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22 January 2025

EFRAG Publishes New Paper Mapping To The Eco-Management And Audit Scheme To Assist With CSRD Reporting

RG
Ropes & Gray LLP

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Ropes & Gray is a preeminent global law firm with approximately 1,400 lawyers and legal professionals serving clients in major centers of business, finance, technology and government. The firm has offices in New York, Washington, D.C., Boston, Chicago, San Francisco, Silicon Valley, London, Hong Kong, Shanghai, Tokyo and Seoul.
The European Financial Reporting Advisory Group (EFRAG) has published a paper mapping the environmental disclosure requirements of the European Sustainability Reporting Standards (ESRS) to the voluntary...
United States Corporate/Commercial Law

The European Financial Reporting Advisory Group (EFRAG) has published a paper mapping the environmental disclosure requirements of the European Sustainability Reporting Standards (ESRS) to the voluntary EU Eco-Management and Audit Scheme (EMAS) framework.

As indicated in the paper, although the environmental disclosure requirements of the ESRS are generally more granular than those of EMAS and some key disclosures go beyond the EMAS scope, the overall system and requirements of EMAS can assist undertaking's in their Corporate Sustainability Reporting Directive reporting, since many of the ESRS environmental disclosure requirements can be built on data already available within the EMAS framework.

The paper, Understanding the synergies between ESRS and EMAS, is organized into two parts:

  • A high-level narrative discussion of similarities and differences between the ESRS and EMAS; and
  • A more detailed grid mapping the environmental and cross-cutting reporting requirements of the ESRS to the EMAS requirements. As noted by EFRAG, the paper can be a useful tool to streamline CSRD reporting by avoiding duplication of effort.

Paragraph 121 of ESRS 1 indicates that information prescribed by an ESRS Disclosure Requirement may be incorporated in a CSRD sustainability statement by reference to the undertaking's EMAS report, so long as the incorporated information is produced using the same basis for preparation as ESRS information, including with respect to scope of consolidation and treatment of value chain information. The disclosures to be incorporated by reference also must:

  • Constitute a separate element of information and be clearly identified in the document concerned as addressing the relevant ESRS Disclosure Requirement or specific datapoint;
  • Be published before or at the same time as the management report;
  • Be in the same language as the sustainability statement;
  • Be subject to at least the same level of assurance as the sustainability statement; and
  • Meet the same technical digitalization requirements as the sustainability statement.

About EMAS

EMAS was established by the European Union through the 1993 EMAS Regulation. EMAS is primarily a voluntary management system to improve environmental performance. It is open to both organizations based within and outside the European Union. More that 4,100 organizations and 17,200 sites are EMAS-registered. The European Commission's EMAS register lists all EMAS registered organizations and sites.

In addition to the management system, EMAS requires participating companies to publish an annual environmental statement, including information on the environmental policy, targets and actions as well as a set of core environmental performance indicators regarding energy, emissions, water, biodiversity, material use and waste.

High-level synergies between EMAS and the Corporate Sustainability Reporting Directive

The EFRAG paper notes the following synergies:

Reporting

  • Both EMAS and the CSRD require undertakings to prepare an annual report/statement.
  • EMAS and the CSRD also both require undertakings to disclose as applicable whether their report/statement is made on a consolidated basis or just for a single entity, site or organization. Relationships with parent organizations have to be explained under both frameworks.

Scope of reporting

  • Under EMAS, the smallest unit for implementation of the environmental management system and reporting is a site, although EMAS allows environmental reporting of several sites/organizations in one report. For large EMAS companies with more than one site, a corporate environmental statement covering all of its sites is a precondition to using the EMAS environmental statement as a reference for preparing a sustainability report according to ESRS. As a consequence, if an EMAS-registered organization is subject to ESRS reporting and the environmental statement covers the entire undertaking, it can incorporate by reference as contemplated by ESRS 1 paragraph 121, as earlier discussed. EMAS also contains requirements regarding employee or stakeholder involvement that may support the preparation of some ESRS social disclosures.

Stakeholder engagement

  • Both frameworks require stakeholder engagement. According to Article 1 of the EMAS Regulation, there must be an open dialogue with the public and other interested parties and active involvement of employees in organizations.

Materiality

  • EMAS requires companies to identify and assess their direct and indirect environmental aspects and impacts in a manner that is similar to the impact materiality assessment under the ESRS.

Reporting areas

  • The EMAS requirements to establish and report upon an environmental management system align well with the general reporting areas of the ESRS (governance, strategy, management of impacts and risks, metrics and targets). Under EMAS, appropriate governance structures for the environmental management system have to be set up to improve environmental performance and organizations have to establish an environmental policy. The EMAS environmental policy can in principle be used for ESRS reporting. EMAS organizations also set environmental objectives and targets, plan and implement actions to improve environmental performance and evaluate their effectiveness, which link with ESRS E1-E5 Disclosure Requirements concerning targets, actions and resources. EMAS organizations also establish environmental performance indicators for measuring progress in target achievement and environmental performance and report on a set of core environmental performance indicators for energy, material, water, waste, land use with regard to biodiversity and emissions, which relate to the environmental topics of the ESRS.
  • The management system put in place in accordance with EMAS can meaningfully complement and support environmental reporting under the ESRS by providing useful data and monitoring progress in meeting targets.

External verification and audit

  • Both frameworks require information to be verified by third parties. Under EMAS the reported information is validated by officially supervised environmental verifiers. In its August 7, 2024 CSRD FAQs, the European Commission clarifies that the validation done by EMAS verifiers corresponds at least to the same level of assurance as the CSRD limited assurance requirement. Some of the August 2024 FAQs are discussed in this Ropes & Gray post.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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