based solutions and the blue economy. This includes funding the restoration of blue carbon ecosystems such as mangroves, seagrass meadows, and salt marshes. These marine habitats are among the most carbon-dense ecosystems on Earth, sequestering massive amounts of carbon dioxide while providing natural flood protection and improving local water quality.

• Adopt the LEAP framework for risk management: Corporations can systematically address their impacts on water and marine resources by utilizing the LEAP approach (Locate, Evaluate, Assess, Prepare) developed by the Taskforce on Nature-related Financial Disclosures (TNFD). This framework guides companies to map out exactly where their operations and supply chains intersect with sensitive water basins. Once these risks are identified, companies can apply the AR3T mitigation hierarchy, meaning they take structured action to Avoid, Reduce, Regenerate, Restore, and Transform their environmental footprint
  

Sources

Abrupt climate change and thermohaline circulation: Mechanisms and predictability - PMC

Introduction to Oceanography – Simple Book Publishing

The Ekman Spiral and Geostrophic Flow – Introduction to Oceanography

Ekman transport and pumping | Oceanography | Research Starters | EBSCO Research

Ocean Circulation and Climate: an Overview

Ocean currents | National Oceanic and Atmospheric Administration

OS - Antarctic Bottom Water and North Atlantic Deep Water in CMIP6 models

Effects of oceanographic environment on the distribution and migration of Pacific saury (Cololabis saira) during main fishing season - PMC

Why Climate Scientists Are Sounding the Alarm on the Ocean Circulation System AMOC - Union of Concerned Scientists

Zero Liquid Discharge and Water Reuse in Recirculating Cooling Towers at Power Facilities: Review and Case Study Analysis

Satellite-Based Analysis of Surface Upwelling in the Sea Adjacent to Zhoushan Islands in China

Influence of ocean winds on the pelagic ecosystem in upwelling regions | PNAS

The hydrological cycle, or water cycle, is a continuous, self-regulating process that governs the movement of water across the atmosphere, the Earth’s surface, and underground layers. Powered by solar radiation and regulated by gravity, it represents a massive, never-ending exchange of moisture that is intimately linked to the ocean and the global climate system.

By facilitating the constant flow of water between these domains, the cycle ensures the availability of freshwater—the lifeblood of terrestrial life and the majority of industrial processes. However, because the cycle is a loop, any disruption—from chemical pollution to the acceleration of evaporation due to rising temperatures—doesn’t just disappear. It propagates through every stage of the water cycle.

In this article you will learn:

✅ The mechanics of the water cycle

✅ How industrial extraction (from textiles to semiconductors) and land-use changes disrupt the water cycle

✅ The physical, regulatory, and reputational threats to companies posed by a shifting hydrological cycle

✅ Mitigation strategies, ranging from Zero Liquid Discharge (ZLD) technology to the LEAP risk framework.

By the end of this article, you will have a comprehensive understanding of the relationship between business and the water cycle, providing you with the insights needed to make water stewardship a pillar of your sustainability strategy.

1. The mechanics of the hydrological cycle

The hydrological cycle, commonly known as the water cycle, is the continuous movement of water across the Earth’s surface, atmosphere, and subsurface. Powered by solar radiation and regulated by gravity, it represents a massive, never-ending exchange of moisture that is intimately linked to the ocean and the global climate system.

The cycle consists of several core processes, or fluxes, that move water between different reservoirs (pools):

• Evaporation and transpiration: Evapotranspiration is the combined process of water moving from the Earth’s surface to the atmosphere. It consists of evaporation, in which solar energy provides the latent heat required to convert liquid water from oceans and lakes into vapor, and transpiration, in which plants release water vapor through leaf pores. While vegetation is a vital contributor to local humidity, the vast majority of global atmospheric moisture originates from evaporation over open water.

  

• Condensation: As water vapor rises into the atmosphere, it cools and transforms back into liquid water droplets or ice crystals, forming clouds.

• Precipitation: When these condensation particles grow too large to be supported by rising air, they fall back to the Earth as rain, snow, or hail.

• Runoff and infiltration: Precipitation that falls on land flows into surface bodies like rivers and lakes (runoff) or seeps into the soil to recharge groundwater aquifers (infiltration and percolation), eventually making its way back to the ocean

Because the cycle is a loop, any disruption—such as chemical pollution or significant changes in global temperature—doesn't just disappear. It propagates through every stage of the cycle, affecting everything from the purity of our drinking water to the intensity of global weather patterns.

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2. How companies affect the hydrological cycle

Industrial and agricultural activities disrupt the natural balance of the water cycle primarily through over-extraction, pollution, and land alteration.

Massive freshwater extraction and aquifer depletion

Industrial sectors pull staggering volumes of water from natural reservoirs, often far faster than precipitation can recharge them.

• Agriculture: Accounts for roughly 70% of global freshwater withdrawals. Inefficient methods like flood irrigation result in excess water evaporating or running off before it can be absorbed.

• Textiles and apparel: Consume lots of liters of water annually, with a single cotton t-shirt requiring around 2,700 liters to produce.

• Technology and semiconductors: Chip manufacturing relies on Ultrapure Water (UPW), requiring up to 38 million liters per day for a single fabrication plant. Globally, the semiconductor industry consumes approximately 210 trillion liters of water annually.

This aggressive extraction leads to the severe depletion of groundwater and underground aquifers, which can cause the land itself to sink (subsidence) and permanently lose its future water-storage capacity.

Severe pollution and water degradation

Corporations frequently discharge untreated or heavily contaminated water back into the environment, damaging the ecosystem’s ability to filter and clean water naturally.

• Agricultural runoff introduces millions of tons of nitrogen, phosphorus, and pesticides into waterways, sparking toxic algal blooms and massive hypoxic “dead zones” where aquatic life cannot survive.

• The textile dyeing process is responsible for an estimated 20% of global industrial water pollution, dumping heavy metals, synthetic dyes, and persistent toxic chemicals into rivers.

Land-use Changes

Corporate expansion often involves deforestation and paving over natural landscapes with impermeable materials like asphalt and concrete. This prevents precipitation from infiltrating the soil to recharge groundwater, instead forcing it to run off rapidly into rivers, exacerbating flash floods. Furthermore, large-scale deforestation reduces plant transpiration, which can literally dry out the atmosphere and alter rainfall patterns hundreds of kilometers downwind.

3. How the hydrological cycle affects companies (water risk)

As climate change accelerates the hydrological cycle—creating longer droughts and more intense, erratic rainfall—companies are increasingly exposed to severe water risks. This impacts their bottom line in three primary ways.

1. Physical risks to operations

When the water cycle shifts, it directly threatens the viability of supply chains and manufacturing.

• The tech sector: Around 40% of existing semiconductor facilities are located in basins projected to face high or extremely high water stress by 2030. During Taiwan’s historic 2021 drought, reservoirs dropped below 5% capacity, forcing the chip manufacturer TSMC to spend millions of dollars on fleets of water trucks just to keep their factories running.

• The energy sector: Thermoelectric and nuclear power plants rely on massive amounts of river water for cooling. As climate change causes river water levels to drop and water temperatures to rise, energy companies are forced to scale back or shut down power generation to avoid overheating the rivers and killing aquatic life.

• Agriculture: Rising temperatures increase evaporation rates, drying out soils and decimating crop yields, forcing farmers to bear the cost of expensive artificial irrigation or face total crop failure.

2. Regulatory risks

As physical water scarcity worsens, governments are forced to implement stricter regulations. Companies face sudden limitations on water allocations, drastically increased water tariffs, or revoked discharge permits.

3. Reputational and social risks

Water is a shared resource. When a corporation consumes vast amounts of local water during a drought, or pollutes a community’s drinking supply, they face intense public backlash, protests, and loss of consumer trust.

4. Corporate mitigation: Moving to a circular water economy

To survive the changing hydrological cycle, many companies are shifting from a linear take-make-dispose model to a circular economy model that prioritizes water reuse and ecosystem regeneration.

• Zero Liquid Discharge (ZLD): Advanced technological systems are being adopted to treat and purify industrial wastewater on-site. ZLD systems can recover up to 95% to 99% of liquid waste, allowing facilities to reuse the same water endlessly and eliminate their discharge of pollutants into the environment.

• Sustainable agriculture: Farms are transitioning to precision drip irrigation, which delivers water directly to plant roots, minimizing evaporation, and planting vegetative buffer zones to trap nutrient runoff before it reaches streams.

• Integrated water stewardship: Companies are utilizing risk assessment frameworks like the LEAP approach (Locate, Evaluate, Assess, Prepare) to map out exactly where their operations intersect with sensitive water basins, allowing them to implement nature-based solutions and reduce their vulnerability to a shifting climate.
  

A common failure in corporate sustainability is treating water risk as an isolated, site-specific issue. The reality is that freshwater and marine systems are deeply bound together by the global hydrological cycle.

Sources

Fast fashion: EU laws for sustainable textile consumption | Topics | European Parliament

Defining freshwater as a natural resource: A framework linking water use to the area of protection natural resources - PMC

Understanding the fashion water footprint - IDRA | The Global Desalination and Water Reuse Community

Freshwater Conservation & Sustainability | World Wildlife Fund

Water Nexus: Can Semiconductors and Sustainability Coexist in Taiwan? – Taiwan Insight

Case-study Water dependency of the tech sector

Nonpoint Source: Agriculture | US EPA

Extreme Heat Shuts Down Some Nuclear Reactors in Europe - The New York Times

Sources and Solutions: Agriculture | US EPA

Clothing Dye Runoff and its Environmental Impact

Textile finishing dyes and their impact on aquatic environs - PMC

Semiconductor industry faces water, sustainability challenges | Manufacturing Dive

Zero Liquid Discharge and Water Reuse in Recirculating Cooling Towers at Power Facilities: Review and Case Study Analysis

Pollution has become an important business issue. Companies are expected to demonstrate how they prevent, control, and reduce their chemical and physical footprint across their value chain.

This article isn’t only for companies in scope of the CSRD. It’s for any organization that wants to report credibly on its environmental impact: EU or non-EU, listed or private, big or small. I use European Sustainability Reporting Standard (ESRS) E2 as a clear and practical blueprint for pollution disclosure. If CSRD doesn’t apply to you (yet), you can still use this guide to structure your reporting and align with international expectations like the Zero Pollution ambition.

