ANNEX II

AR

Application Requirements

BP-1

Disclosure Requirement – Basis for preparation of the sustainability statements

BP-2

Disclosure Requirement – Specific information if the undertaking uses phasing-in options

CapEx

Capital Expenditure

CH₄

Methane

CLP

Classification, Labelling and Packaging of substances and mixtures (Regulation (EC) No 1272/2008)

CO₂

Carbon Dioxide

CRR

Capital Requirements Regulation (Regulation (EU) No 575/2013)

CSRD

Corporate Sustainability Reporting Directive (Directive (EU) 2022/2464)

DRs

Disclosure Requirements

EC

European Commission

EEA

European Economic Area

EFRAG

European Financial Reporting Advisory Group

EFRAG SRB

European Financial Reporting Advisory Group – Sustainability Reporting Board

E-PRTR

European Pollutant Release and Transfer Register (Regulation (EC) No 166/2006)

ESG

Environmental, Social and Governance

ESRS

European Sustainability Reporting Standards

ESRS 1

European Sustainability Reporting Standard 1 General Requirements

ESRS 2

European Sustainability Reporting Standard 2 General Disclosures

ESRS E1

European Sustainability Reporting Standard E1 Climate Change

ESRS E2

European Sustainability Reporting Standard E2 Pollution

ESRS E3

European Sustainability Reporting Standard E3 Water

ESRS E4

European Sustainability Reporting Standard E4 Biodiversity and Ecosystems

ESRS E5

European Sustainability Reporting Standard E5 Resource Use and Circular Economy

ESRS G1

European Sustainability Reporting Standard G1 Business Conduct

ESRS S1

European Sustainability Reporting Standard S1 Own Workforce

ESRS S2

European Sustainability Reporting Standard S2 Workers in the Value Chain

ESRS S3

European Sustainability Reporting Standard S3 Affected Communities

ESRS S4

European Sustainability Reporting Standard S4 Consumers and End-users

EU

European Union

EU ETS

European Union Emissions Trading System (Directive (EU) 2023/959 of the European Parliament and of the Council (Directive (EU) 2023/959 of the European Parliament and of the Council of 10 May 2023 amending Directive 2003/87/EC establishing a system for greenhouse gas emission allowance trading within the Union and Decision (EU) 2015/1814 concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading system (OJ L 130, 16.5.2023, p. 134, ELI: http://data.europa.eu/eli/dir/2023/959/oj).¹))

FPIC

Free, Prior and Informed Consent

FTE

Full-time equivalent

GBF

The Kunming-Montreal Global Biodiversity Framework

GDR

General Disclosure Requirement

GDR-A

General Disclosure Requirement for actions and resources

GDR-M

General Disclosure Requirement for metrics

GDR-P

General Disclosure Requirement for policies

GDR-T

General Disclosure Requirement for targets

GHG

Greenhouse Gas

GOV-1

Disclosure Requirement – The role of the administrative, management and supervisory bodies in relation to sustainability

GOV-2

Disclosure Requirement – Integration of sustainability-related performance in incentive schemes

GOV-3

Disclosure Requirement – Statement on due diligence

GOV-4

Disclosure Requirement – Risk management and internal controls over sustainability reporting

GRI

Global Reporting Initiative

GWP

Global Warming Potential

HFCs

Hydrofluorocarbons

IEPR

Industrial Emissions Portal Regulation (Regulation (EU) 2024/1244)

IFRS

International Financial Reporting Standards

ILO

International Labour Organisation

IRO-1

Disclosure Requirement – ESRS 2 IRO-1 Description of the process to identify and assess material impacts, risks and opportunities and material information to be reported

IRO-2

Disclosure Requirement – ESRS 2 IRO-2 Material impacts, risks and opportunities and Disclosure Requirements included in the sustainability statement

ISO

International Organization for Standardization

IUCN

International Union for Conservation of Nature

KBA

Key Biodiversity Areas

LEAP

Locate Evaluate Assess Prepare

MWh

Megawatt-hours

N₂O

Nitrous Oxide

NACE

Statistical Classification of Economic Activities in the European Community

NF₃

Nitrogen trifluoride

NGOs

Non-Governmental Organisations

NOX

Nitrogen oxides

OECD

Organisation for Economic Co-operation and Development

OpEx

Operating Expenditure

PFCs

Perfluorocarbons

REACH

Registration, Evaluation, Authorisation and Restriction of Chemicals (Regulation (EC) No 1907/2006)

SBM-1

Disclosure Requirement – ESRS 2 SBM-1 Strategy, business model and value chain

SBM-2

Disclosure Requirement – ESRS 2 SBM-2 Interests and views of stakeholders

SBM-3

Disclosure Requirement – ESRS 2 SBM-3 Interaction of material impacts risks and opportunities with strategy and business model, and financial effects

SDGs

Sustainable Development Goals

SFDR

Sustainable Finance Disclosures Regulation (Regulation (EU) 2019/2088)

SF₆

Sulphur hexafluoride

SMEs

Small and medium-sized undertakings

SoC

Substances of concern

SOX

Sulphur oxides

SVHC

Substances of Very High Concern

UN

United Nations

WRI

World Resources Institute

(¹)  Directive (EU) 2023/959 of the European Parliament and of the Council of 10 May 2023 amending Directive 2003/87/EC establishing a system for greenhouse gas emission allowance trading within the Union and Decision (EU) 2015/1814 concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading system (OJ L 130, 16.5.2023, p. 134, ELI: http://data.europa.eu/eli/dir/2023/959/oj).

