Pollution

This standard sets out disclosure requirements related to the pollution of air, water, and soil, and substances of concern, including substances of very high concern¹. Its objective is to specify disclosure requirements which will enable users of the sustainability statement to understand:

1. how the company affects pollution of air, water, and soil, in terms of material positive and negative actual or potential impacts;

2. any actions taken, and the result of such actions, to prevent or mitigate actual or potential negative impacts, and to address risks and opportunities;

3. the plans and capacity of the company to adapt its strategy and business model in line with the transition to a sustainable economy and with the need to prevent, control, and eliminate pollution, in support of the EU Action Plan “Towards a Zero Pollution for Air, Water and Soil”;

4. the nature, type, and extent of the company’s material risks and opportunities related to its pollution-related impacts and dependencies, as well as the prevention, control, elimination, or reduction of pollution, including where this results from the application of regulations, and how the company manages this;

5. the financial effects on the company over the short-, medium-, and long-term of material risks and opportunities arising from the company’s pollution-related impacts and dependencies.

Pollution of air refers to the companys’s emissions into air (both indoor and outdoor), and prevention, control and reduction of such emissions. Pollution of water refers to the company’s emissions to water, and prevention, control and reduction of such emissions. Pollution of soil refers to the company’s emissions into soil and the prevention, control and reduction of such emissions.

With regard to substances of concern, this standard covers the company’s production, use and/or distribution and commercialisation of substances of concern, including substances of very high concern. Disclosure requirements on substances of concern aim at providing users with an understanding of actual or potential impacts related to such substances, also taking account of possible restrictions on their use and/or distribution and commercialisation.

(Expand each chapter below to learn more about ESRS-E2 disclosure requirements.)

CH 1. Impact, risk and opportunity management

DR related to ESRS 2 IRO-1 : Description of the processes to identify and assess material pollution-related impacts, risks and opportunities

The company should describe the process it uses to identify material IROs. It should provide information on:

1. whether it has screened its site locations and business activities in order to identify its actual and potential pollution-related IROs in its own operations and upstream and downstream value chain, and if so, the methodologies, assumptions and tools used in the screening;
2. whether and how it has conducted consultations, in particular with affected communities.

When conducting a materiality assessment on environmental subtopics, the company should assess the materiality of pollution in its own operations and its upstream and downstream value chain. The company may consider the LEAP approach, which consists of four phases:

• Phase 1: Locate where in its own operations and its upstream and downstream value chain the interface with nature takes place;

• Phase 2: Evaluate the pollution-related dependencies and impacts;

• Phase 3: Assess the material risks and opportunities;

• Phase 4: Prepare and report the results of the materiality assessment.

The materiality assessment for this standard corresponds to the first three phases of the LEAP approach. The fourth phase addresses the outcome of the process.

The process to assess the materiality of IROs and dependencies should consider the provisions in ESRS 2 IRO-1 (Description of the processes to identify and assess material IROs), and IRO-2 (Disclosure Requirements in ESRS covered by the company’s sustainability statement).

The sub-topics covered by the materiality assessment under this standard include:

1. pollution of air, water and soil (excluding GHG emissions and waste), microplastics, and substances of concern;

2. dependencies on ecosystem services that help to mitigate pollution-related impacts.

In Phase 1, to locate where in its own operations and its upstream and downstream value chain the interface with nature takes place, the company may consider:

1. the site locations of direct assets and operations and related upstream and downstream activities across the value chain;

2. the site locations where emissions of water, soil, and air pollutants occur;

3. the sectors or business units related to those emissions or to the production, use, distribution, commercialization, and import/export of microplastics, substances of concern, and substances of very high concern, on their own, in mixtures, or in articles.

Phase 2 relates to the evaluation of the company’s impacts and dependencies for each material site or sector/business unit, including by assessing the severity and likelihood of impacts on the environment and human health.

In Phase 3, to assess its material risks and opportunities based on the results of Phases 1 and 2, the company may:

1. identify transition risks and opportunities in its own operations and its upstream and downstream value chain by the categories of:

   1. policy and legal: e.g., introduction of regulation, exposure to sanctions and litigation (e.g., negligence towards ecosystems), enhanced reporting obligations;

   2. technology: e.g., substitution of products or services by products or services with a lower impact, transition away from substances of concern;

   3. market: e.g., shifting supply, demand, and financing, volatility or increased costs of some substances;

   4. reputation: e.g., changing societal, customer or community perceptions as a result of an organisation’s role in pollution prevention and control;

2. identify physical risks, e.g., sudden interruption of access to clean water, acid rain, or other pollution incidents that are likely to lead to or that have led to pollution with subsequent effects on the environment and society;

3. identify opportunities related to pollution prevention and control categorised by:

   1. resource efficiency: decrease quantities of substances used or improve efficiency of production process to minimise impacts;

   2. markets: e.g., diversification of business activities;

   3. financing: e.g., access to green funds, bonds or loans;

   4. resilience: e.g., diversification of substances used and control of emissions through innovation or technology;

   5. reputation: positive stakeholder relations as a result of a proactive stance on managing risks.