ESRS E2 addresses how companies disclose their pollution-related impacts, risks, and opportunities, along with the strategies and metrics used to manage them. It is designed to align business reporting with among others the EU Action Plan ‘Towards a Zero Pollution for Air, Water and Soil’ and the Chemicals Strategy for Sustainability.

In this article, you will learn:

✅ What pollution is
✅ The main objectives of ESRS E2
✅ How ESRS E2 connects with other standards like Climate (E1) and Biodiversity (E4)
✅ The key components of ESRS E2 (E2-1 to E2-5), from policy to microplastics
✅ Acronyms and terms used in ESRS E2

By the end, you’ll gain a clear, structured understanding of reporting about pollution and ESRS E2.

2. Short introduction to pollution

First of all, it is important to know what pollution actually is in a reporting context. In short: Pollution is the direct or indirect introduction of pollutants into the air, water, or soil that can be harmful to human health or the environment.

In today’s world, the scale of pollution is becoming increasingly critical. It is no longer just a local issue but a global systemic threat that degrades ecosystems and reduces biodiversity. According to the 2025 Lancet Countdown on health and climate change, air pollution mortality has reached staggering levels. In 2022, deaths attributable to total ambient PM2.5 air pollution (fine inhalable particles with diameters generally 2.5 micrometers or smaller) increased from 7.5 million deaths in 2010 to 8.5 million globally.

The threat of chemical pollution, often referred to as “novel entities,” has reached a tipping point. Scientists have confirmed that we have crossed the planetary boundary for chemical pollution, meaning the pace at which humanity is producing and releasing new substances into the environment exceeds the Earth’s ability to safely process them. This crisis is exacerbated by the rise of microplastics, which are now found in almost every biological system, contributing to systemic inflammation and cardiovascular risks.

To halt the progression of pollution, the European Union has established the Zero Pollution Action Plan, which aims to reduce pollution to levels that are no longer considered harmful to health or natural ecosystems by 2050.

Because pollution poses such a direct and measurable risk to both global health and business resilience, it is included as the second environmental standard (ESRS E2) in the CSRD.

Here follows a brief timeline of two frameworks by the European Union:

• December 2019: The European Union published the European Green Deal. This massive framework introduced the overarching “Zero Pollution Ambition for a toxic-free environment.”

• October 2020: The EU published the Chemicals Strategy for Sustainability. The European Commission officially designated this strategy as the first step and a core pillar for delivering on the 2019 Green Deal’s zero-pollution commitment. It tackled the “toxic-free” part of the overarching goal first.

• May 2021 (the broader plan): The EU published the Zero Pollution Action Plan. This document formally laid out the targets for the remaining aspects of the 2019 ambition—specifically detailing the operational targets for air, water, and soil pollution.

Read the Zero Pollution Action Plan here:
Zero pollution targets - Environment - European Commission

Read more about the Chemicals Strategy for Sustainability here:
Chemicals Strategy

3. Understanding the objective of ESRS E2

The objective of ESRS E2 is for companies to disclose information on pollution whenever it represents a material impact, risk, or opportunity. This ensures stakeholders understand how a company manages its chemical footprint and its transition toward a toxic-free environment.

The standard defines five key sub-topics:

• Pollution of air: Emissions of pollutants like SOx, NOx, and particulate matter (excluding GHGs). To understand the difference between air pollution and greenhouse gas emissions check out this article:
  

• Pollution of water: Emissions to both freshwater and seawater.
  

• Pollution of soil: Direct emissions to land and groundwater.
  

• Substances of (very high) concern (SoC & SVHC): Including the manufacturing, use, and distribution of hazardous chemicals.
  

• Microplastics: Both primary (manufactured) and secondary (resulting from product wear and tear).
  

To get a better understanding of the interactions between air, water, and soil pollution:

Interaction with other topics (ESRS Standards)

ESRS E2 interacts with several other standards:

• ESRS E1 Climate Change: E1 covers the seven main greenhouse gases (like CO₂ and methane), while E2 covers all other harmful air emissions.

• ESRS E3 Water: E3 focuses on the volume of water used, while E2 focuses on the pollutants contained within that water.

• ESRS E4 Biodiversity: While E4 looks at how pollution drives ecosystem change, E2 focuses on the actual emissions causing that change.

• ESRS E5 Resource Use: E5 looks at circularity and waste, but the pollutants generated during resource extraction or waste transformation are handled by E2.

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4. The different components of ESRS E2

While ESRS E1 is structured around three pillars: Strategy (long-term plans, risk analysis, and resilience), Implementation (policies, actions, and resources), and Targets & Metrics (quantifiable goals, emissions data, and financial implications). ESRS E2 is structured into only two pillars: implementation (how you handle pollution) and targets & metrics (the actual numbers).

Read more below to explore each element in detail. I’ve also linked to my other articles below, where you can dive deeper into each specific topic, from ESRS E2-1 through ESRS E2-5, for a more comprehensive understanding.

E2-1, E1-2: Policies, actions, and resources

E2-1 (Policies): companies must disclose their policies for preventing and reducing pollution. The rules in ESRS 2 GDR-P frame these policies.

Read more about ESRS E2-1 here:

E2-2 (Actions and resources): requires reporting on the key actions taken (such as installing new filtration systems) and the financial resources (CapEx/OpEx) allocated to them.

Read more about ESRS E2-2 here:

E2-3: Targets related to pollution

E2-3 focuses on the disclosure of specific, measurable goals for reducing pollutants.

Read more about ESRS E2-3 here:

E2-4: Pollution of air, water, and soil

E2-4: this is the data-heavy section. Companies must report:

• Material emissions: Amounts of pollutants released into air, water, and soil from own operations.

• Microplastics: Weight of primary microplastics manufactured/used, and qualitative or quantitative info on secondary microplastics (like tire wear).

Read more about ESRS E2-4 here:

E2-5: Substances of concern and SVHC

This requirement is particularly strict for the chemical sector.

• Manufacturers/importers: Must disclose the total weight of SoC and SVHC procured, manufactured, placed on the market, or released.

• Other users: Must disclose the weight of SVHC used in production and released.

• Article manufacturers: Must name specific SVHCs present in products at concentrations above 0.1%.

Read more about ESRS E2-5 here:

Share CSRD Simplified

4. Acronyms and terms

Relevant Sources

November 2025 ESRS E2

The 2025 report of the Lancet Countdown on health and climate change: climate change action offers a lifeline - The Lancet

Planetary boundaries - Stockholm Resilience Centre

Microplastics and Nanoplastics in Atheromas and Cardiovascular Events - PubMed

Zero pollution targets - Environment - European Commission

Zero pollution targets - Environment - European Commission

Chemicals Strategy

The systematic measurement of energy performance is the cornerstone of any robust Energy Management System (EnMS). While the international standard ISO 50001 establishes the high-level framework for managing energy, ISO 50006 offers the technical guidance on how to measure it.

This article translates that technical guidance into action via 6 steps. It provides the methodology needed to transform raw utility data into a sophisticated system of Energy Performance Indicators (EnPIs) and Energy Baselines (EnBs).

For any organization, moving from simple bill tracking to a normalized system is the difference between guessing and knowing exactly where your efficiency stands.

In this article, you’ll learn:

✅ The fundamental framework: The relationship between Energy Baselines, Performance Indicators, and energy targets.
✅ How to set boundaries using energy fence diagrams.
✅ How to distinguish routine relevant variables (like weather and production) from static factors (like building size).
✅ The different types of EnPIs—choosing the right indicator for each user
✅ Establishing your historical baseline and utilizing three different methods to calculate energy savings.
✅ Visualizing your success with SEC, X-Y Scatter, and CUSUM charts, along with the specific operational triggers that require you to reset your baseline.

1. The fundamental framework of energy performance

Energy performance itself is a broad concept, encompassing three distinct but interrelated categories: energy consumption, energy use, and energy efficiency. To manage these effectively, an organization must understand the core relationship between its performance metrics and its reference points.

The interrelationship between EnPIs, EnBs, and energy targets is the engine of continual improvement:

• EnPI (Energy Performance Indicator): A quantitative value or measure of performance. It could be a simple number, a ratio, or a complex mathematical model .

• EnB (Energy Baseline): A quantitative reference period. It is the “yardstick” against which current performance is measured.

• Energy Target: A specific, quantifiable requirement you intend to meet.

• EnPI Improvement: The gap between your current performance and your baseline.

2. A 6-step guide to proving energy savings

Before we dive into the math and methodology, here is a high-level look at the six steps required to build an energy measurement system from the ground up:

Now, let’s break down how to execute each of these steps.

Step 1: Setting the perimeter: EnPI boundaries

Before you can measure anything, you must define where the measurement starts and stops. There are three levels of boundaries :

1. Individual level: A physical perimeter around a single piece of equipment or process (e.g., a boiler or a production line).

2. System level: A group of facilities or equipment interacting together (e.g., the steam production system plus the dryers that use that steam).

3. Organizational level: The entire site or multiple sites under management control.

To visualize these boundaries, you can make a fence diagram or, in other words, an energy map.

This is a schematic map of your facility. A bold line (the fence) is drawn around the area you are measuring. Raw energy inputs like natural gas and electricity are shown entering the fence at specific metering points (M). Inside the fence, the diagram maps how that energy flows to different departments. You can show the largest energy users with the tag SEU (Significant Energy Use). An energy fence visualization ensures you know exactly which meters belong to which indicator.

Step 2: Variable analysis: relevant variables and static factors

Once the boundary is set, you must account for factors inside and outside that boundary that influence energy performance. We distinguish between two types of factors: relevant variables and static factors.

Relevant variables

Relevant variables are quantifiable factors that impact energy performance and change routinely. Common examples include production parameters (e.g., tonnage, units produced), weather conditions (e.g., outdoor temperature, degree days), and operating hours. Because these factors change frequently, they must be used to normalize energy data. Normalization is the process of routinely modifying energy data to account for these changes, allowing for a fair comparison between the baseline and reporting periods.

Determining significance

To determine the relevance of specific variables, it is essential to visualize the relationship between your potential drivers and energy consumption. This is typically achieved by plotting the potential driver (e.g., outdoor temperature or production volume) on the horizontal axis and energy use on the vertical axis of an X-Y scatter diagram.