Defined term

Definition

Action

Actions refer to:

Actions can be individual actions, taken only by the undertaking, or collective actions, that is, collaborative efforts by a group of stakeholders – such as undertakings, governments, civil society, or communities – to address shared challenges or achieve common goals, particularly when those goals cannot be effectively achieved by any single actor working alone.

Actual impact

Actual impacts are those impacts that have manifested in the reporting period. They include those that have originated in the previous reporting periods and continue to exist in the current reporting period.

Adequate wage

A wage that provides for the satisfaction of the needs of the worker and their family in light of national economic and social conditions.

Administrative, management and supervisory body

The administrative, management and supervisory bodies refer to the governance bodies with the highest decision-making authority in the undertaking, including its committees.

If in the governance structure, there are no members of the administrative, management or supervisory bodies of the undertaking, the CEO, and if such function exists, the deputy CEO, should be included.

Affected community

People or group(s) living or working in the same area who have been or may be affected by a reporting undertaking’s operations or through its upstream and downstream value chain. Affected communities can range from those living adjacent to the undertaking’s operations (local communities) to those living at a distance. Affected communities include actually and potentially affected indigenous peoples.

Annual total remuneration

Annual total remuneration to own workforce includes salary, bonus, stock awards, option awards, non-equity incentive plan compensation, change in pension value, and nonqualified deferred compensation earnings provided over the course of a year.

Anticipated financial effect

Financial effects that do not meet the recognition criteria for inclusion in the financial statement line items in the reporting period and that are not captured by the current financial effects.

Article (for the purposes of ESRS E2)

An object, which during production is given a special shape, surface or design that determines its function to a greater degree than does its chemical composition (Regulation (EC) No 1907/2006).

Banned product

Banned products are goods or materials whose manufacture, sale, distribution, import, export, or use is prohibited by law or regulation due to risks they pose to health, safety, the environment, or public order.

Banned service

Banned services are services that are prohibited by law or regulation from being offered, provided, or used because they are considered unsafe, illegal, unethical, or otherwise contrary to public interest or policy.

Biodiversity and ecosystems transition plan

A biodiversity and ecosystems transition plan is an aspect of an organisation’s overall business strategy that lays out the organisation’s goals, targets, actions, accountability mechanisms and intended resources to respond and contribute to the transition implied by the Global Biodiversity Framework, where:

Biodiversity can also be part of an undertaking’s broader transition plan. It should respect human rights and, among others, can include the identification and management of synergies and trade-offs with other transition plan objectives, including any response and contribution to the transition implied by the Paris Agreement (transition plan for climate change mitigation). See also the definition of ‘transition plan.’

Biodiversity / biological diversity

The variability among living organisms from all sources, including, inter alia, terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are a part; this includes diversity within species, between species and of ecosystems.

Biodiversity loss

The reduction of any aspect of biological diversity (i.e. diversity at the genetic, species and ecosystem levels) in a particular area through death (including extinction), destruction or physical removal; it can refer to many scales, from global extinctions to population extinctions, resulting in decreased total diversity at the same scale.

Biodiversity offset

Biodiversity offsets are measurable conservation outcomes designed to compensate for adverse and unavoidable impacts on biodiversity and ecosystems of the undertaking’s activities, in addition to prevention and mitigation measures already implemented. In the context of the mitigation hierarchy (i.e. contributing to avoidance, minimisation, restoration and compensation), biodiversity offsets are typically considered a measure of last resort.

Biodiversity-sensitive area

Biodiversity-sensitive areas are:

Biological materials

Materials that are derived from living organisms, such as plants, animals, or microorganisms, and that can safely return to the biosphere after use without causing harm to the environment. These include both living and dead organic materials, such as trees, crops, grasses, algae, animals, and biological waste like manure. Biological materials can be virgin/non-virgin and renewable /non-renewable. Materials of biological origin, embedded in geological formations or transformed into fossilised material are not considered biological materials (e.g. fossil fuels).

Bribery

Dishonestly persuading someone to act in your favour by giving them a gift of money or another inducement.

Business model

The undertaking’s system of transforming inputs through its activities into outputs and outcomes that aims to fulfil the undertaking’s strategic purposes and create value over the short, medium and long term. ESRS use the term ‘business model’ in the singular, although it is recognised that undertakings may have more than one business model.

