Nature conservation and biodiversity within the ESRS: what should you report?

The European Sustainability Reporting Standards (ESRS) are a crucial component of the EU strategy to standardise and make sustainability information transparent. These standards help companies report on their impact and raise awareness of and contribute to sustainability. An important aspect within these reporting standards is nature conservation and biodiversity. However, for most companies this is an entirely new topic; many companies do not even consider biodiversity as an impact area. Therefore, in this blog we explore the relationship between biodiversity and the ESRS, and how companies should report on this topic.

Biodiversity under the ESRS

Biodiversity, often described as the backbone of all ecosystems, is of crucial importance for the survival and well-being of the planet. Under the ESRS, biodiversity is regarded as one of the five environmental topics. These standards emphasise the importance of biodiversity conservation and the need for companies to manage and minimise their impact on it.

Companies play a significant role in influencing biodiversity, both negatively (through, for example, deforestation or pollution) and positively (through conservation and restoration initiatives). Within the framework of ESRS, companies must provide insight into how their activities contribute to the conservation or degradation of biodiversity. This includes reporting on direct and indirect effects on ecosystems and species, and taking responsibility for improving their practices where needed.

Reporting requirements for biodiversity under ESRS

Companies must conduct a comprehensive assessment of how their activities affect biodiversity. This includes direct effects such as land use and indirect effects such as supply chains. Furthermore, the organisation may operate in an area where a protected species is present, and what measures they take to minimise negative impact or promote positive impact.

From this impact assessment, companies must, if they have not already done so, establish and monitor specific KPIs (Key Performance Indicators) that are relevant to their impact on biodiversity. Examples include the extent of land use, the status of endangered species in the areas where they operate, and changes in the quality of natural habitats. It is essential that companies set clear objectives for improving their impact on biodiversity and regularly report on their progress in achieving these objectives.

The mitigation hierarchy

A useful tool from the ESRS for recognising positive influence on biodiversity is the mitigation hierarchy. This involves the different layers aimed at addressing the positive or minimising the negative influence on biodiversity and nature conservation. These layers, sorted by preference, are:

1. Avoidance: the goal is to completely prevent negative environmental effects where possible. Such as replacing animal products.
2. Minimisation: If avoiding impact is not possible, the next step is to keep this impact to a minimum. This includes reducing the scale, intensity or duration of negative environmental effects. Such as implementing a policy against vehicle idling.
3. Restoration and rehabilitation: this intervention focuses on restoring or improving ecosystems that have already been affected by the company's activities. Such as installing a culvert so that hedgehogs do not have to cross the road.
4. Compensation or Offset: as a last resort, when negative environmental impacts cannot be avoided or sufficiently minimised and restored, compensation or offset can be considered. This means that negative effects are compensated by taking positive measures elsewhere. Such as reforesting the rainforest.

Connection with other ESRS chapters

Given the extent of companies' dependence on raw materials from natural resources, biodiversity and ecosystems, it is inevitable that the other environmental topics are connected to this subject, such as:

• ESRS E1 Climate change: the influence of greenhouse gas emissions and energy consumption on the planet and biodiversity.
• ESRS E2 Pollution: the influence of pollution of water, air and soil on ecosystems and biodiversity.
• ESRS E3 Water and marine resources: the use of marine resources and water.
• ESRS E5 Resource use and circular economy: the transition to circular resource use and reduction of waste and pollution.

Shortcomings of biodiversity under the ESRS

Despite the ESRS providing insights into actual and potential, positive and negative impacts on biodiversity, the ESRS is criticised for its lack of depth on biodiversity. This is overall a critical point about the ESRS, as not all 10 ESG topics need to be addressed, as long as they are not material to the organisation. It is therefore common for biodiversity to have the lowest priority or not be addressed at all, because the other (environmental) topics directly or indirectly impact the climate, ecosystems and biodiversity, such as pollution, resource use, and climate change. The topic is also often new and unfamiliar to companies, and there is a lack of knowledge within the organisation.

Conclusion and future perspectives

The integration of biodiversity into ESRS reporting underscores the growing recognition that companies play a crucial role in the conservation of natural ecosystems. By transparently reporting on their impact and efforts, companies can not only meet regulatory requirements, but also play a leading role in the transition to a more sustainable future.