Based on the resulting visual distribution, you can categorize the variable into one of two scenarios:

Scenario A: High correlation (significant variable)

If the data points form a clear path or cluster tightly around a mathematical trend line, the variable has a high correlation.

• Interpretation: This indicates that when the variable changes, energy consumption changes in a predictable manner.

• Action: Keep this variable. It is a significant driver and should be included in your Energy Performance Indicator (EnPI) model.

Scenario B: No correlation

If the data points appear as a random, scattered cloud with no discernible direction, there is no meaningful relationship between the two factors.

• Interpretation: The variable has little to no impact on your energy usage.

• Action: Exclude this variable. Removing irrelevant data prevents over-complicating the model and ensures your performance tracking remains accurate.

Focusing only on significant variables ensures your sustainability reporting and energy management systems are built on credible, actionable data.

Static factors

Static factors are identified factors that impact energy performance but do not routinely change. Examples include facility size, the design of installed equipment, the number of production shifts, and the range of products manufactured. While static factors remain constant during typical operations, a significant change in one (such as a factory expansion or a switch from manufacturing aluminum to plastic parts) constitutes a change in the equivalent conditions of the baseline.

Step 3: The different types of EnPIs: Choosing indicators & matching them to users

With boundaries defined and variables analyzed, you can select the right type of EnPI. Each offers a different level of detail and suitability for various stakeholders.

Read more

We finish the Pollution standard with perhaps the most technical but chemically critical disclosure: Substances of Concern (SoC) and Substances of Very High Concern (SVHC).

While E2-4 focuses on bulk emissions, E2-5 zooms in on the toxicity of the materials you handle. It connects your reporting directly to major EU chemical regulations, such as REACH and CLP.

This disclosure asks a fundamental question: Is your business model dependent on hazardous chemicals?

I will briefly explain the requirements for disclosing information on these dangerous substances.

More elaborate articles are, or will become available, which can be found on: Sustainability Simplified.

2. What are SoCs and SVHCs?

These are not just pollutants in the general sense; they are chemicals flagged for their potential to cause serious harm to health or the environment.

• Substances of Very High Concern (SVHC): A specific legal list under the EU REACH regulation. These are carcinogens, mutagens, reproductive toxins (CMRs), or substances that persist and bioaccumulate in the environment.

• Substances of Concern (SoC): A broader category defined in the ESRS (aligned with the EU Chemicals Strategy). It includes SVHCs but also substances that hamper recycling (circular economy) or cause chronic health effects.

Read more about SVHC here:

The ESRSes define SoC and SVHC as follows:

Substances of Concern (SoC)

“A substance that:

(a) Meets the criteria laid down in Article 57 of Regulation (EC) No 1907/2006 and is identified in accordance with Article 59(1) of that Regulation;

(b) Is classified in Part 3 of Annex VI to Regulation (EC) No 1272/2008 in one of the following hazard classes or hazard categories:

• (i) carcinogenicity categories 1 and 2;

• (ii) germ cell mutagenicity categories 1 and 2;

• (iii) reproductive toxicity categories 1 and 2;

• (iv) endocrine disruption for human health categories 1 and 2;

• (v) endocrine disruption for the environment categories 1 and 2;

• (vi) persistent, mobile and toxic or very persistent, very mobile properties;

• (vii) persistent, bioaccumulative and toxic or very persistent, very bioaccumulative properties;

• (viii) respiratory sensitisation category 1;

• (ix) skin sensitisation category 1;

• (x) hazard to the aquatic environment – categories chronic 1 to 4;

• (xi) hazardous to the ozone layer;

• (xii) specific target organ toxicity – repeated exposure categories 1 and 2;

• (xiii) specific target organ toxicity – single exposure categories 1 and 2.”

Substances of Very High Concern (SVHCs)

“Substances that meet the criteria laid down in Article 57 of Regulation (EC) No 1907/2006 (REACH) and were identified in accordance with Article 59(1) of that Regulation.”

3. ESRS E2-5 at a glance

E2-5 is unique because your disclosure obligations depend entirely on what you do (your role in the value chain).

The standard breaks requirements down into categories:

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4. How E2-5 links to the rest of ESRS E2

E2-5 provides the hazard context to your pollution management:

• E2-1 (Policy): Establishes the governance and strategic commitment to eliminate or minimize the use of hazardous substances.

• E2-2 (Action): Details the concrete steps taken to substitute these substances, such as R&D into safer alternatives or changing procurement standards.

• E2-3 (Target): Sets the specific, measurable goals for reducing the volume of substances of concern in products and operations over time.

• E2-5 (Metric): Quantifies the risk. By reporting the actual weight of SVHCs used or produced, this metric reveals the “toxicity footprint” of your business. A static or increasing number here immediately challenges the credibility of your phase-out targets (E2-3) and the effectiveness of your substitution efforts (E2-2).

5. Bottom line

E2-5 is the bridge between sustainability reporting and chemical compliance.

• Check your REACH data: If you are a European manufacturer, you likely already track SVHCs for legal compliance. E2-5 asks you to aggregate and publish this data.

• Know your role: Determine immediately if you fall under Category A (Chemical Manufacturer) or Category B (User), as the reporting burden for manufacturers (tracking all SoCs) is significantly higher than for users (tracking only SVHCs).

• Transparency is inevitable: The EU’s goal is a “Toxic-Free Environment.” Hiding hazardous chemical use is becoming impossible; the strategy now is to show how you are managing and reducing it.

Relevant Standards

ESRS E2

November 2025 ESRS E2

We have covered the rules (E2-1), the work (E2-2), and the goals (E2-3). Now we arrive at the evidence. ESRS E2-4 asks undertakings to disclose the data on what they are releasing into the environment.

This disclosure is the proof of performance. It provides the numbers that allow stakeholders to assess your environmental footprint and verify if your actions are working.

I will briefly explain the requirements for disclosing metrics on pollution of air, water, and soil.

More elaborate articles are, or will become available, which can be found on: Sustainability Simplified.

2. What are pollution metrics?

Pollution metrics are quantitative measurements of the specific pollutants your company releases into the environment.

The scope covers three main areas:

1. Air emissions: Pollutants released into the atmosphere (e.g., Nitrogen Oxides (NOx), Sulfur Oxides (SOx), Volatile Organic Compounds (VOCs)). Note: GHGs like CO2 are covered in E1, not here.

2. Water emissions: Pollutants discharged into freshwater or seawater (e.g., Nitrates, Phosphates, Heavy Metals).

3. Soil emissions: Pollutants released directly to soil (e.g., pesticides, industrial leaks).

Plus microplastics: E2-4 also specifically targets microplastics, which are tiny plastic particles that accumulate in the environment. Companies must report on both the microplastics they intentionally use (primary) and those generated as a byproduct of wear and tear (secondary).

The ESRSes define metrics as follows:

“Qualitative and quantitative indicators that the undertaking uses to measure and report on the effectiveness of the delivery of its sustainability-related policies and against its targets over time. Metrics also support the measurement of the undertaking’s results in respect of affected people, the environment and the undertaking.”

3. ESRS E2-4 at a glance

E2-4 requires that “the undertaking shall disclose the amounts of material emissions of pollutants to air, water and soil from its own operations”.

To comply, the disclosure must include:

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The European Pollutant Release and Transfer Register (E-PRTR), originally established by Regulation (EC) No 166/2006, historically served as the publicly accessible database tracking key environmental data from industrial facilities across Europe. While it was amended in 2019 to streamline reporting, this framework has now been superseded. In 2024, the EU adopted the Industrial Emissions Portal Regulation (IEPR)—Regulation (EU) 2024/1244, which officially repeals and replaces the E-PRTR.

Under this updated framework, the existing register is being upgraded into a more comprehensive Industrial Emissions Portal. The regulation ensures that industrial operators continue to report their pollutant releases (to air, water, and land), off-site transfers, and resource usage annually. National authorities compile and submit this data to the European Commission, which makes it available to the public, supporting transparency and public participation in environmental decision-making.

The disclosed data must include emissions from all facilities under the company’s financial and operational control, provided they exceed the specific threshold values now detailed in Annex II of the IEPR (Regulation (EU) 2024/1244).

You can find the Annex here: Regulation - EU - 2024/1244 - EN - EUR-Lex

4. How E2-4 links to the rest of ESRS E2

E2-4 is the scorecard for your entire pollution strategy:

• E2-1 (Policy): Defines your commitment to compliance and pollution reduction.

• E2-2 (Action): Describes the technology (e.g., filters) installed to reduce emissions.

• E2-3 (Target): Sets the goal (e.g., “keep NOx below 50 tonnes”).

• E2-4 (Metric): Checks your progress. If you report 60 tonnes of NOx in E2-4, it immediately signals that you missed your E2-3 target, prompting questions about the effectiveness of your E2-2 actions.

5. Bottom line

E2-4 is often where companies face the biggest data challenges. To report effectively:

• Check the list: Review Annex II of the IEPR (European Industrial Emissions Portal). If you emit it, you likely need to measure and report it.

• Don’t forget water transfers: Sending dirty water to a municipal treatment plant doesn’t make the pollution disappear from your report, it just moves it to the “transfers” category.

• Microplastics are new: Many companies have data on chemicals but lack data on microplastics. Start mapping where plastic particles might be shedding from your products now.

• Absolute values matter: While intensity metrics (e.g., pollution per unit of revenue) are helpful for internal tracking, E2-4 demands absolute mass (tonnes/kg).

Relevant Sources

Regulation - EU - 2024/1244 - EN - EUR-Lex

ESRS E2

November 2025 ESRS E2

When we manage pollution in a corporate setting, we often treat it in silos. We view air emissions, wastewater discharge, and solid waste as separate compliance boxes to tick. However, nature does not recognize these boundaries. The Earth acts as a giant, interconnected system.

For sustainability professionals, understanding this movement is important. Solving a problem in one medium—for example, scrubbing toxins from a factory smokestack—can inadvertently create a new problem in another if the resulting toxic ash leaches into the soil. To avoid these regretful solutions, we must look at the environment as a whole.