In order to assess materiality, the company may consider Commission Recommendation (EU) 2021/2279 on the use of the Environmental Footprint methods to measure and communicate the life cycle environmental performance of products and organisations.

In Phase 4, when providing information on the outcome of its materiality assessment, the company should consider:

1. a list of site locations where pollution is a material issue for the company’s own operations and its upstream and downstream value chain; and
2. a list of business activities associated with pollution material IROs.

DR E2-1 : Policies related to pollution

The objective of this disclosure requirement is to provide an understanding of the policies that the company has in place, to address the identification, assessment, management and/or remediation² of material pollution related IROs.

The information disclosed here should be in accordance with “ESRS 2 MDR-P Policies adopted to manage material sustainability matters”.

The company should indicate, with regard to its own operations and its upstream and donwstream value chain, whether and how its policies address the following areas where material:

1. mitigating negative impacts related to pollution of air, water and soil including prevention and control;

2. substituting and minimising the use of substances of concern, and phasing out substances of very high concern, in particular for non-essential societal use and in consumer products; and

3. avoiding incidents and emergency situations, and if and when they occur, controlling and limiting their impact on people and the environment.

These policies may be integrated in broader environmental or sustainability policies covering different subtopics.

When disclosing this information, the company may include contextual information on the relations between its policies implemented and how they may contribute to the EU Action Plan with, for instance, elements on:

1. how it is or may be affected by the targets and measures of the EU Action Plan and the revision of existing directives (e.g., the Industrial Emissions Directive);

2. how it intends to reduce its pollution footprint to contribute to these targets.

DR E2-2 : Actions and resources related to pollution

The company should also disclose its pollution-related actions and the resources allocated to their implementation. The information disclosed should contain information prescribed in “ESRS 2 MDR-A Actions and resources in relation to material sustainability matters”.

In addition to ESRS 2 MDR-A, the company may specify to which layer in the following mitigation hierarchy an action and resources can be allocated:

1. avoid pollution, including any phase-out of materials or compounds that have a negative impact (prevention of pollution at source);

2. reduce pollution, including any phase-out of materials or compounds; meeting enforcement requirements such as Best Available Techniques (BAT) requirements; or meeting the ‘Do No Significant Harm’ criteria for pollution prevention and control according to the EU Taxonomy Regulation and its delegated acts (minimization of pollution);

3. restore, regenerate, and transform ecosystems, where pollution has occurred (control of the impacts both from regular activities and incidents).

CH 2. Metrics and targets

DR E2-3 : Targets related to pollution

The goal of this disclosure requirement is to help users understand the targets the company has set to support its pollution-related policies and to address its material pollution-related IROs. These targets may cover the company’s own operations and/or the value chain.

The information disclosed here should contain the requirements defined in “ESRS 2-MDR-T : Tracking effectiveness of policies and actions through targets”.

This disclosure should indicate whether and how the company’s targets relate to the prevention and control of:

1. air pollutants and respective specific loads;

2. emissions to water and respective specific loads;

3. pollution to soil and respective specific loads; and

4. substances of concern and substances of very high concern.

In addition to the requirement set out in ESRS 2 MDR-T, the company may specify whether ecological thresholds (e.g., the biosphere integrity, stratospheric ozone-depletion, atmospheric aerosol loading, soil depletion, ocean acidification) and entity specific allocations were taken into consideration when setting targets. If so, the company may specify:

1. the ecological thresholds identified, and the methodology used to identify such thresholds;

2. whether or not the thresholds are entity-specific and if so, how they were determined; and

3. how responsibility for respecting identified ecological thresholds is allocated in the company.

If the company refers to ecological thresholds when setting targets, it may refer to the guidance provided by the Science-Based Targets Initiative for Nature (SBTN) in its interim guidance (Initial Guidance for Business, September 2020), or any other guidance with a scientifically acknowledged methodology that allows setting of science-based targets³ by identifying ecological thresholds and, if applicable, entity-specific allocations. Ecological thresholds can be local, national and/or global.

The company should specify whether the targets that it has set and presented are mandatory i.e. required by legislation, or voluntary.

The company may provide information on the targets set at site level, to support the policies it has adopted.

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

This disclosure requirement requires a company to disclose the pollutants it emits through its own operations, as well as the micro plastics it generates or uses.

The company should disclose:

1. each pollutant listed in Annex II of Regulation (EC) No 166/2006 of the European Parliament and of the Council (European Pollutant Release and Transfer Register “E-PRTR Regulation”) emitted to air, water and soil, with the exception of emissions of GHGs which are disclosed in accordance with ESRS E1;

2. microplastics generated or used by the company.

The information to be provided on microplastics should include microplastics that have been generated or used during production processes or that are procured, and that leave the company’s facilities as emissions, as products, or as part of products or services. Microplastics may be unintentionally produced when larger pieces of plastics like car tires or synthetic textiles wear and tear or may be deliberately manufactured and added to products for specific purposes e.g., exfoliating beads in facial or body scrubs.