Business relationship

The relationships the undertaking has with business partners, entities in its value chain, and any other non-State or State entity directly linked to its business operations, products or services. Business relationships are not limited to direct contractual relationships. They include indirect business relationships in the undertaking’s value chain beyond the first tier, and shareholding positions in joint ventures or associates as well as other investments.

Carbon credit

A transferable or tradable instrument that represents one metric tonne of CO₂eq emission reduction or removal and is issued and verified according to recognised quality standards.

Carbon dioxide equivalent (CO₂ eq)

The universal unit of measurement to indicate the global warming potential (GWP) of each greenhouse gas, expressed in terms of the GWP of one unit of carbon dioxide. It is used to evaluate releasing (or avoiding releasing) different greenhouse gases on a common basis.

Channel to raise concerns or needs

Channels to raise concerns or needs are formal structures established by the undertaking or a third party (for example, governments, NGOs, industry associations), including its business relationships, with dedicated processes through which affected stakeholders can raise their concerns or needs. Such structures typically include steps or criteria that are followed to ensure that concerns or needs are adequately addressed. They can also include, if applicable, processes to provide or cooperate in remediation for actual impacts.

Examples of channels to raise concerns or needs include grievance mechanisms, hotlines, trade union or community representatives at workplace or local level, works councils, dialogue processes, community or consumer complaints mechanisms as well as whistleblowing mechanisms, to the extent that they enable people to raise any concerns or needs regarding actual or potential impacts that affect them or other stakeholders.

Child labour

Work that deprives children of their childhood, their potential and their dignity, and that is harmful to physical and mental development. It refers to work that:

A child is defined as a person under the age of 18. Whether or not particular forms of ‘work’ can be called ‘child labour’ depends on the child’s age, the type and hours of work performed and the conditions under which it is performed. The answer varies from country to country, as well as among sectors within countries.

The minimum age of work should not be less than the minimum age of completion of compulsory schooling, and, in any case, should not be less than 15 years according to International Labour Organization (ILO) Convention No. 138 on Minimum Age. Exceptions can occur in certain countries where economies and educational facilities are insufficiently developed, and a minimum age of 14 years applies.

These countries of exception are specified by the ILO in response to a special application by the country concerned and in consultation with representative organisations of employers and workers.

National laws may permit the employment of persons aged 13 to 15 in light work as long as it is not likely to be harmful to their health or development and does not prejudice their attendance at school or participation in vocational or training programmes. The minimum age for admission into work, which by its nature or the circumstances in which it is carried out is likely to jeopardise the health, safety or morals of young persons, shall not be less than 18 years.

Circularity

Degree of alignment with the principles of a circular economy.

Circular economy

An economic system in which the value of resources in the economy is maintained for as long as possible, enhancing the efficiency in production and consumption, thereby reducing the environmental impact of their use, minimising waste and the release of hazardous substances at all stages of their life cycle, including through the application of the waste hierarchy.

Circular economy principle

The circular economy principles are:

Circular economy service

As per Annex II to the EU Taxonomy (Commission Delegated Regulation (EU) 2023/2486 supplementing Regulation (EU) 2020/852), the following economic services activities (CEY 5.1 – CEY 5.6) are considered to substantially contribute to the transition towards a circular economy:

Climate change adaptation

The process of adjustment to actual and expected climate change and its impacts.

Climate change mitigation

The process of reducing GHG emissions and holding the increase in the global average temperature to 1,5 °C above pre-industrial levels, in line with the Paris Agreement.

Climate-related opportunity

Potential positive effects related to climate change for the undertaking. Efforts to mitigate and adapt to climate change can produce opportunities for undertakings. Climate-related opportunities will vary depending on the region, market, and industry where an undertaking operates.

Climate-related physical risk (Physical risk from climate change)

Risks resulting from climate change that can be event-driven (acute) or from longer-term shifts (chronic) in climate patterns. Acute physical risks arise from particular hazards, especially weather-related events such as storms, floods, fires or heatwaves. Chronic physical risks arise from longer-term changes in the climate, such as temperature changes, and their effects on rising sea levels, reduced water availability, biodiversity loss and changes in land and soil productivity.

Climate-related transition risk

Risks that arise from the transition to a low-carbon and climate-resilient economy. They typically include policy risks, legal risks, technology risks, market risks and reputational risks.

Climate resilience

The capacity of an undertaking to adjust to climate changes, and to developments or uncertainties related to climate change. Climate resilience involves the capacity to manage climate-related risks and benefit from climate-related opportunities, including the ability to respond and adapt to transition risks and physical risks. An undertaking’s climate resilience includes both its strategic resilience and its operational resilience to climate-related changes, developments or uncertainties associated with climate change.

Collective bargaining

All negotiations which take place between an employer, a group of employers or one or more employers’ organisations, on the one hand, and one or more trade unions or, in their absence, the representatives of the workers duly elected and authorised by them in accordance with national laws and regulations, on the other, for:

Consumer

Individuals who acquire, consume or use goods and services for personal use, either for themselves or for others, and not for resale, commercial or trade, business, craft or profession purposes.