In this article, you will learn:

✅ How air, water, and soil interact as connected reservoirs

✅ How air pollution travels in the sky to contaminate land and water

✅ How soil acts as a reservoir that can release pollutants

✅ How water bodies can release toxins back into the air or trap them in the soil

By the end of this article, you will understand pollution transport and why a holistic approach is necessary to prevent pollution shifting in your environmental strategy.

2. Pollution moves from bucket to bucket

When we think about pollution, we often picture them in separate boxes: a dark cloud of smoke in the sky (air pollution), a plastic bottle floating in a river (water pollution), or a landfill leaking into the ground (soil pollution).

In reality, nature doesn’t have boxes. Our planet acts as a giant, interconnected system. Pollution rarely stays where it starts. Instead, it constantly moves between the air we breathe, the water we drink, and the soil that grows our food.

This traveling of pollutants is known as cross-media transfer. It describes how a chemical or particle moves from one environmental compartment to another.

The three buckets: Imagine the environment as three interconnected buckets representing air, water, and soil.

• If you pour pollution into the air bucket (like exhaust from a car), it doesn’t just vanish.

• Gravity pulls some of it down into the soil bucket.

• Rain washes the rest into the water bucket.

If we only focus on cleaning up one bucket, for example, using a filter to scrub toxins out of factory smoke, we often end up with a pile of toxic ash. If that ash is buried improperly, it leaks into the soil and water. Solving a problem in one medium can inadvertently create a new one in another.

Learn more about soil, water, and air pollution here:

3. How air pollution becomes soil & water pollution

The atmosphere often acts as a rapid transport highway, carrying pollutants far from their source before depositing them onto land and water.

Atmospheric deposition

This is the primary mechanism by which airborne pollutants settle onto surfaces. It occurs in two forms:

• Wet deposition: Pollutants are scavenged by rain, snow, or fog. This is the dominant pathway for heavy metals like lead (Pb) and zinc (Zn) in humid regions.

• Dry deposition: Gases and particles settle directly onto surfaces due to gravity. In arid regions, this is the main source of soil contamination.

Acid rain

Emissions of sulfur dioxide (SO₂) and nitrogen oxides (NOx) from burning fossil fuels transform in the atmosphere into acids. These deposit onto lakes and soils, lowering pH levels (acidification), which can kill aquatic life and leach toxic metals like aluminum from the soil.

Mercury cycling

Mercury emitted into the air can travel globally. It eventually deposits into oceans and lakes, where it converts into methylmercury, a potent neurotoxin, and accumulates in the food web.

4. How soil pollution becomes water & air pollution

Soil acts as both a reservoir and a source of pollution, releasing stored contaminants into groundwater or back into the air.

From the soil to water

• Leaching to groundwater: Water moving through the soil (percolation) dissolves pollutants and carries them into underground aquifers. For example, nitrates from agricultural fertilizers and heavy metals like cadmium (Cd) can leach from soil into groundwater.

• Runoff to surface water: Heavy rains wash soil particles laden with pesticides and fertilizers into nearby rivers and lakes. This pollution causes eutrophication (nutrient overload) in water bodies.

From the soil to the air

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Water is the foundation of life and a critical resource for nearly every industry. Yet, the chemical properties that make water essential, specifically its ability to dissolve almost anything, also make it uniquely vulnerable to pollution.

For sustainability professionals, water risk is often viewed through the lens of scarcity (quantity). However, water quality is equally important. Understanding how industrial activities transform water chemistry, often in subtle and invisible ways, is essential to comprehend the full extent of their environmental impact.

In this article, you will learn:

✅ Why water’s chemical structure makes it the Universal Solvent

✅ The difference between visible waste and invisible threats

✅ How specific business activities drive water pollution

By the end of this article, you will understand water pollution and how corporate activities directly alter the quality of this important resource.

1. Water, the perfect solvent

At first glance, water seems simple. We know its chemical formula, H₂O, which means it is made of just two hydrogen atoms and one oxygen atom. However, despite its simple structure, water behaves in complex ways that are essential for life but also risky for the environment.

Why water is sticky

Scientists call water the Universal Solvent because it is better at dissolving other substances than almost any other liquid. But why?

It all comes down to electricity. You can think of a single water molecule as a tiny magnet.

• The Oxygen side has a slight negative electrical charge.

• The Hydrogen side has a slight positive electrical charge.

Because opposites attract, the positive side of one water molecule grabs onto the negative side of another, or onto other substances entirely. This is called polarity. It is this “stickiness” that allows water to break down salts, sugars, and minerals effectively.

The delivery system

This magnetic ability makes water an incredible means of transportation.

• The good news: In nature and our bodies, water grips onto essential nutrients and carries them where they need to go. It transports dissolved vitamins through your blood to your cells and pulls sap from the roots of a tree all the way to the highest leaves.

• The bad news: This same strength is also water’s greatest vulnerability. Because it dissolves things so easily, it cannot distinguish between good nutrients and bad chemicals.

As water flows over the ground (like rainwater running off a street or farm), it easily dissolves and picks up toxic substances like pesticides, motor oil, and industrial waste. Instead of just washing over them, it absorbs them, becoming a delivery system for poisons. It then carries these pollutants into our rivers, lakes, and oceans.

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2. Understanding water pollution

Water pollution occurs when harmful substances—chemicals, microorganisms, or physical waste—contaminate a body of water to the point where it becomes unsafe for its intended use, such as drinking, swimming, or supporting aquatic life.

Pollution isn’t always visible like a plastic bottle floating in a river. Some of the most dangerous forms of pollution are invisible changes to the water’s chemistry:

• Oxygen depletion: Fish and other aquatic creatures need oxygen dissolved in the water to breathe. When too much organic waste (like sewage) enters the water, bacteria multiply rapidly to eat it. These bacteria use up all the available oxygen, creating “dead zones” where nothing else can survive.

• Thermal pollution: Pollution isn’t always a substance; sometimes it is energy. If the temperature of a river changes drastically (usually getting hotter), it can kill sensitive species. Warm water cannot hold as much oxygen as cold water, so heating a river effectively suffocates the fish.

• Eutrophication: This is a process caused by an excess of nutrients, specifically nitrogen and phosphorus (often from fertilizers). These nutrients act like super-food for algae, causing massive algal blooms on the surface. When these blooms die and rot, they choke the water of oxygen.

  

3. Business as the driver of water pollution

Industries are a major source of water degradation. While regulations exist, companies pollute water through several specific mechanisms, often categorized as point sources (a direct pipe) or non-point sources (runoff from a large area).

Here are the primary ways companies introduce pollution:

Industrial discharge

Many industries, such as textile manufacturing and pharmaceuticals, use water to wash chemicals during production. This wastewater is often loaded with dyes, heavy metals (like lead and mercury), and toxic solvents. If not properly treated before being released, these chemicals enter the food chain. Through a process called bioaccumulation, small animals eat these toxins, and larger predators eat the small animals, concentrating the poison until it reaches dangerous levels in the fish humans eat.

Thermal pollution

Power plants and steel mills use massive amounts of water to cool down their machinery. They draw cool water from a nearby lake, run it through their hot pipes, and dump it back into the lake at a much higher temperature. This sudden "thermal shock" kills fish eggs and larvae and depletes the water's oxygen levels.

Mining and acid mine drainage

Mining companies dig deep into the earth, exposing rocks that have been buried for millions of years. When certain minerals (like sulfides) are exposed to air and water for the first time, they react to create sulfuric acid. This acid flows into nearby streams, turning them bright orange or red and dissolving heavy metals from the surrounding rock, creating a highly toxic flow known as Acid Mine Drainage.

Agricultural runoff

While often viewed as farming rather than industry, large-scale corporate agriculture is a massive polluter. Rain washes excess fertilizers and pesticides off the fields and into waterways. This is the leading cause of eutrophication and algal blooms mentioned earlier, turning clear lakes into green swamps.

Sources

Regional Cooperation for Water Quality Improvement in Southwestern Pennsylvania

Comprehensive review of industrial wastewater treatment techniques

Water Pollution, Its Treatment, and Its Adverse Impact on Humans

HEAVY METAL LEACHING FROM LANDFILLS: A REVIEW OF GROUNDWATER CONTAMINATION AND LONG TERM ENVIRONMENTAL IMPACTS

THERMAL POLLUTION AND ITS IMPACTS ON HUMAN HEALTH: A REVIEW

A Comprehensive Review on Mine Tailings as a Raw Material in the Alkali Activation Process

A Current Review of Water Pollutants in American Continent: Trends and Perspectives in Detection, Health Risks, and Treatment Technologies - PMC

Global Distribution, Ecotoxicity, and Treatment Technologies of Emerging Contaminants in Aquatic Environments: A Recent Five-Year Review

Water Contamination and Its Effects on Human Health: A Review | Journal of Geography, Environment and Earth Science International

Water | H2O | CID 962 - PubChem

If policies (E2-1) set the rules and actions (E2-2) describe the work, then targets define the destination. ESRS E2-3 asks undertakings to disclose the specific, measurable goals they have set to reduce or eliminate pollution.

This disclosure allows investors and stakeholders to judge whether a company’s ambition matches the urgency of its material impacts. It transforms vague promises such as “we will be cleaner” into trackable commitments such as “we will reduce NOx emissions by 40% by 2030”.

I will briefly explain the requirements for disclosing pollution-related targets.

More elaborate articles are, or will become available, which can be found on: Sustainability Simplified.

2. What are pollution targets?

Pollution targets are measurable, time-bound objectives that the undertaking aims to achieve in relation to its material pollution impacts.

According to ESRS 2 (AR 47), targets regarding material impacts should be outcome-oriented. This means they should focus on the actual result for the environment or people (e.g., reduce tonnes of pollutants released), rather than just a procedural output (e.g., train 50 employees).

Typical examples include:

• Air: Reduce absolute SOx and NOx emissions by 50% by 2030 against a 2020 baseline.

• Water: Achieve zero discharge of untreated wastewater by 2027.

• Plastics: Eliminate 100% of microplastics from product formulations by 2028.

• Soil: Remediate all contaminated sites to regulatory standards by 2035.

The ESRSes define targets as follows:

“Measurable, outcome-oriented and time-bound goals that the undertaking aims to achieve in relation to material impacts, risks or opportunities. They may be set voluntarily by the undertaking or derive from legal requirements on the undertaking.”