When providing information on pollutants, the company should prioritize quantification methods in the following order:

1. direct measurement of emissions, effluents, or other pollution using recognized continuous monitoring systems e.g., AMS (Automated Measuring Systems);

2. periodic measurements;

3. calculations based on site-specific data;

4. calculations using published pollution factors;

5. estimations.

The amounts of pollutants disclosed should be consolidated amounts, including the emissions from those facilities over which the company has financial or operational control. These amounts should be presented in appropriate mass units, for example tonnes or kilogrammes.

The company should put its disclosure into context and describe:

1. the changes over time,

2. the measurement methodologies; and

3. the process(es) used to collect data for pollution-related accounting and reporting, including the type of data needed and the information sources.

When disclosing this information, the company should consider:

1. whether its monitoring is carried out in accordance with EU BREF Standards or another relevant reference benchmark; and

2. whether and how the calibration tests of the automated measuring system were undertaken and the verification of periodic measurement by by independent labs were ensured.

When the company chooses to quantify emissions using an inferior methodology compared to direct measurement, it should outline the reasons for choosing this inferior methodology. If the company uses estimates, it should disclose the standard, sectoral study or sources which form the basis of its estimates, as well as the possible degree of uncertainty and the range of estimates reflecting the measurement uncertainty.

The information required under this disclosure requirement should be provided at the level of the reporting company. However, the company may disclose additional breakdown including information at site level or a breakdown of its emissions by type of source, by sector or by geographical area.

When providing contextual information on the emissions, the company may consider:

1. the local air quality indices (AQI) for the area where the company’s air pollution occurs;

2. the degree of urbanisation (DEGURBA) for the area where air pollution occurs; and

3. the company’s percentage of the total emissions of pollutants to water and soil occurring in areas at water risk, including areas of high-water stress.

DR E2-5 : Substances of concern and substances of very high concern

The company should also disclose information on the production, use, distribution, commercialisation and import/export of substances of concern and substances of very high concern, on their own, in mixtures or in articles.

This disclosure should include:

1. the total amounts of substances of concern generated or used during production or procured;

2. the total amounts of substances of concern that leave the company’s facilities as emissions, as products, or as components of products or services.

This information should be categorized according to the main hazard classes of substances of concern and the amounts presented in mass units, for example tonnes or kilogrammes or other mass units appropriate for the volumes and type of pollutants being released.

Information on substances of very high concern should be disclosed separately.

In order for the information to be complete, substances in the company’s own operations and those procured should be included e.g., those embedded in ingredients, semi- finished products, or the final product.

DR E2-6 : Anticipated financial effects from material pollution-related risks and opportunities

In addition to the information on current financial effects of the company’s financial position, financial performance and cash flows for the reporting period required under ESRS 2 SBM-3, the company should disclose the anticipated financial effects of material pollution-related risks and opportunities.

This disclosure should include:

1. A quantification of the anticipated financial effects in monetary terms before accounting for pollution-related actions, or if this is not feasible without undue cost or effort, qualitative information instead. For financial effects related to opportunities, quantification is not required if it would result in disclosure that does not meet the qualitative characteristics of information (see chapter 2 of ESRS 1).

2. A description of the effects considered, the associated impacts, and the time horizons within which they are expected to materialize.

3. The critical assumptions used to quantify the anticipated financial effects, along with the sources and level of uncertainty of those assumptions.

Specifically, the information disclosed here should include:

1. the share of net revenue derived from products and services that contain substances of concern, and the share of net revenue derived from products and services that contain substances of very high concern;

2. the operating and capital expenditures incurred during the reporting period related to major incidents and deposits;

3. provisions for environmental protection and remediation costs, such as rehabilitating contaminated sites, recultivating landfills, removing environmental contamination at existing production or storage sites, and similar measures.

The company should disclose any relevant contextual information, including a description of material incidents and deposits where pollution had negative impacts on the environment and/or is expected to negatively affect the company’s financial cash flows, financial position, and financial performance over short-, medium-, and long-term time horizons.

The operating and capital expenditures related to incidents and deposits may include, for example:

1. costs for eliminating and remediating the pollution of air, water, and soil, including environmental protection measures;

2. damage compensation costs, including payment of fines and penalties imposed by regulators or government authorities.

Incidents may include, for example, interruptions in production, whether caused by the supply chain or the company’s own operations, that resulted in pollution.

The company may include an assessment of its related products and services at risk over the short-, medium-, and long-term. This should explain how these risks are defined, how financial amounts are estimated, and which critical assumptions are made.

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Footnotes

1. ECHA: Substances of very high concern identification

2. When a company takes action to address and rectify negative impacts that it has caused or contributed to.

3. Science-based targets (SBTs) are goals that companies set to reduce their carbon emissions in line with what scientists say is needed to stop climate change.