A week ago, on September 25, 2023, I discussed how ESRS standards approach biodiversity reporting during a conference. Carbon footprint and what next? organized by UNEP/GRID – Warsaw as part of the program Climate Leadership. I gave the presentation together with Dr. Monika Szewczyk, Chief Specialist for Biodiversity Conservation in the Ecosystems Division of UNEP/GRID. If you are interested in the entire conference, I invite you to read its summary.
The ESRS E4 thematic standard is dedicated to biodiversity and ecosystems. It contains six disclosure requirements, and although almost all of them can pose quite serious challenges, I will focus primarily on three issues.
One of the more complex tasks will be to examine the significance of biodiversity. Do we have a significant impact on biodiversity and the state of ecosystems through our operations or through business relationships in our value chain? The following should help us TNFD recommendations, However, the LEAP methodology presented in them is a new tool and it takes some time to learn it. This methodology will help us determine the significance of the impact, while its second dimension, i.e., financial significance, is not currently included in any recognized and widely used methodology.
We should report the measurement of a company's impact on biodiversity and ecosystems using appropriate indicators. The main challenge in this area is the need to select indicators for the types of impact exerted. This impact can have so many aspects that no uniform and standardized measures have been developed to calculate the „overall impact of a company on biodiversity.” In the case of climate change, such a measure is greenhouse gas emissions, which are reduced to a single denominator – tons of carbon dioxide equivalent. In accordance with ESRS E4, specifically under disclosure requirement E4-5, we will disclose our impact on the status of species (including population size or range), our impact on the quality of ecosystems, and our impact on the structural components of habitat status in completely different ways. The selection of impact measures will be based on, on the one hand, a materiality assessment and, on the other hand, the biodiversity policies and objectives we adopt in our company.
The third challenge will be to develop and implement a biodiversity and ecosystems transition plan. The ESRS standards do not require the development and implementation of such a plan, but they specify what should be reported about it if it exists in our organization. It is to be expected that for those companies for which biodiversity is an important issue, various stakeholder groups, and in particular financial institutions, will expect a transition plan to be drawn up and implemented.
These are not the only challenges arising from ESRS E4. The first difficulty arises when reading the standard. In order to understand what the regulator expects from us, we need to learn a number of concepts, terms, and definitions from the fields of biology and natural sciences, which we may never have encountered before. But after all, each of us heard the terms „climate change” and „greenhouse gas emissions” for the first time at some point, and now they are commonplace in reporting on sustainability issues. We can all cope with biodiversity and ecosystems too!
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