Corporate culture

Corporate culture expresses goals through values and beliefs. It guides the undertaking’s activities through shared assumptions and group norms such as values or mission statements or a code of conduct.

Corruption

Abuse of entrusted power for private gain, which can be instigated by individuals or organisations. It includes practices such as facilitation payments, fraud, extortion, collusion, and money laundering. It also includes an offer or receipt of any gift, loan, fee, reward, or other advantage to or from any person as an inducement to do something that is dishonest, illegal, or a breach of trust in the conduct of the undertaking’s business. This can include cash or in-kind benefits, such as free goods, gifts, and holidays, or special personal services provided for the purpose of an improper advantage, or that can result in moral pressure to receive such an advantage.

Credible proxy

Individuals with sufficiently deep experience in engaging with affected stakeholders from a particular region or context (for example, women workers on farms, indigenous peoples or migrant workers) who can help to effectively convey their likely concerns. In practice, this can include development and human rights NGOs, international trade unions and local civil society, including faith-based organisations.

Critical raw materials

Critical raw materials are materials that have high economic importance and are subject to supply risk, due to factors such as geographic concentration, economic or geopolitical limitations, low end-of-life recycling input rates or difficulties in substitution. Critical raw materials are those listed in Annex II, Section 1 in the Critical Raw Materials Acts (2023).

Current financial effect

Financial effects for the current reporting period that are recognised in the primary financial statements.

Decarbonisation lever

Aggregated types of mitigation actions such as energy efficiency, electrification, fuel switching, use of renewable energy, products change, and supply chain decarbonisation that fit with undertakings’ specific actions.

Dependency

The situation of an undertaking being dependent on natural, human and/or social resources for its business processes. Dependencies may be sources of risks or opportunities, irrespective of the undertaking’s potential impacts on the natural, human and social resources it relies on.

Desertification

Land degradation in arid, semi-arid and dry sub-humid areas resulting from various factors, including climatic variations and human activities. Desertification does not refer to the natural expansion of existing deserts.

Designed recyclability rate

An indicator which measures the share of the resource outflow that is designed and manufactured in such a way that it can be processed into recycled material. The designed recyclability rate can be demonstrated by, for example, the use of materials that are fully recyclable with existing recycling schemes, selection of fewer material types and increased material homogeneity, ability to dismantle the product or the suitability of the product parts and materials for recycling into high quality materials and the implementation of adequate guidelines for design for recycling for the product type.

The rate is a reporting indicator on how the product and used materials can be recycled by an existing recycling scheme and that ‘use phase’ does not significantly change the recyclability (e.g. contamination preventing recycling).

Discrimination

Discrimination can occur directly or indirectly. Direct discrimination occurs when an individual is treated less favourably by comparison to how others, who are in a similar situation, have been or would be treated, and the reason for this is a particular characteristic they hold, which falls under a ‘protected ground’. Indirect discrimination occurs when an apparently neutral rule disadvantages a person or a group sharing the same characteristic. It must be shown that a group is disadvantaged by a decision when compared to a comparator group.

Double materiality

Double materiality has two dimensions: impact materiality and financial materiality. A sustainability topic meets the criterion of double materiality if it is material from the impact perspective or the financial perspective or both.

Drivers of biodiversity and ecosystem change

All the factors that, directly or indirectly, cause changes in nature, anthropogenic assets, nature’s contributions to people and quality of life. Direct drivers of change can be both natural and anthropogenic. They have direct physical (mechanical, chemical, noise, light etc.) and behaviour-affecting impacts on nature. They include, inter alia, climate change, pollution, different types of land use change, invasive alien species and zoonoses, and direct exploitation of organisms. Indirect drivers of ecosystem and biodiversity change operate diffusely by altering and influencing direct drivers as well as other indirect drivers. They affect the level, direction or rate of direct drivers. Interactions between indirect and direct drivers create different chains of relationship, attribution, and impacts, which may vary according to type, intensity, duration, and distance. These relationships can also lead to different types of spill-over effects. Global indirect drivers include economic, demographic, governance, technological and cultural ones. Special attention is given, among indirect drivers, to the role of institutions (both formal and informal) and impacts of the patterns of production, supply and consumption on nature, nature’s contributions to people and good quality of life.

Durability

The ability of a product, component or material to remain functional and relevant under specified conditions of use, maintenance and repair, until its technical end of life. Durability often refers to the physical capacity of a product to resist wear, damage or degradation, but it can also encompass technological durability, for instance the ability to remain effective through software updates.

Eco-design requirement

Performance or information requirements aimed at making a product, including the processes taking place throughout the product’s value chain, more environmentally sustainable. The requirements include:

The complete list is in Regulation (EU) 2024/1781.

Ecological threshold

The point at which a relatively small change in external conditions causes a rapid change in an ecosystem. When an ecological threshold has been passed, the ecosystem may no longer be able to return to its previous equilibrium state by means of its inherent resilience.