3. ESRS E2-3 at a glance

E2-3 specifically requires that “the undertaking shall disclose its pollution-related targets in accordance with the provisions of ESRS 2 GDR-T“.

To comply with ESRS 2 GDR-T, the disclosure must include the following elements for each target:

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4. How E2-3 links to the rest of ESRS E2

The target gives context to the metric. A metric is just a number, but with a target, it becomes a performance indicator.

• E2-1 (Policy): “We commit to reducing air pollution.”

• E2-2 (Action): “We are installing scrubbers.”

• E2-3 (Target): “To achieve a 50% reduction by 2030.”

• E2-4 (Metric): “This year, we emitted 1,200 tonnes, which is a 5% reduction.”

5. Bottom line

To report E2-3 effectively:

• Be SMART: Ensure targets are Specific, Measurable, Achievable, Relevant, and Time-bound.

• Define the baseline: A target of reducing emissions is meaningless without knowing the starting point (the baseline year and value).

• Don’t hide: If you don’t have a target for a material pollution topic, you must admit it and explain how you are monitoring progress otherwise.

• Look to science: Whenever possible, ground your pollution targets in scientific evidence (e.g., planetary boundaries or local ecological limits).

Relevant Standards

ESRS E2

November 2025 ESRS E2

If policies (E2-1) are the rules of the road, then actions are the actual driving. ESRS E2-2 asks undertakings to move beyond high-level commitments and disclose the concrete steps they are taking to tackle pollution.

This disclosure is important for credibility. It proves that a company is investing real effort and capital into managing its environmental impact. It connects the policies defined in E2-1 to the measurable results reported in E2-3 (Targets) and E2-4 (Metrics).

I will briefly explain the requirements for disclosing pollution-related actions and the resources allocated to them.

More elaborate articles are, or will become available, which can be found on: Sustainability Simplified.

2. What are pollution actions?

Pollution actions are the specific initiatives, projects, or changes in business practices implemented to manage material pollution impacts, risks, and opportunities.

According to ESRS 2 (AR 38), environmental actions should ideally be classified according to the mitigation hierarchy:

1. Avoidance: Preventing the pollution from happening (e.g., phasing out a Substance of Very High Concern).

2. Minimization: Reducing the amount or intensity of pollution (e.g., installing air scrubbers or wastewater treatment plants).

3. Restoration: Remediating damage already done (e.g., cleaning up a contaminated soil site).

4. Compensation: Offsetting residual impacts (though this is less common for pollution than for biodiversity).

Typical examples include:

• Technology upgrades: Retrofitting factories with best available techniques (BAT) to reduce air emissions.

• Process changes: Reformulating products to eliminate microplastics or hazardous chemicals.

• Value chain engagement: Working with suppliers to reduce their water pollutant discharges.

• Remediation: Projects to decontaminate soil after an accidental spill.

The ESRS defines actions as follows:

“Actions refer to:

i. actions and action plans (including transition plans) that are undertaken to ensure that the undertaking delivers against targets set and through which the undertaking seeks to address material impacts, risks and opportunities; and
ii. decisions to support these with financial, human or technological resources.

Actions can be individual actions, taken only by the undertaking, or collective actions, this is, collaborative efforts by a group of stakeholders - such as undertakings, governments, civil society, or communities - to address shared challenges or achieve common goals, particularly when those goals cannot be effectively achieved by any single actor working alone.”

3. ESRS E2-2 at a glance

E2-2 requires that “the undertaking shall disclose its key pollution-related actions and resources allocated to the implementation of those actions in accordance with the provisions of ESRS 2 GDR-A“.

To comply with ESRS 2 GDR-A, the disclosure must include:

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4. How E2-2 links to the rest of ESRS E2

The Action disclosure is the bridge between policy and performance:

• E2-1 (Policy): You commit to “Zero Pollution.”

• E2-2 (Action): You invest €2M in a new water filtration system (CapEx) and €100k/year in maintenance (OpEx) to achieve this.

• E2-3 (Target): You aim to reduce water pollutants by 50% by 2030.

• E2-4 (Metric): You report the actual tonnes of pollutants discharged this year to verify if the action is working.

The disclosure of actions and resources provides the evidence that the company is mobilizing to meet its goals.

5. Bottom line

E2-2 is where you demonstrate execution. To report effectively:

• Be specific: Avoid vague statements like “we are working on it.” State what you are building, changing, or fixing.

• Show the money: Investors review the resources section to ensure your budget aligns with your ambitions. If you have a massive target but zero budget allocated, it raises red flags.

• Use the hierarchy: Frame your actions around avoidance and minimization first, as these are more effective than remediation.

• Link to value chain: Don’t forget actions taken to address pollution upstream (suppliers) or downstream (product use).

Relevant Standards

ESRS E2

November 2025 ESRS E2

Air emissions are often reduced to a single metric: carbon emissions. While climate change is important, it is only one aspect of air pollution. The atmosphere is a delicate chemical solution, and when businesses introduce foreign agents—whether through combustion, chemical solvents, or logistics—they disrupt a balance that has existed for millions of years.

To manage environmental impact effectively, we must look beyond carbon and understand the broader spectrum of atmospheric degradation.

In this article, you will learn:

✅ Why the air is important and how it impacts us

✅ The difference between the greenhouse gas emissions and air pollution

✅ Pollution traveling thousands of kilometers

✅ How specific industrial activities alter the air

By the end of this article, you will have a better understanding of air pollution.

1. Air, a dynamic mixture

Before understanding pollution, we must first appreciate the delicate baseline from which we are deviating. The Earth’s atmosphere is not merely the space between us and the stars; it is a complex, dynamic, and thin protective envelope that makes life possible. Think of the atmosphere as Earth’s life-support system. It acts like a shield (blocking harmful solar rays), a blanket (keeping us warm), and a water delivery system (moving rain around the world).

The perfect mixture

For millions of years, the atmosphere has maintained a relatively stable chemical composition. This specific mix of gases is what biological life has evolved to breathe and thrive in. If you were to take a dry sample of the air we breathe, it would consist of a distinct mixture:

• Nitrogen (~78%): The most abundant gas and essential for building proteins in plants and animals via nitrogen fixation in the soil.

• Oxygen (~21%): The fuel for respiration in most living organisms and a key component in the chemical reactions that drive our ecosystems.

• Argon (~0.9%): A noble gas that is chemically inert.

• Trace gases (~0.1%): This tiny fraction includes naturally occurring Carbon Dioxide, Neon, Helium, Methane, and water vapor.

The power of the 0.1%

It is important to recognize that although trace gases make up less than 0.1% of the atmosphere, they exert a massive influence on the planet’s climate and weather patterns. A slight alteration in this fractional percentage can trigger global shifts in temperature.

Ecosystem services of the atmosphere

Beyond simply providing air to breathe, the atmosphere performs critical services that maintain the planet’s habitability:

1. Thermal regulation: through the natural greenhouse effect, trace gases trap just enough solar heat to keep Earth’s average temperature at a habitable level (roughly 15°C/59°F). Without this, Earth would be a frozen rock.

2. Radiation shielding: High in the stratosphere, the Ozone layer acts as natural sunscreen, absorbing the majority of the sun’s harmful ultraviolet (UV) radiation before it reaches the surface.

3. Meteorological distribution: The movement of air masses redistributes heat and moisture from the equator toward the poles, creating the weather cycles and precipitation patterns required for agriculture and fresh water.

A delicate balance

In its pristine state, the atmosphere exists in dynamic equilibrium. This means that while gases are constantly being exchanged—oxygen produced by photosynthesis, carbon dioxide released by respiration—the overall ratios remain steady. The system is resilient, but it has limits.

When we view the atmosphere not as an infinite dump, but as a finite, delicately balanced chemical solution, the severity of introducing foreign agents becomes clear.

2. Understanding air pollution

Air pollution occurs when the atmosphere’s delicate chemical balance is disrupted by the introduction of harmful solids, liquids, or gases in concentrations that exceed natural capacities.

In the corporate sustainability conversation, we often lump emissions into one category. However, it is vital to distinguish between Greenhouse Gases (GHGs) and air pollutants. While often described as “two sides of the same coin,” they behave differently:

• Greenhouse Gases (CO2, Methane, etc.): These are a global stock problem. They accumulate in the atmosphere over centuries and primarily affect the climate by trapping heat.

• Air pollutants (PM2.5, NOx, Ozone, etc.): These are a local and regional flow problem. They remain in the air for a short time (days to weeks) but cause immediate damage to human health and ecosystems.

The major air pollutants

To understand the risk, we must look beyond just carbon. The primary pollutants include:

• Particulate Matter (PM2.5 and PM10): Tiny solid or liquid particles suspended in the air. PM2.5 is particularly dangerous because it is small enough to penetrate deep into the lungs and enter the bloodstream, causing systemic inflammation.

• Black Carbon (Soot): A component of PM formed by incomplete combustion. It is a short-lived climate pollutant that hits twice: it warms the atmosphere by absorbing sunlight and, when deposited on snow or ice, it darkens the surface and accelerates melting.

• Ground-level Ozone (O3): Unlike other pollutants, this is not emitted directly. It is a secondary pollutant formed when sunlight reacts with chemical ingredients (NOx and VOCs) in the air. It is the main component of smog and is highly toxic to human lungs and crops.

• Nitrogen Oxides (NOx) and Sulfur Dioxide (SO2): Reactive gases formed primarily from burning fossil fuels. They are major lung irritants and the primary drivers of acid rain.

• Volatile Organic Compounds (VOCs): Chemicals that vaporize easily (found in paints, solvents, and fuels). While some are directly toxic, their main danger is acting as a precursor for ground-level ozone.

• Ammonia (NH3): Often overlooked in industrial reports, this gas primarily comes from agriculture (fertilizers and livestock). It reacts with NOx and SO2 in the air to form dangerous secondary particulate matter.

The transboundary issue
We tend to think of pollution as a localized urban issue—smog over a city. However, phenomena like Atmospheric Brown Clouds (ABCs) prove otherwise. These are vast, 3-kilometer-thick layers of pollution consisting of aerosols, soot, and chemical particles that can span entire ocean basins. They prove that air pollution is not just a city problem; it is a transcontinental crisis that alters weather patterns and agriculture thousands of kilometers from the source.

