In-depth CSRD analysis with a focus on biodiversity

Sustainability reporting is not only a mandatory requirement under the CSRD, but also an opportunity for companies to demonstrate their commitment and responsibility to our natural environment. Operating sustainably is becoming increasingly important as a competitive advantage to continue attracting stakeholders. Conducting an effective and meaningful CSRD analysis to understand the company's impacts on and dependencies on nature is the starting point for long-term sustainability efforts.

In the fall of 2023, many companies have struggled with their overall CSRD analysis or are in the start-up phase of the process. At Ecogain, we help companies meet the reporting requirements of the Biodiversity and Ecosystems Standard. Here we share methods, key concepts and how to conduct an in-depth CSRD analysis in accordance with EU requirements, for those who have a significant business impact in the area.

Double materiality analysis: understanding impacts and dependencies

Dual materiality analysis is the starting point for sustainability reporting under CSRD and is a method for aligning strategies, policies, targets and monitoring with ESRS requirements. By mapping the impacts and dependencies of the business, potential risks and opportunities can be anticipated and interacted early on in the company's strategy and business model.

It takes into account two factors to be reported and assessed: understanding the impact of the company's business activities on the external environment and understanding how the external environment affects, or risks affecting, the company's own performance.

The essence of the dual materiality analysis is that it should cover the company's entire value chain of direct and indirect impacts related to nature to ensure transparency and effectiveness. A clear and structured framework for what to assess and present in sustainability reporting is provided in ESRS 1 AR 16, (Sustainability matters covered in topical ESRS.

ESRS E4 - the requirements for your work related to biodiversity and ecosystems

If you have carried out a double materiality analysis and identify negative impacts on ecosystems and biodiversity, it is essential to consider the specific requirements set out in the Thematic Standard on Biodiversity and Ecosystems (ESRS E4) at an early stage. Negative impacts can result, for example, from construction or other development, and the sourcing of materials such as metals, minerals, agricultural and forest products - which in turn affect nature upstream in the value chain.

According to ESRS E4, there are 15 different aspects to be considered. The company's business model and strategy should be described and should be clearly linked to actions, targets and monitoring. To meet these requirements more precisely, you need to follow the guidelines for impacts, dependencies, risks and opportunities linked to biodiversity and ecosystems described in ESRS E4. By proactively and systematically following the guidelines, you ensure that you do not miss important aspects or requirements linked to the business in connection with sustainability reporting.

LEAP methodology according to TNFD for your biodiversity work

Ecogain helps companies meet the requirements for sustainability reporting linked to biodiversity and ecosystems. We use LEAP, a methodology from the global TNFD framework, which is well aligned with the rules and guidelines of ESRS E4. 

LEAP provides a qualitative, clear and objective process to identify and assess different aspects of sustainability. ESRS also specifically points to the TNFD methodology in the Application Requirements under IRO-1 in the thematic standards, including in ESRS E4. Following these guidelines and using LEAP as a tool allows companies to create a more comprehensive and informed understanding of their impacts on ecosystems and biodiversity, which in turn enables companies to act more strategically and responsibly.

Next steps: Include nature in your sustainability strategy

Double materiality analysis, CSRD, ESRS and TNFD are areas that are relatively new to many companies. Some have already made a journey in terms of climate work, and now need to take the next step and include both their impact and dependence on nature - that is, a broader perspective on sustainability work. This is not only for their own operations - although the reporting requirements are more specific to their own sites, but also in the value chain.