What to do when information on material metrics is not available

In short:

• Material metrics have to be reported from year one.
• The level of measurement uncertainty of metrics is not a reason for omitting them.
• If a metric cannot be determined through direct data collection, it shall be estimated.
• Quantitative metrics and monetary amounts disclosed that are subject to a high level of measurement uncertainty have to be listed in DP ESRS 2, 11a.
• Assumptions, approximations and judgements made in metric measurement, and sources of measurement uncertainty, have to be described in DP ESRS 2, 11b.
• Value-chain information on metrics can be phased-in, except for metrics derived from EU law, such as Scope 3 GHG emissions.
• When metrics include upstream and/or downstream value chain data estimated using indirect sources, such as sector-average data or other proxies, planned actions to improve accuracy in such estimates should be described in DP ESRS 2, 10d.

ESMA and EFRAG have provided clarifications:

On July 5 the European Securities and Markets Authority, ESMA, issued a public statement on the 1st application of the ESRS.

On page 8 (paragraph 35) ESMA noted that, as a general rule, the ESRS do not envisage cases in which the lack of data justifies the omission of disclosure of material information.

With regards to the disclosures on value chain, issuers should carefully assess the transitional provisions set out in paragraphs 132-134 of ESRS 1 for the first three years for reporting, most notably:

(i)?issuers can explain why not all the information regarding upstream and downstream value chain is available and how it plans to fill the gaps;

(ii)?issuers can limit the information on policies, actions and targets relating to value chains to information available in-house or from publicly available sources; and

(iii) issuers are not required to consider value-chain information in metrics disclosures (including entity-specific ones, see par. 91 of IG 2), except for metrics derived from EU law (e.g., Scope 3 GHG emissions).

In May, EFRAG published an answer to the question “Disclosure Requirements on material metrics when information is not available” (ID 504).

The question was: If the undertaking cannot disclose information regarding policies, actions or targets, it shall then disclose this to be the case and may report on a timeframe to have these in place. Is this also the case for metrics?

The answer is: No, this is not the case for metrics.

The treatment of paragraph 33 of ESRS 1 is limited to policies, actions and targets and cannot be applied by analogy to metrics – to which paragraph 34 applies instead.

Material metrics are to be reported.

If the metric cannot be determined through direct data collection, it shall be estimated.

The level of measurement uncertainty of metrics is not a reason for omitting them.

According to ESRS 2 BP-2, if a metric is subject to a high level of measurement uncertainty, the undertaking shall disclose information about the sources of measurement uncertainty (for example, availability and quality of data) and disclose the assumptions, approximations and judgments that the entity has made in measuring it.?

On August 30, Patrick de Cambourg, the EFRAG SRB Chair, added:

Information contained within sustainability reports prepared in accordance with the ESRS is likely to be useful to suppliers, clients, investors and other stakeholders of the undertaking that need to collect and aggregate information for their own sustainability reports or for other reporting requirements.

Determining the impact of the value chain, or of investments, on a specific granular datapoint is much more efficient if that same granular datapoint is digitally identified in reports coming from that value chain or investments.?

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