Ecosystem

A dynamic complex of plant, animal and micro-organism communities and their non-living environment interacting as a functional unit. A typology of ecosystems is provided by the IUCN Global Ecosystem Typology 2.0.

Ecosystem service

The contributions of ecosystems to the benefits that are used in economic and other human activities, especially the benefits people obtain from ecosystems. In the Millennium Ecosystem Assessment, ecosystem services are divided into supporting, regulating, provisioning and cultural. The Common International Classification of Ecosystem Services also classifies types of ecosystems services.

Emission

The direct or indirect release of substances, vibrations, heat or noise from individual or diffuse sources into air, water or soil (Directive (EU) 2024/1785).

Employee

An individual who is in an employment relationship with the undertaking according to national law or practice.

End-user

Individuals who ultimately use or are intended to ultimately use a particular product or service.

Environmental accident

An unexpected occurrence, such as a major emission, fire, or explosion, resulting from uncontrolled developments during operation, leading to potential or actual negative impacts on health or the environment.

Equal treatment

The principle of equal treatment is a general principle of European law which presupposes that comparable situations or parties in comparable situations are treated in the same way. In the context of ESRS S1 Own Workforce, the term ‘equal treatment’ also refers to the principle of non-discrimination, according to which there shall be no direct or indirect discrimination based on any ground such as sex, race, colour, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, membership of a national minority, property, birth, disability, age or sexual orientation.

Extent of terrestrial, freshwater, and marine ecosystem / Ecosystem extent

The size of an ecosystem asset, where an ecosystem asset is the contiguous space of a specific ecosystem type characterised by a distinct set of biotic and abiotic components and their interactions.

Family-related leave

Family-related leave includes maternity leave, paternity leave, parental leave and carers’ leave that is available under national law or collective agreements. For the purpose of ESRS, these concepts are defined as:

Financial effect

Effects from risks and opportunities that affect the undertaking’s financial position, financial performance and cash flows over the short, medium or long term.

Financial materiality

A sustainability topic is material from a financial perspective if it generates risks or opportunities that affect (or could reasonably be expected to affect) the undertaking’s financial position, financial performance, cash flows, access to finance or cost of capital over the short, medium or long term.

Forced labour

All work or service which is exacted from any person under the threat of penalty and for which the person has not offered himself or herself voluntarily. The term encompasses all situations in which persons are coerced by any means to perform work and includes both traditional ‘slave-like’ practices and contemporary forms of coercion where labour exploitation is involved, which may include human trafficking and modern slavery.

Formulator

Any natural or legal person combining substances into mixtures, often placing them on the market under their own brand label. This definition applies only to entities operating within the chemical industry.

Fossil fuel

Non-renewable carbon-based energy sources such as solid fuels, natural gas and oil.

Free, Prior and Informed Consent (FPIC)

A manifestation of indigenous peoples right to self-determine their political, social, economic and cultural priorities. It constitutes three interrelated and cumulative rights of indigenous peoples: the right to be consulted, the right to participate, and the right to their lands, territories and resources. FPIC pertains to indigenous peoples and is recognised under international human rights law, notably the United Nations Declaration on the Rights of Indigenous peoples.

Freshwater

Groundwater and surface water with a mean annual salinity of < 0,5 ‰ (i.e. the limit mentioned in Annex II to the Water Framework Directive (Directive 2000/60/EC).

General Disclosure Requirement (GDR)

A General Disclosure Requirement sets the required content of the information that the undertaking includes when it reports on policies, actions, metrics or targets as described in ESRS 2 General Disclosures, either pursuant to a Disclosure Requirement in an ESRS or on an entity-specific basis. Its abbreviation is GDR.

GHG emission reduction

Decrease in the undertaking’s Scope 1, 2, 3 or total GHG emissions at the end of the reporting period, relative to emissions in the base year. Emission reductions may result from, among others, energy efficiency, electrification, suppliers’ decarbonisation, electricity mix decarbonisation, sustainable products development or changes in reporting boundaries or activities (e.g. outsourcing, reduced capacities), provided they are achieved within the undertaking’s own operations and upstream and downstream value chain. Removals and avoided emissions are not counted as emission reductions.

GHG removal and storage

(Anthropogenic) removals refer to the withdrawal of GHGs from the atmosphere as a result of deliberate human activities. These include enhancing biological anthropogenic sinks of CO₂ and using chemical engineering to achieve long-term removal and storage. Carbon capture and storage from industrial and energy-related sources, which alone does not remove CO₂ from the atmosphere, can remove atmospheric CO₂ if it is combined with bioenergy production (Bioenergy with Carbon Capture & Storage). Removals can be subject to reversals, which are any movement of stored GHG out of the intended storage that re-enters the atmosphere. For example, if a forest that was grown to remove a specific amount of CO₂ is subject to a wildfire, the emissions captured in the trees are reversed.

Geographies

Geographies or geographic contexts can be analysed at different levels, e.g. country, region, county, water basin, ecosystem or site, according to their relevance for the materiality assessment.

