Table of Contents
For most companies, ESRS environmental reporting is where CSRD stops being theoretical and starts breaking systems.
Why?
Because environmental disclosures under ESRS are:
- deeply data-dependent,
- heavily value-chain driven,
- and increasingly subject to regulatory and audit scrutiny.
How Environmental ESRS Fit Into CSRD
Under the Corporate Sustainability Reporting Directive (CSRD):
- companies must assess all environmental ESRS topics for materiality,
- disclosures are mandatory if a topic is material under either impact or financial materiality,
- exclusions must be explicitly justified and documented.
Environmental ESRS are not optional climate add-ons. They are core regulatory disclosures.
ESRS E1: Climate Change
What E1 Covers
ESRS E1 addresses:
- climate change mitigation,
- climate change adaptation,
- energy use and transition planning.
This includes:
- greenhouse gas (GHG) emissions (Scopes 1, 2, and where material, Scope 3),
- transition plans aligned with EU climate objectives,
- climate-related risks and opportunities.
Key Reality
E1 is the most mature ESRS topic — and the most audited.
However, companies often fail by:
- treating Scope 3 as optional,
- publishing targets without transition logic,
- disconnecting climate risks from financial planning.
If E1 is material, narrative disclosures without data do not pass.
ESRS E2: Pollution
What E2 Covers
E2 focuses on:
- pollution of air, water, and soil,
- substances of concern,
- substances of very high concern (SVHCs).
This standard intersects directly with:
- chemical compliance,
- product design,
- manufacturing processes,
- supplier material declarations.
Key Reality
Pollution impacts often sit upstream, not inside the reporting entity.
Common failure points:
- lack of supplier substance data,
- reliance on outdated declarations,
- inability to trace regulated substances in components and materials.
If pollution is material, supplier visibility is mandatory, not optional.
ESRS E3: Water and Marine Resources
What E3 Covers
E3 addresses:
- water withdrawal and consumption,
- water discharge,
- water stress and scarcity risks,
- impacts on marine ecosystems.
This applies even to companies that:
- do not operate in water-intensive sectors,
- but source from high-risk regions.
Key Reality
Water risk is location-specific, not company-wide.
Failures typically arise when companies:
- assess water risk at HQ level only,
- ignore supplier geography,
- rely on generic risk ratings without operational data.
Material water disclosures require site-level and supplier-level logic.
ESRS E4: Biodiversity and Ecosystems
What E4 Covers
E4 requires disclosure of:
- impacts on biodiversity and ecosystems,
- land use and land-use change,
- pressures on protected or sensitive areas.
This includes both:
- direct operations, and
- upstream sourcing of raw materials.
Key Reality
Biodiversity is the least mature but fastest-escalating ESRS topic.
Companies fail when they:
- assume biodiversity only applies to extractive industries,
- ignore indirect impacts through sourcing,
- lack traceability to land-based risks.
If biodiversity is material, generic commitments are insufficient.
ESRS E5: Resource Use and Circular Economy
What E5 Covers
E5 focuses on:
- resource inflows and outflows,
- waste generation,
- product durability, repairability, and recyclability,
- circular business models.
This standard links directly to:
- product design,
- material selection,
- end-of-life responsibility.
Key Reality
E5 exposes data fragmentation more than any other ESRS topic.
Common issues include:
- no consolidated material flow data,
- lack of lifecycle perspective,
- weak connection between design and sustainability teams.
Circular economy reporting requires product-level thinking, not corporate averages.
Environmental ESRS and Double Materiality
Environmental ESRS disclosures are triggered when:
- impacts are severe or widespread (impact materiality), or
- risks and costs could affect financial performance (financial materiality).
Key point: A topic does not need to be financially material to be reportable.
Environmental harm alone can trigger mandatory disclosure.
Value Chain Exposure Is the Dominant Risk
Across E1–E5, the biggest compliance failures come from:
- upstream suppliers,
- outsourced manufacturing,
- raw material sourcing,
- logistics and downstream use.
If your environmental data stops at Tier 1, materiality conclusions are vulnerable.
Documentation and Evidence Expectations
For each material environmental topic, companies must be able to show:
- how the topic was assessed,
- what data sources were used,
- how suppliers were considered,
- who approved conclusions,
- how disclosures align with ESRS datapoints.
Environmental ESRS are evidence-driven, not narrative-driven.
Common Environmental ESRS Failure Patterns
Auditors and regulators repeatedly flag:
- unjustified exclusions of E-topics,
- missing Scope 3 logic,
- absence of supplier data,
- generic biodiversity statements,
- circularity claims without metrics.
These failures undermine the entire CSRD report.
Environmental ESRS Are Not Standalone Topics
E1–E5 connect directly to:
- double materiality,
- supplier due diligence,
- product compliance,
- audit and assurance.
Treating them as isolated ESG disclosures guarantees rework.
Final Reality Check
If your company cannot clearly explain:
- why each E-topic is or is not material,
- where environmental impacts occur in the value chain,
- what data supports your disclosures,
- and how conclusions were approved,
then environmental ESRS compliance is not defensible.
Under CSRD, that is not a future risk. It is a present one.