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3. Business as the driver of air pollution

Incomplete combustion (energy & heat)

The most significant source of industrial air pollution is the burning of fossil fuels (coal, oil, natural gas) and biomass.

• The mechanism: When fuel is burned to generate electricity, power boilers, or run heavy machinery, it rarely burns “cleanly.”

• The output: This releases Carbon Dioxide (CO2), but also Nitrogen Oxides (NOx), Sulfur Dioxide (SO2), and Black Carbon.

• Key sectors: Energy generation, heavy manufacturing, and heating.

Industrial processes & fugitive emissions

Many industries release pollutants from the chemical reactions inherent to their production processes. And not just from burning fuel for power.

• Iron and steel: This industry is a major source of dust and heavy metals. The sintering and coking processes release vast amounts of PM, SO2, and NOx.

• Chemicals and solvents: Industries using solvents (paints, coatings, cleaning agents) release VOCs through evaporation. These are known as fugitive emissions because they often leak from valves, pumps, or open vats rather than a smokestack.

• Construction & mining: These sectors are responsible for significant coarse particulate matter (dust) generated by breaking rocks, moving soil, and demolition.

Supply chain & logistics (the hidden pollution)

For many companies, the bulk of their air pollution footprint lies outside their own fence line, within their supply chain.

• Transportation: The global movement of goods relies heavily on diesel engines (trucks, ships, trains). Diesel exhaust is a primary source of NOx and Particulate Matter.

• The “Pollution Haven” effect: There is a phenomenon known as the “Pollution Haven Hypothesis,” where multinational corporations may relocate dirty production stages to developing countries with laxer environmental regulations. This effectively offshores the air pollution, allowing the company to appear cleaner at home while contributing to global atmospheric degradation (such as the Asian Brown Cloud).

The Asian Brown Cloud is a massive, three-kilometer-thick layer of air pollution that hangs over South Asia and the Indian Ocean, primarily during the dry winter months. It is caused by a mixture of soot, dust, and chemicals from burning fossil fuels in factories and vehicles, as well as the burning of wood and crop waste in rural areas. Because there is no rain to wash the air clean between November and April, this toxic haze builds up and traps heat while blocking sunlight, which disrupts weather patterns, accelerates the melting of Himalayan glaciers, and poses serious respiratory health risks to millions of people.

Sources

The Atmosphere: Getting a Handle on Carbon Dioxide - NASA Science

Basics of air pollution

Frontiers | Environmental and Health Impacts of Air Pollution: A Review

Editorial: Atmospheric chemistry and air pollution - PMC

Global supply chain relocation reshaped PM2.5 pollution and human health risks

The Asian brown cloud

Air Quality and Climate Change Research | US EPA

Industrial pollution control based on artificial intelligence: A synergistic model using social network analysis and machine learning | Journal of Innovation & Knowledge

OCCUPATIONAL EXPOSURES DURING IRON AND STEEL FOUNDING - Chemical Agents and Related Occupations - NCBI

The Direct Effects of Air Pollutant Exposure from Industrial Complexes on Chronic Respiratory Diseases in Local Residents: A Population-Based Cohort Study - PMC

Unbundling the Pollution Haven Hypothesis

While targets and metrics measure the output of a company’s environmental impact, policies provide the governance framework that dictates how those results are achieved. ESRS E2-1 asks undertakings to describe the official rules, principles, and commitments they have established to prevent and control pollution.

This disclosure serves as the foundation of the Pollution standard. It connects your high-level sustainability governance (ESRS 2) to the tangible actions (E2-2) and targets (E2-3) aimed at reducing your environmental footprint.

I will briefly explain the requirements for companies to disclose their policies in relation to pollution of air, water, and soil.

More elaborate articles are, or will become available, which can be found on: Sustainability Simplified.

2. What is a pollution policy?

A pollution policy is a framework that outlines how an undertaking manages its emissions and releases into the environment. It addresses the prevention, control, and reduction of emissions to air, water (including freshwater and seawater), and soil.

Context-specific considerations are particularly important here, as pollution impacts are often tied to specific geographies or sites.

Typical examples include:

• Zero Pollution commitments: Strategies aligned with the EU Action Plan ‘Towards a Zero Pollution for Air, Water and Soil’.

• Chemical Management: Rules regarding Substances of Concern (SoC) and Substances of Very High Concern (SVHC), including restrictions on production or use.

• Microplastics: Commitments to reduce the use of primary microplastics or the release of secondary microplastics.

• Site-specific controls: Policies governing emissions at specific production sites or areas with water stress.

The ESRS 2 General Disclosures (GDR-P) provides the framing for this requirement. It states that the objective is to enable an understanding of the policies in place to manage the prevention, mitigation, and remediation of material negative impacts.

The ESRS defines a policy as follows:

“A set or framework of general objectives and management principles that the undertaking uses for decision-making. A policy implements the undertaking’s strategy or management decisions related to a material sustainability topic. Each policy is under the responsibility of defined person(s), specifies its perimeter of application, and includes one or more objectives (linked when applicable to measurable targets). A policy is validated and reviewed following the undertakings’ applicable governance rules. A policy is implemented through actions or action plans.”

3. ESRS E2-1 at a glance

E2-1 specifically requires that “the undertaking shall disclose its pollution-related policies in accordance with the provisions of ESRS 2 GDR-P”.

To comply with ESRS 2 GDR-P, the disclosure must include:

If a company has not adopted policies regarding pollution despite it being a material topic, it must explicitly disclose this fact.

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4. How E2-1 links to the rest of ESRS E2

• E2-1 (policies) sets the rules and strategic direction for pollution prevention and control.

• E2-2 (actions and resources) describes the key actions taken to implement those policies and the financial resources allocated to them.

• E2-3 (targets) defines the measurable goals the company aims to achieve.

• E2-4 & E2-5 (metrics) provide the data on actual emissions (air, water, soil) and substances of concern to track performance against the policy.

For example, a policy to eliminate microplastics (E2-1) would be implemented through specific manufacturing changes (E2-2), tracked against a reduction target (E2-3), and reported via the mass of microplastics released (E2-4).

5. Bottom line

E2-1 is your opportunity to demonstrate that your organization’s approach to pollution is systematic rather than reactive. To comply and communicate effectively:

• Define the scope clearly: Specify if policies apply to specific sites, the whole group, or the value chain, especially regarding transfers of pollutants to external treatment plants.

• Address the full spectrum: Ensure policies cover air, water, soil, and specific concerns like microplastics and hazardous substances.

• Link to regulations: Where relevant, show how your policies align with frameworks like the Chemical Strategy for Sustainability or the Industrial Emissions Directive.

A robust pollution policy is the starting point for credible reporting on how an undertaking contributes to a toxic-free environment.

Relevant Standards

ESRS E2

November 2025 ESRS E2

Soil is often treated as an inert platform for building factories or planting crops. In reality, it is the living skin of our planet, a complex, non-renewable resource that takes centuries to form but only moments to destroy.

Soil pollution presents a unique challenge: unlike a plume of smoke or an oil spill, it is often invisible. Contaminants can hide for decades, silently traveling through the ground to poison aquifers or accumulating in the food chain until they reach toxic levels on our plates.

To manage environmental liabilities, companies must understand not just what they emit, but how those emissions interact with the land beneath their feet.

In this article, you will learn:

✅ Why soil is often called the living skin of the Earth

✅ How pollutants behave underground

✅ How toxins climb the food chain through bioaccumulation and biomagnification

✅ How specific industries create a toxic soil

By the end of this article, you will understand the mechanics of soil pollution and why protecting this finite asset is important.

1. Soil, the living skin

Soil is often called the living skin of the Earth. It is a dynamic mix of mineral particles, organic matter, water, and air.

• Mineral particles (~45%): These come from the weathering of rocks over thousands of years. They are categorized by size: sand (large and gritty), silt (medium and floury), and clay (microscopic and sticky).

• Organic matter (~5%): This is the “engine” of the soil. It includes living organisms like bacteria and fungi, plant roots, and humus (decomposed plant and animal remains). It holds nutrients and helps the soil soak up water like a sponge.

• Pore space (~50%): The gaps between soil particles are filled with air and water, which are essential for roots to breathe and for nutrients to move.

Soil formation and layers

Soil forms very slowly through the interaction of climate, living organisms, and topography acting on rocks over time. This creates distinct layers called horizons. The top layer (topsoil) is the most fertile and is where most biological activity happens. Because it takes hundreds of years to form just one inch of topsoil, soil is considered a non-renewable resource.

2. Understanding soil pollution

Soil pollution occurs when human-made chemicals or other alterations reach concentrations that harm the health of plants, animals, or humans. Unlike air or water pollution, soil pollution is often “invisible” and can remain hidden for decades.

How pollutants behave in soil

Once a pollutant enters the soil, it doesn’t just sit there; it interacts with the soil particles:

• Sorption: This is when a pollutant “sticks” to the surface of clay or organic matter. If a pollutant is strongly “sorbed,” it stays in place; if not, it can move easily.

• Leaching: Rainwater can wash soluble pollutants down through the soil and into the groundwater, which eventually reaches our drinking water.

Soil pollution occurs when the concentration of harmful chemicals or substances in the soil is high enough to damage soil functions or pose a risk to the health of humans, animals, and plants.

Types of pollution

• Point-source pollution: Contamination originating from a single, identifiable source, such as a specific industrial spill, an illegal dumping site, or a leaking underground storage tank.

• Diffuse pollution: Contamination spread over large areas that cannot be traced to a single source. This often occurs through atmospheric deposition (pollutants falling with rain) or the widespread use of agricultural chemicals.

Common soil contaminants

Industrial and human activities introduce various pollutants into the soil:

• Heavy metals: Elements like lead, mercury, arsenic, and cadmium, which are toxic and persist in the environment for centuries.

• Organic pollutants: Including pesticides, mineral oils, and persistent organic pollutants (POPs).

• Nutrient imbalance: Excessive nitrogen and phosphorus from fertilizers can leach into water or disrupt soil biology.

Impact of soil pollution: The food chain

Soil is a natural filter, but when overloaded with pollution, it sends toxins directly into our food and water.