Global Framework Agreement (GFA)

Global Framework Agreements (GFAs) serve to establish an ongoing relationship between a multinational enterprise and a Global Union Federation to ensure that the undertaking adheres to the same standards in every country in which it operates.

Global warming potential (GWP)

A factor describing the radiative forcing impact (degree of harm to the atmosphere) of one unit of a given GHG relative to one unit of CO₂.

Greenhouse Gases (GHGs)

The gases listed in Part 2 of Annex V of Regulation (EU) 2018/1999 of the European Parliament and of the Council. These include Carbon dioxide (CO₂), Methane (CH₄), Nitrous Oxide (N₂O), Sulphur hexafluoride (SF₆), Nitrogen trifluoride (NF₃), Hydrofluorocarbons (HFCs) and Perfluorocarbons (PFCs).

Grievance mechanism

Any routinised, state-based or non-state-based, judicial or non-judicial processes through which stakeholders can raise grievances and seek remedy. Examples of state-based judicial and non-judicial grievance mechanisms include courts, labour tribunals, national human rights institutions, National Contact Points under the OECD Guidelines for Multinational Enterprises, ombudsperson offices, consumer protection agencies, regulatory oversight bodies, and government-run complaints offices. Non-state-based grievance mechanisms include those administered by the undertaking, either alone or together with stakeholders, such as operational-level grievance mechanisms and collective bargaining, including the mechanisms established by collective bargaining. They also include mechanisms administered by industry associations, international organisations, civil society organisations, or multi-stakeholder groups.

Operational-level grievance mechanisms are administered by the undertaking either alone or in collaboration with other parties and are directly accessible by the undertaking’s stakeholders. They allow for grievances to be identified and addressed early and directly, thereby preventing both harm and grievances from escalating. They also provide important feedback on the effectiveness of the undertaking’s due diligence from those who are directly affected.

According to UN Guiding Principle 31, effective grievance mechanisms are legitimate, accessible, predictable, equitable, transparent, rights-compatible, and a source of continuous learning. In addition to these criteria, effective operational-level grievance mechanisms are also based on engagement and dialogue. It can be more difficult for the undertaking to assess the effectiveness of grievance mechanisms that it participates in compared to those it has established itself.

Groundwater

All water which is below the surface of the ground in the saturation zone and in direct contact with the ground or subsoil. Also defined as water, which is being held in, and can be recovered from, an underground formation.

Harassment

A situation where an unwanted conduct related to a protected ground of discrimination (for example, gender under Directive 2006/54/EC of the European Parliament and of the Council, or religion or belief, disability, age or sexual orientation under Council Directive 2000/78/EC) occurs with the purpose or effect of violating the dignity of a person, and of creating an intimidating, hostile, degrading, humiliating or offensive environment.

Hazardous waste

Waste which displays one or more of the hazardous properties listed in Annex III of the Waste Framework Directive (2008/98/EC).

High climate impact sectors

Sectors that are listed in Sections A to H and Section L of Annex I to Regulation (EC) No 1893/2006 of the European Parliament and of the Council (as defined in Delegated Regulation (EU) 2022/1288).

Human rights incident

Human rights incidents  are those that relate to not respecting internationally recognised human rights as defined in Article 29b(2)(b)(iii) of Directive 2013/34/EU (Accounting Directive). These incidents are understood as the number of substantiated instances registered by the undertaking of:

Impact

Refer to the definition of sustainability-related impact.

Impact materiality

A sustainability topic is material from an impact perspective when it pertains to the undertaking’s material actual or potential, positive or negative impacts on people or the environment over the short, medium and long term. A material sustainability topic from an impact perspective includes impacts connected with the undertaking’s own operations and upstream and downstream value chain, including through its products and services, as well as through its business relationships.

Importer

Any natural or legal person who is responsible for import (i.e. physical introduction into the customs territory). The import of substances on their own or in mixtures includes the wholesale distribution of chemical substances, as per NACE code G46.85 (Rev.2.1).

Impracticable

Applying a requirement is impractical when an undertaking cannot apply it after making every reasonable effort to do so. For example, data might not have been collected in the preceding period in a way that allows for the retrospective application of a new definition of a metric and it might be impracticable to re-create the data.

Incident of discrimination

The incidents of discrimination are those that relate to  discrimination. These incidents are understood as the number of substantiated instances registered by the undertaking of:

Independent board member

Board members that exercise independent judgment free from any external influence or conflicts of interest. Independence generally means the exercise of objective, unfettered judgement. When used as the measure by which to judge the appearance of independence, or to categorise a non-executive member of the administrative, management and supervisory bodies or their committees as independent, it means the absence of an interest, position, association or relationship which, when judged from the perspective of a reasonable and informed third party, is likely to influence unduly or cause bias in decision-making.

