New disclosure requirements for climate targets

The European Union has introduced standards for corporate sustainability reporting, including the European Sustainability Reporting Standard (ESRS) E1. This standard relates to climate protection, climate adaptation and energy.

They oblige companies to report comprehensively. It covers both positive and negative, actual and potential impacts.

Furthermore, the company should describe its past, current and future efforts to mitigate climate change in accordance with the Paris Agreement (or an updated international agreement on climate change) and to limit global warming to 1.5°C. The company should indicate what strategies it has planned to adapt its business models to the transition to a sustainable economy and how it will contribute to limiting global warming to 1.5°C. This should also include risks and opportunities arising from the company’s impact and dependence on climate change, as well as the financial effects on the company.

ESRS E1 – Focus on climate change

This standard covers sustainability aspects of climate change mitigation and adaptation. It specifies that companies must report on both positive and negative impacts, actual and potential impacts, climate-related hazards and threats that may lead to physical climate risks, and the measures taken to reduce these risks. This includes energy-related issues where relevant to climate change. Companies must clearly explain how they are achieving their sustainability goals and what concrete steps they are taking to minimize their environmental footprint.

Climate protection measures and adaptation to climate change

Companies must disclose their efforts to reduce greenhouse gas emissions. This includes how they contribute to limiting global warming to 1.5°C above pre-industrial levels, as agreed in the Paris Agreement. This includes:

• Plans and strategies to reduce greenhouse gas emissions
• Measures and their results to prevent, mitigate or remediate climate risks
• Significant climate-related risks and opportunities and their management
• Short, medium and long-term financial impact on the company.

Adaptation to climate change refers to the company’s adaptation processes to actual and expected climatic changes. Companies must demonstrate how they are making their strategies and business models resilient to these changes.

Detailed information on emissions and energy consumption

Companies must also disclose their energy mix and their direct and indirect greenhouse gas emissions in the Scope 1, 2 and 3 categories in accordance with the Greenhouse Gas Protocol. Information on CO₂ reduction projects and possible internal CO₂ pricing is also required.

Analyzing the financial consequences of climate risks

Another important point is the analysis of the potential financial impact of significant physical risks such as storms or flooding as well as transitory risks in the course of the climate transition. Companies should also include opportunities arising from climate change and carry out scenario analyses. The new rules are intended to give investors and other stakeholders a comprehensive insight into companies’ climate strategies and risks.

How we can support you:

For many companies, mandatory sustainability reporting is a major challenge. Our experts are at your side to help you meet the complex requirements:

• Design of ESG-compliant sustainability reporting including a SMART approach for ESRS E1: Specific, Measurable, Appropriate, Realistic, Timely
• Advice on reporting including TÜV-certified CO₂ reporting
• Funding opportunities for sustainability investments
• Review of voluntary sustainability reports.