ESRS E3: Impact, Risk, and Opportunity Management
ESRS E3: Water and marine resources impact, risk, and opportunity management
1. Introduction
While governance and strategy are not part of ESRS E3, Impact Risk, and Opportunity management is. Companies must be more transparent and responsible about how they impact water and marine resources. This involves not just managing risks but also taking advantage of opportunities to improve their environmental footprint. Companies need to disclose their policies, actions, and processes related to water and marine resources. In this article, we'll break down these requirements and explain what companies need to disclose. How companies can effectively disclose this information will be covered in another article.
2. Impact, Risk, and Opportunity Management
Impact, Risk, and Opportunity (IRO) are important elements in the ESRS:
Impact: This refers to the effects that a company's actions have on the environment, society, and the economy. Impacts can be positive (beneficial) or negative (harmful).
Risk: Risks are potential events or conditions that could cause harm or loss to a company. These can stem from various sources, including financial, operational, environmental, or social factors.
Opportunity: Opportunities are potential favorable circumstances or conditions that a company can exploit to its advantage. They can lead to growth, innovation, and a competitive edge.
Identifying and Assessing Impacts, Risks, and Opportunities
Companies are required to describe their processes for identifying and assessing significant impacts, risks, and opportunities related to water and marine resources. This includes:
Screening assets and activities: Companies must explain whether and how they evaluate their operations and supply chains to identify actual and potential impacts on water and marine resources. This involves detailing the methods, assumptions, and tools they use for this screening process.
Consulting affected communities: Companies should also disclose whether and how they consult with communities that might be affected by their water and marine resource activities. This consultation helps ensure that all potential impacts are considered and addressed.
Policies Related to Water and Marine Resources
Companies need to describe the policies they have adopted to manage their significant impacts, risks, and opportunities related to water and marine resources. Key elements of these policies should include:
Water management: Policies should cover the use and sourcing of water, water treatment, and measures to prevent and reduce water pollution.
Product and service design: Companies should design their products and services to address water-related issues and preserve marine resources.
Commitment to reduce water consumption: Especially in areas facing water scarcity, companies should commit to reducing their water usage both in their operations and throughout their supply chains.
If a company operates in a high-water-stress area and lacks a relevant policy, it must state this and explain why. Additionally, companies should disclose if they have adopted policies related to sustainable oceans and seas.
Actions and Resources
To achieve their water and marine resource-related targets, companies must also disclose the specific actions they take and the resources they allocate. This includes:
Avoiding use: Measures to avoid using water and marine resources where possible.
Reducing use: Efficiency measures to reduce water usage.
Reclaiming and reusing water: Actions to reclaim and reuse water.
Restoration and regeneration: Efforts to restore and regenerate aquatic ecosystems and water bodies.
For areas at high risk of water scarcity, companies must specify the actions and resources dedicated to mitigating these risks.
Companies must identify and assess significant impacts, risks, and opportunities related to water and marine resources by screening their operations and consulting affected communities. They should also disclose their policies and actions to manage these impacts.
3. Conclusion
Understanding and managing the impacts, risks, and opportunities related to water and marine resources are critical for sustainable business operations. By following the ESRS guidelines, companies can ensure they are transparent about their efforts and are actively contributing to the preservation and sustainable use of these vital resources.
In an upcoming article, we will explore how companies can report on these disclosures. Subscribe to stay updated.
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Relevant Standards
ESRS E2
Disclosure Requirement related to ESRS 2 IRO-1 – Description of the processes to identify and assess material water and marine resources-related impacts, risks and opportunities
8. The undertaking shall describe the process to identify material impacts, risks and opportunities and shall provide information on:
(a) whether and how the undertaking it has screened its assets and activities in order to identify its actual and potential water and marine resources-related impacts, risks and opportunities in its own operations and its upstream and downstream value chain, and if so the methodologies, assumptions and tools used in the screening;
(b) whether and how it has conducted consultations, in particular, with affected communities
Disclosure Requirement E3-1 – Policies related to water and marine resources
9. The undertaking shall describe its policies adopted to manage its material impacts, risks and opportunities related to water and marine resources.
10. The objective of this Disclosure Requirement is to enable an understanding of the extent to which the undertaking has policies that address the identification, assessment, management and/or remediation of its material water and marine resources-related impacts, risks and opportunities.
11. The disclosure required by paragraph 9 shall contain the information on the policies the undertaking has in place to manage its material impacts, risks and opportunities related to water and marine resources in accordance with ESRS 2 MDR-P Policies adopted to manage material sustainability matters.
12. The undertaking shall indicate whether and how its policies address the following matters where material:
(a) water management including: i. the use and sourcing of water and marine resources in its own operations; ii. water treatment as a step towards more sustainable sourcing of water; and iii. the prevention and abatement of water pollution resulting from its activities.
(b) product and service design in view of addressing water-related issues and the preservation of marine resources; and
(c) commitment to reduce material water consumption in areas at water risk in its own operations and along the upstream and downstream value chain.
13. If at least one of the sites of the undertaking is located in an area of high-water stress and it is not covered by a policy, the undertaking shall state this to be the case and provide reasons for not having adopted such a policy. The undertaking may disclose a timeframe in which it aims to adopt such a policy.
14. The undertaking shall specify whether it has adopted policies or practices related to sustainable oceans and seas.
Disclosure Requirement E3-2 – Actions and resources related to water and marine resources
15. The undertaking shall disclose its water and marine resources-related actions and the resources allocated to their implementation.
16. The objective of this Disclosure Requirement is to enable an understanding of the key actions taken and planned to achieve the water and marine resources-related policy objectives and targets.
17. The description of the actions and resources shall follow the principles defined in ESRS 2 MDR-A Actions and resources in relation to material sustainability matters. In addition to ESRS 2 MDR-A, the undertaking may specify to which layer in the mitigation hierarchy an action and
18. Resources can be allocated to:
(a) avoid the use of water and marine resources;
(b) reduce the use of water and marine resources such as through efficiency measures;(c) reclaiming and reuse of water; or
(d) restoration and regeneration of aquatic ecosystem and water bodies.
19. The undertaking shall specify actions and resources in relation to areas at water risk, including areas of high-water stress.
ESRS 2
Disclosure Requirement related to ESRS 2 IRO-1 – Description of the processes to identify and assess material impacts, risks and opportunities
6. When describing the process to identify material impacts, risks and opportunities in relation to business conduct matters, the undertaking shall disclose all relevant criteria used in the process, including location,activity, sector and the structure of the transaction.