Indigenous peoples

There is no single definition for indigenous peoples agreed on at the international level. In practice, there is convergence among international agencies on what groups can be considered indigenous peoples and should enjoy special protection as such. An important criterion for defining indigenous peoples is related to their connection to a traditional area, as defined in ILO Convention No. 169, Article 1, which states that the convention applies to: ‘(a) tribal peoples in independent countries whose social, cultural and economic conditions distinguish them from other sections of the national community, and whose status is regulated wholly or partially by their own customs or traditions or by special laws or regulations; (b) peoples in independent countries who are regarded as indigenous on account of their descent from the populations which inhabited the country, or a geographical region to which the country belongs, at the time of conquest or colonisation or the establishment of present state boundaries and who, irrespective of their legal status, retain some or all of their own social, economic, cultural and political institutions’. ILO Convention 169 also states in Article 1(2) that: ‘[s]elf-identification as indigenous or tribal shall be regarded as a fundamental criterion for determining the groups to which the provisions of this Convention apply’.

Indirect GHG emissions

GHG emissions that are a consequence of the activities of an undertaking but occur at sources owned or controlled by another undertaking. Indirect emissions are Scope 2 GHG emissions and Scope 3 GHG emissions combined.

Internal carbon pricing scheme

An organisational arrangement that allows an undertaking to apply carbon prices in strategic and operational decision making. Internal carbon price is a price used by an undertaking to assess the financial implications of changes to investment, production, and consumption patterns, and of potential technological progress and future emissions abatement costs. There are two types of internal carbon prices commonly used by undertakings. The first type is a shadow price, which is a theoretical cost or notional amount that the undertaking does not charge but that can be used in assessing the economic implications or trade-offs for such things as risk impacts, new investments, net present value of projects, and the cost-benefit of various initiatives. The second type is an internal tax or fee, which is a carbon price charged to a business activity, product line, or other business unit based on its GHG emissions (these internal taxes or fees are similar to intracompany transfer pricing).

Invasive species / Invasive alien species

Species whose introduction and/or spread by human action outside their natural distribution threatens biological diversity, food security, and human health and well-being. ‘Alien’ refers to a species having been introduced outside its natural distribution (‘exotic’, ‘non-native’ and ‘non-indigenous’ are synonyms for ‘alien’). ‘Invasive’ means ‘tending to expand into and modify ecosystems to which it has been introduced’. Thus, a species may be alien without being invasive, or, in the case of a species native to a region, it may increase in abundance and become invasive without actually being an alien species.

Key Biodiversity Area (KBA)

Sites contributing significantly to the global persistence of biodiversity in terrestrial, freshwater and marine ecosystems. Sites qualify as global KBAs if they meet one or more of 11 criteria, clustered into five categories: threatened biodiversity; geographically restricted biodiversity; ecological integrity; biological processes; and irreplaceability. The World Database of KBAs is managed by BirdLife International on behalf of the KBA Partnership.

Key material

Materials, substances, components or products which are essential for the undertaking’s ability to manufacture or deliver its products or services, identified through a managerial assessment which considers:

Examples include, but are not limited to, silicon (materials), electrolytes (substances), micro-capacitors (components) and smartphones (products).

Key product

Products that are central to the undertaking’s value creation or strategic objectives, identified through a managerial assessment which considers:

Land degradation

Land degradation refers to the many processes that drive the decline or loss of biodiversity, ecosystem functions or their benefits to people and includes the degradation of all terrestrial ecosystems.

Landfill

A waste disposal site for the deposit of waste onto or into land (see Council Directive 1999/31/EC on the landfill of waste).

Land-use (change)

The human use of a specific area for a certain purpose (such as residential, agriculture, recreation, industrial etc.). Influenced by, but not synonymous with, land cover. Land-use change refers to a change in the use or management of land by humans, which may lead to a change in land cover.

Legitimate representative

Individuals recognised as legitimate under law or practice, such as elected trade union representatives in the case of workers, or other similarly freely chosen representatives of affected stakeholders.

Leverage

The ability of the undertaking to effect a change in the wrongful practices of another party that is connected with a negative sustainability-related impact.

Lobbying activity

Activities carried out with the objective of influencing the formulation or implementation of policy or legislation, or the decision-making processes of governments, governmental institutions, regulators, European Union institutions, bodies, offices and agencies or standard setters. Such activities include (non-exhaustive list):

Locked-in GHG emissions

Estimates of future GHG emissions that are likely to be caused by an undertaking’s key assets or products sold within their operating lifetime.

Manufacturer of articles

Any natural or legal person making or assembling an article (see Regulation (EC) No 1907/2006).

Manufacturer of substances

Any natural or legal person manufacturing substances (i.e. producing or extracting substances in the natural state) (see Regulation (EC) No 1907/2006).

Marine resource

Biological materials and non-biological materials found in the seas and oceans. Examples include but are not limited to deep sea minerals, gravels, and seafood products.

Materiality

A sustainability topic is material if it meets the definition of impact materiality, financial materiality, or both.

Metric

Qualitative and quantitative indicators that the undertaking uses to measure and report on the effectiveness of the delivery of its sustainability-related policies and against its targets over time. Metrics also support the measurement of the undertaking’s results in respect of affected people, the environment and the undertaking.