• Food & Water: Plants absorb heavy metals through their roots, and chemicals leak into our drinking water.

• Ecosystems: Pollution kills the beneficial microbes that keep land fertile.

Toxins climb the food chain via two processes:

1. Bioaccumulation: Plants act as biological pumps. They often cannot distinguish between nutrients and toxins. A plant might absorb toxic Arsenic instead of Phosphorus. When an animal (or human) eats that plant, the toxin is absorbed faster than the body can excrete it, accumulating in organs like the liver.

2. Biomagnification: As predators eat herbivores, the concentration of the toxin increases at each step up the food chain. A human eating livestock raised on contaminated feed ingests a concentrated dose of the pollutant.

The result: By the time we eat crops or livestock from polluted land, we are consuming a concentrated dose of the original soil toxins.

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3. Business as the driver of soil pollution

Mining and raw material extraction

Mining is one of the most visible ways industry alters the earth. It doesn’t just move dirt, it also changes the soil’s chemistry.

• Toxic legacies: Mining unearths heavy metals like lead, mercury, and arsenic. Unlike organic waste, these “forever chemicals” do not break down and can stay in the soil for centuries, long after the mine has closed.

• Waste mountains: After valuable minerals are removed, the leftover “tailings” (powdered rock) are often stored in large piles or ponds. These fine particles easily blow away in the wind or wash away in the rain, spreading toxins to nearby farms and forests.

• Fuel extraction: Drilling for oil and gas can lead to accidental spills. Additionally, “brines”—salty, toxic water found deep underground—are often brought to the surface during drilling, poisoning the soil if they leak.

Manufacturing and industrial factories

Factories create the products we use daily, but their production lines often generate hazardous by-products.

• Chemical leaks: Industries like textile dyeing, leather tanning, and chemical manufacturing use powerful solvents and dyes. If these aren’t stored in perfectly sealed containers, they seep into the ground through cracks in factory floors or storage area leaks.

• Falling pollutants: Pollution isn’t just a ground-level issue. Factories release smoke and soot into the sky. When it rains, these airborne chemicals turn into “acid rain” or simply settle as dust, coating the soil in a layer of industrial pollutants.

• The tech burden: As we produce more electronics, the “e-waste” industry has grown. When old phones or computers are recycled improperly—such as by burning them to get to the copper inside—toxic dioxins and metals are baked directly into the earth.

Waste disposal and trash Management

The way we get rid of what we don’t want is a major source of “hidden” soil pollution.

• Landfill hazards: Even “legal” landfills can be a problem. As trash decomposes, it creates a toxic “garbage juice” called leachate. If the landfill’s bottom liner fails, this liquid sinks into the soil, carrying battery acid, pharmaceuticals, and household cleaners with it.

• Historical burying: In the past, many companies used an “out of sight, out of mind” approach, simply burying barrels of industrial waste. Today, these aging barrels are rusting and leaking, creating “brownfields”—plots of land too contaminated to be used safely.

• Sewage sludge: Sometimes, treated waste from cities (sewage sludge) is used as fertilizer. While it contains nutrients, it can also contain concentrated pathogens and microplastics if the treatment process isn’t rigorous enough.

Construction and transportation

Building the world’s infrastructure requires movement and materials that can degrade the land.

• Road runoff: Busy roads are constant sources of pollution. Every time a car brakes or a tire wears down, tiny bits of metal and rubber fall onto the asphalt. Rain washes these metals and oily compounds (PAHs) into the soil along the roadside.

• Soil sealing: This is a unique type of “pollution” where we cover living soil with concrete or asphalt. This “seals” the soil, killing the beneficial microbes underneath.

• Leaded history: Even though leaded gasoline was banned decades ago in many places, the lead particles emitted from exhaust pipes during that era still sit in the topsoil of many urban yards today.

The agrochemical industry

Large-scale farming depends on an industrial supply chain that can inadvertently harm the soil it aims to help.

• Fertilizer impurities: Creating massive amounts of fertilizer involves processing rocks and minerals. This process can leave behind trace amounts of radioactive elements or heavy metals like cadmium, which are then spread across millions of acres of farmland.

• Pesticide production: The factories that manufacture bug and weed killers generate their own concentrated waste. If a manufacturing plant has a spill, it creates a “point-source” of pollution—a small area with an extremely high, dangerous concentration of chemicals.

Sources

Enviroweb Home

Soil chronosequences, soil development, and soil evolution: A critical review - Research Explorer The University of Manchester

Soil Processes

Major contaminants of emerging concern in soils: a perspective on potential health risks - PMC

Soil architecture and physical properties

Heavy Metals Removal from Electroplating Wastewater by Waste Fiber-Based Poly(amidoxime) Ligand

Polycyclic Aromatic Hydrocarbons: Sources, Toxicity, and Remediation Approaches - PMC

Don't let nitrogen acidify your soil

UN says up to 40% of world’s land now degraded | Environment | The Guardian

Frontiers | Phytoremediation: A Promising Approach for Revegetation of Heavy Metal-Polluted Land

In the previous article, we designed a sustainability flywheel: a way to turn better data, smarter decisions, and reinvestment into a compounding engine for profit, resilience, and long-term value.

But there is a hard truth most organisations discover the painful way:

Many sustainability flywheels never start spinning.

Not because the model is wrong—but because the early ideas that would power the flywheel are killed too early. Pilots stall. Innovations get stuck in “proof-of-concept.” Teams reset direction every year. Momentum never builds.

This is exactly the failure mode Safi Bahcall describes in Loonshots.

His research helps explain why organisations systematically reject the very ideas they later wish they had protected—and how to design systems that let fragile innovations survive long enough to become profitable.

In this article, you’ll learn:

✅ Why sustainability innovation fails inside otherwise well-run organisations

✅ How Safi Bahcall’s core Loonshots concepts explain common ESG failure modes

✅ How to design a lightweight sustainability loonshot engine that protects early ideas and connects them to the core business

✅ How loonshots feed the sustainability flywheel — and why the flywheel cannot spin without them

✅ A concrete case study showing how fragile sustainability ideas became a repeatable, profitable system over time

By the end, you’ll understand not just why sustainability innovation so often stalls, but how to build the missing system that allows profitable sustainability to get started and scale.

What Loonshots means for sustainability

Bahcall’s research highlights three ideas that matter directly for sustainability leaders.

1. Phase transitions: when innovation suddenly stops

One of the book’s core insights is that organisational behaviour can change abruptly when incentives shift. As groups grow, the balance often moves from stake (you win if the idea wins) to rank (you win if your position improves).

When rank dominates, organisations become hostile to risk. New ideas are filtered out—not because they are bad, but because they threaten existing structures. Bahcall describes this as a phase transition: the same people behave differently under different incentive physics.

For sustainability, this explains a familiar pattern: once initiatives touch core operations, capex, or margins, they face resistance that has little to do with their actual business merit.

2. Artists and soldiers: why one system can’t do both

In Loonshots, Safi Bahcall distinguishes between two fundamentally different kinds of work that exist inside every organisation.

• Artists explore fragile, uncertain ideas. Their job is to test possibilities, learn quickly, and find out whether something could work.

• Soldiers execute, scale, and optimise what already works. Their job is reliability, efficiency, and consistency.

Both roles are essential—but they succeed under very different conditions.

Artists need small budgets, fast decisions, and permission to be wrong early. Soldiers need stable processes, clear targets, and predictable returns. Problems arise when organisations apply soldier rules too early. New sustainability ideas are judged using annual budgets, fixed KPIs, and short payback expectations—the same standards used for mature investments. Under those conditions, uncertainty looks like failure, and fragile ideas rarely survive.

Bahcall’s insight is not that one role is more important than the other. It is that one system cannot optimise for both at the same time.

His rule is simple: separate the phases, but keep them connected. Artists should explore until there is evidence of value. Soldiers should take over once scaling makes sense. The handover between the two—when an idea moves from exploration to execution—is where most sustainability efforts either succeed or quietly die.

3. The Moses Trap: why hero leadership breaks innovation

Another failure mode Bahcall describes is the Moses Trap: when ideas advance only at the discretion of a single powerful leader. This can look decisive and effective, especially early on—but it creates bottlenecks and bias.

In sustainability, this often shows up when progress depends on one exceptional CSO or CEO. As long as that person pushes, projects move. But when they shift focus, lose influence, or leave, the innovation pipeline collapses. The organisation never learned how to move ideas forward on its own.

The alternative is a system mindset. Instead of acting as heroes, leaders act as gardeners: they design clear rules, incentives, and decision paths so that good ideas can emerge, be tested, and transferred reliably—regardless of who is in the room. That is what turns sustainability innovation from a personal mission into an organisational capability.

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A simple sustainability loonshot engine

The sustainability flywheel explains how value compounds once momentum exists.

A loonshot engine explains how that momentum gets started in the first place.

Most organisations already run sustainability initiatives. What they usually lack is a system that allows early ideas to survive long enough to prove whether they work.

A simple sustainability loonshot engine looks like this:

This is not a new department.
It is not a large transformation programme.

Think of it as a small, deliberately lightweight system layered on top of the existing organisation.

Its role is very specific:

• to test sustainability ideas cheaply,

• to learn quickly,

• and to hand over only the ideas that clearly create value.

Everything else is allowed to fail early and quietly.

This engine feeds the sustainability flywheel at exactly the point where most organisations struggle: turning ideas into real savings, innovation, and momentum.

Step 1 – Diagnose the phase transition

Many organisations believe sustainability innovation fails because of culture, mindset, or lack of ambition.

Loonshots suggests a different explanation:
innovation often fails because the decision system has crossed a tipping point.

As organisations grow, decision-making tends to shift from:

• “Will this idea work?”
  to

• “Will this affect my position, budget, or risk exposure?”

When that happens, uncertainty becomes a reason to reject ideas — even if the expected value is attractive.

In sustainability, this shows up in very recognisable ways:

• Ideas move quickly when they stay within one team, but stall once multiple functions are involved

• Approval discussions focus on downside risk, not upside potential

• Finance asks for certainty that can only exist after experimentation

This is not a people problem.
It is a system design problem.

Practical focus
Review your last 10 sustainability ideas that did not progress. Ask a simple question:
At what point did the decision shift from learning to risk avoidance?

