Principles of the proposal to amend the CSRD and ESRS

FOCUS

> Reduction of current mandatory disclosures (DPs) to those that are necessary to understand the basis of the report, e.g., size, corrections, uncertainties in the data, as these are still the rule for purchased impacts

> Definition of mandatory DPs on consensual topics that can and should be reported for the company’s operations and all purchased products/ services, independent of a materiality assessment, because

– „who pays decides“ – also on the connected impacts

– without this data, reporting is useless, as much can be outsourced to the upstream value chain, making a comparison (e.g., emissions/sales or /price) impossible

– Societal goals can only be achieved through competition between all economic activities and not through a centrally planned economy

> Pragmatic use of the 80-20 rule when dealing with primary data and estimated values, including the resulting threshold values for the operations and upstream scope, as well as transition periods

BALANCE BETWEEN FREEDOM AND STANDARDIZATION

> Voluntary reporting on the existence and structure of a sustainability management system based on either the single or double materiality definition, as

– “Only PR” doesn’t help anyone and only costs time and money

– The double materiality definition only offers a plausible basis for a few strategies, creating “Only PR” or costs for others

– Only a voluntary sustainability management that fits the company strengthens its competitiveness

> Partial standardization of the materiality analysis without making it and a materiality definition mandatory (see above) to enable a certain degree of comparability under voluntary application of the ESRS

> Change all KPIs in the ESRS, LSME, and VSME that use turnover as the denominator: the scope of the numerator should match the scope of the denominator (incorrect, e.g., for E3-4: operational water consumption/turnover)

Proposal: Reduction of mandatory DPs by ca. 80% to 30 DPs

OBLIGATION

>Reduction to 6 – 12 DPs1, 2 that are necessary to understand the basis of the report (e.g., size, corrections, uncertainties)

>Change of 153 DPs to vDPs, i.e., data points to be reported voluntarily, as they either become obsolete due to clearly defined mandatory KPIs or require sustainability management, which should be induced, not enforced

>Definition of 16 new mandatory DPs on the topics of climate, water, biodiversity and health/social issues3, which must be reported for each organization’s operations and the upstream value chain, where the topic relevance is consensual and for which estimated values can also be used to a certain extent (separately defined threshold values for this by organization and upstream) using the 80-20 rule. In other words, an ongoing definition of economic activities that, for example, account for 80% of emissions, where reporting on primary data is mandatory, and estimation of the remaining 20% based on industry averages is possible

>Addition of corporate income taxes paid, and subsidies received as mandatory information (cash flow approach), as the latter is becoming a societal problem

IF MATERIAL

>Voluntary application of the single or double materiality definition as a basis for additional reporting

>Standardization and simplifycation of the assessment of impact materiality4

>Flexibilization of the assessment of financial materiality regarding the definition of short, medium and long-term to fit the business model by design

>Specification that the scope of the numerator must match the scope of the denominator in each case of an intensity KPI

VOLUNTARY

> Downstream value chain as voluntary additional information (for selected end consumer products, additional mandatory information on the use phase and recyclability can be defined)

Notes: 1) BP-1 (5 a), BP-2 (10 a), BP-2 (10 b), BP-2 (10 c), BP-2 (11 a), BP-2 (11 b i), BP-2 (11 b ii), BP-2 (13 a), BP-2 (14 a), BP-2 (14 b), SBM-1 (40 a i), SBM-1 (40 b); 2) Six of these are „Conditional“, thus only if applicable; 3) E1-6 (44), E1-6 (44, 52 b), E1-6 (AR 46 g), E1-6 (AR 55), E1-7 (58), E1-7 (58a), E1-7 (AR 62b), E2-4 (28 a) only regarding Nitrogen oxides (NOx/NO2), Sulphuroxides (SOx/SO2), Non-methane volatile organic compounds (NMVOC), as well as Total nitrogen and Total phosphorus, E2-4 (28 a), E3-4 (28 a), E4-3 (28 b), E4-3 (28 b iii), E5-5 (37 a), E5-5 (37 c), S1-14 (88 b), S1-14 (88 c); 4) Limitation to Scale x Scope, with irremediability as an optional third dimension, which is, however, considered in the Scale x Scope assessment.