KPIs to track

• Time from idea submission to pilot approval

• Number of approval layers required to start a pilot

• Number of functions with veto power over experiments

Step 2 – Separate artists and soldiers

One of the most actionable ideas in Loonshots is that exploration and execution require different rules.

• Artists explore uncertain ideas. They need speed, protection, and permission to be wrong.

• Soldiers scale proven ideas. They need reliability, efficiency, and control.

Most organisations apply soldier rules too early — especially in sustainability. Early ideas are forced to meet the same standards as mature investments, which almost guarantees rejection.

A sustainability loonshot engine creates a protected space for artists, without weakening operational discipline elsewhere.

In practice, this means:

• Small budgets

• Clear learning goals

• Limited exposure to the rest of the organisation

This is not:

• A reporting team

• A branding exercise

• A traditional R&D function

It is a temporary shelter for fragile ideas.

Practical focus
Create a small cross-functional team (sustainability, finance, operations, data) that runs a handful of experiments per year, each designed to answer one clear business question.

KPIs to track

• Cost per experiment

• Time to first measurable signal (cost reduction, risk reduction, feasibility, or demand)

The goal is not certainty. The goal is to decide whether an idea deserves a chance to scale.

Step 3 – Build transfer, not more pilots

Many sustainability innovations fail after they succeed.

Pilots deliver results—but never become standard practice. This is what Bahcall describes as a system failure, not an execution failure.

To avoid “pilot purgatory” (successful pilots that never scale), transfer must be designed upfront.

Every sustainability experiment should pass four explicit transfer gates:

1. Value signal demonstrated
   A credible cost saving, risk reduction, or revenue signal exists.

2. Operational owner assigned
   A business unit or function commits to owning the solution.

3. Process integration defined
   Changes to procedures, systems, or decision templates are documented.

4. Funding source identified
   Scale-up is linked to capex, opex, or reinvested savings.

Practical focus
Require each experiment to nominate its future operational owner before it starts.

KPIs to track

• % of pilots transferred into operations

• Time from pilot completion to full rollout

Step 4 – Fund learning so good ideas don’t die early

In the flywheel article, reinvestment is about scaling proven value.

Here, reinvestment has a different job: keeping exploration alive long enough to find value.

Many sustainability ideas don’t fail because they’re wrong. They fail because funding resets before the organisation has learned enough to decide. A pilot shows promise, but there is no budget to run the next iteration, expand to a second site, or do the integration work needed for transfer. The idea quietly dies—not from poor performance, but from lack of continuity.

That’s why a loonshot engine needs a simple rule: once an experiment shows a credible value signal, it should unlock small, predictable follow-on funding.

You can formalise this in different ways (green revolving funds, internal carbon fees), but the mechanism matters less than the principle:

Protect a portion of verified savings or budget to fund the next round of experiments and scale-up work.

Practical focus
Create a small “follow-on” pool that can fund the next step after a pilot—replication at a second site, process integration, supplier onboarding, or data system changes. Make access to that pool conditional on passing the transfer gates (value signal, owner, integration plan, funding path).

KPIs to track

• Annual verified sustainability savings

• % of savings (or budget) reserved for follow-on funding and scale-up work

• Number of experiments that receive follow-on funding within 60 days of showing a value signal

Step 5 – Convert S-type loonshots into strategy

Some sustainability ideas improve efficiency or reduce costs. Others quietly change how the organisation makes decisions.

Loonshots calls these S-type innovations.

A simple way to think about it:

• P-type loonshots change what you do (a new product, process, or technology).

• S-type loonshots change how decisions are made (rules, incentives, metrics).

In sustainability, many of the most powerful breakthroughs are S-type:

• Using lifecycle cost instead of purchase price

• Applying internal price signals to emissions or resources

• Shifting from product sales to service models

These changes often look small on paper, but they systematically steer decisions toward lower risk and higher long-term value.

Because they reshape decision logic, they are harder to reverse — and harder for competitors to copy.

Practical focus
Identify one recurring decision where sustainability impacts exist but are currently invisible (e.g. procurement, capex approval, product design).

KPIs to track

• % of relevant decisions using lifecycle or sustainability-adjusted metrics

• Number of decisions delayed, redesigned, or cancelled due to sustainability insights

Step 6 – Prevent the Moses Trap

In Loonshots, the “Moses Trap” is the pattern where progress depends on a single powerful sponsor. Ideas move forward because one leader believes in them—not because the organisation has a repeatable way to test, prove, and transfer them.

Sustainability is especially vulnerable to this. One strong CSO or CEO can push projects through. But when that person is busy, changes roles, or leaves, the pipeline slows down or collapses. The organisation never learns how to innovate without them.

The fix is not less leadership. It is a better system.

You want sustainability ideas to advance because they meet clear criteria—not because they have the right champion. That is what makes innovation scalable and durable.

A practical way to do this is to create a standing “loonshot review” forum with simple, consistent rules:

• Experiments are approved based on a clear learning goal and a limited budget.

• Projects move from pilot to rollout only if they pass the transfer gates (value signal, owner, integration plan, funding path).

• The forum includes finance and operations so that scaling decisions are real, not symbolic.

Practical focus
Create a recurring (e.g., monthly) review where sustainability experiments are evaluated with a one-page template. Keep decisions fast and criteria consistent. Rotate membership so the system doesn’t become another rank-driven bottleneck.

KPIs to track

• Number of business units or functions sponsoring experiments (not just the sustainability team)

• Share of experiments with an operational owner assigned before the pilot starts

• Average decision cycle time (proposal → approval; pilot complete → scale decision)

How this feeds the sustainability flywheel

The connection to the sustainability flywheel is direct:

Read more

In the world of corporate sustainability, we celebrate a “15% reduction in global water use” or a “net-zero commitment for 2040” as if these figures, when aggregated onto a shiny spreadsheet, tell the whole story of a company’s environmental footprint.

But environmental data is often meaningless at a global aggregate level. In fact, for topics like pollution and water, “the average” is often a mask that hides the most significant risks a business faces.

What you will read in this article:

✅ Why global averages hide existential operational and reputational risks.

✅ How “strategic disaggregation” reveals the truth about your footprint.

✅ Why pollution and water stress are fundamentally “local” issues.

✅ The path from reporting data to building genuine corporate resilience.

2. The problem with the “global average”

Imagine a multinational beverage company. Its global sustainability report proudly states it has reduced its water intensity by 10% across all operations. On paper, this looks like a win.

However, dig deeper, and you find that 90% of those savings came from a bottling plant in rainy Scotland, where water is abundant. Meanwhile, at its facility in the drought-stricken Central Valley of California, water use actually increased. By looking only at the aggregate, investors and stakeholders miss the fact that the company is facing an existential operational and reputational risk in California.

This is the “Averaging Trap.” For environmental impacts, context is everything.

3. Breaking down the silos of data

To avoid the trap, businesses must move from simple aggregation (lumping everything together) to strategic disaggregation (breaking data down by site or region). Information should be presented in a way that reflects where significant variations in risks or opportunities actually arise.

This shift requires looking at:

• Geography and asset: A factory in a protected ecosystem or a water-scarce basin is not the same as a factory in an industrial park with a surplus of resources.

• The “Obscurity” risk: High-level reporting can often obscure material information. If a company’s total emissions are stable, but they are increasingly concentrated in a community with strict new air-quality laws, the “average” fails to signal a major looming cost.

The CSRD perspective:

Under the European Sustainability Reporting Standards (ESRS):

• ESRS 1 (General Requirements): Mandates that companies must disaggregate information by country, site, or significant asset whenever presenting it at a higher level would “obscure material information” about impacts, risks, or opportunities.

• ESRS E2 (Pollution): Requires site-specific screening to identify actual pollution-related impacts, focusing on where emissions to air, water, and soil are most material.

• ESRS E3 (Water): Explicitly requires companies to disclose total water consumption specifically in areas of high water stress.

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3. Why pollution is a “local” issue

When we talk about pollution, we are rarely talking about a global atmospheric phenomenon (with the notable exception of greenhouse gases). Most pollution—whether it is nitrogen runoff into a river, microplastics on a specific coastline, or sulfur dioxide in a local community’s air—is felt at the site or basin level.

Reporting “1,000 tonnes of material emissions” globally doesn’t tell a user if that emission is happening in a desert or a wetland. The former might have a negligible impact on local biodiversity, while the latter could lead to a total ecosystem collapse—a “severe” impact defined by its scale, scope, and irremediable character.

4. Water stress: the ultimate contextual challenge

Water is the most context-sensitive resource of all. To manage it effectively, companies must look beyond their own fences. “water stress” is a combination of quantity (scarcity), quality, and accessibility.

When a company reports a single water figure, it treats every liter of water as having equal “value.” But a liter of water in a water-stressed basin in the Sahara is infinitely more important to the business and the environment than a liter of water in the Great Lakes. True sustainability leadership requires identifying which operations are located in these high-pressure basins and managing them with site-specific targets.

5. The path forward: from reporting to resilience

This shift toward context-specific data isn’t just a compliance exercise; it is a fundamental shift in how we understand corporate resilience.

• True materiality: By breaking down data, companies can identify which specific assets are at risk of regulatory shutdowns, local community backlash, or physical resource failure.

• Meaningful stakeholder engagement: You cannot engage with an “aggregate” community. You engage with the people living next to a specific plant. Their local knowledge is a key input for understanding your actual impact.

• Ecological thresholds: Sophisticated companies are beginning to set targets based on ecological thresholds—the “tipping points” of a specific local environment. This ensures that corporate actions are actually solving the problems that matter most in that specific spot.
  

The next step: Mapping your context with LEAP

Transitioning from global averages to local resilience requires a structured methodology. One of the most effective tools for this, is the LEAP approach.

Developed by the Taskforce on Nature-related Financial Disclosures (TNFD), LEAP provides a four-phase journey to move a business from an “operational blind spot” to strategic water and nature management, read more about it here:

By adopting the LEAP framework, companies can systematically dismantle the “Averaging Trap,” ensuring that their sustainability strategy is as localized as the environmental challenges we face.

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Relevant Sources

ESRS 1 General Requirements

ESRS E2 Pollution

ESRS E3 Water

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