Microplastics

Synthetic polymer microparticles that are solid and which fulfil both of the following conditions:

The following polymers are excluded from this designation:

Please refer to Regulation (EU) 2023/2055 for a list of derogations.

Microplastics are typically categorised into primary and secondary types. Primary microplastics are intentionally produced and added to products (e.g. microbeads, glitter or stabilisers in cosmetics), resulting in a direct release into the environment during the use phase of the product or at their end-of-life. Secondary microplastics derive from the breakdown of larger pieces of plastics (e.g. plastic waste, such as packaging or fishing nets).

Nature-based solution

Actions to protect, conserve, restore, sustainably use and manage natural or modified terrestrial, freshwater, coastal and marine ecosystems which address social, economic and environmental challenges effectively and adaptively, while simultaneously providing human well-being, ecosystem services, resilience and biodiversity benefits.

Net-zero target

Setting a net-zero target at the level of an undertaking aligned with meeting societal climate goals means:

Non-employee

Non-employees in an undertaking’s own workforce include both individual contractors supplying labour to the undertaking (‘self-employed people’) and people provided by undertakings primarily engaged in ‘employment activities’ (NACE Code O78).

Non-guaranteed hours employee

Non-guaranteed hours employees are employed by the undertaking without a guarantee of a minimum or fixed number of working hours. The employee may need to make themselves available for work as required, but the undertaking is not contractually obliged to offer the employee a minimum or fixed number of working hours per day, week, or month. Casual employees, employees with zero-hour contracts, and on-call employees are examples that fall under this category.

Non-renewable energy

Energy which cannot be identified as being derived from renewable sources.

Occupational safety and health management system

A set of interrelated or interacting elements to establish occupational safety and health policy and objectives, and to achieve those objectives.

Opportunity

Refer to the definition of sustainability-related opportunity.

Own workforce

Employees who are in an employment relationship with the undertaking (‘employees’) and non-employees who are either individual contractors supplying labour to the undertaking (‘self-employed people’) or people provided by undertakings primarily engaged in ‘employment activities’ (NACE Code O78).

Ozone-depleting substance

Substances listed in the Montreal Protocol on Substances that Deplete the Ozone Layer.

Packaging

Products made of any materials of any nature to be used for the containment, protection, handling, delivery, storage, transport and presentation of goods, from raw materials to processed goods, from the producer to the user or consumer (see Directive 94/62/EC of the European Parliament and of the Council on packaging and packaging waste).

Pay

The ordinary basic or minimum wage or salary and any other remuneration, whether in cash or in kind which the worker receives directly or indirectly (‘complementary or variable components’), in respect of his/her employment from his/her employer. ‘Pay level’ means gross annual pay and the corresponding gross hourly pay. ‘Median pay level’ means the pay of the employee that would have half of the employees earn more and half less than they do.

Person with disability

Persons who have long-term physical, mental, intellectual or sensory impairments which in interaction with various barriers may hinder their full and effective participation in society on an equal basis with others.

Physical risk

All global economic enterprise depends on the functioning of earth systems, such as a stable climate, and on ecosystem services, such as the provision of biomass (raw materials). Nature-related physical risks are a direct result of an organisation’s dependence on nature. Physical risks arise when natural systems are compromised due to the impact of climatic events (e.g. extremes of weather such as a drought), geologic events (e.g. seismic events such as an earthquake), or changes in ecosystem equilibria, such as soil quality or marine ecology, which affect the ecosystem services organisations depend on. These can be acute, chronic, or both. Nature-related physical risks arise as a result of changes in the biotic (living) and abiotic (non-living) conditions that support healthy, functioning ecosystems. Physical risks are usually location-specific. Nature-related physical risks are often associated with climate-related physical risks.

Placed on the market

Supplying or making available to a third party, whether in return for payment or free of charge. Import shall be deemed to be placing on the market.

Policy

A set or framework of general objectives and management principles that the undertaking uses for decision-making. A policy implements the undertaking’s strategy or management decisions to prevent, mitigate, bring to an end, minimise and/or remediate material actual and potential impacts, address material risks and pursue material opportunities, either individually or at a higher level (i.e. groups of them or related topics). Each policy is under the responsibility of defined person(s), specifies its perimeter of application, and includes one or more objectives (linked when applicable to measurable targets). A policy is validated and reviewed following the undertakings’ applicable governance rules. A policy is implemented through actions or action plans.

Pollutant

A substance, vibration, heat, noise, light or other contaminant present in air, water or soil which may be harmful to human health and/or the environment, which may result in damage to material property, or which may impair or interfere with amenities and other legitimate uses of the environment (see Regulation (EU) 2020/852).

Pollution

The direct or indirect introduction, as a result of human activity, of pollutants into air, water or soil which can be harmful to human health or the quality of the environment, result in damage to material property, or impair or interfere with amenities and other legitimate uses of the environment (see Directive (EU) 2024/1785).

Potential Impact

Potential impacts are those that have not yet occurred but may occur in the future and affect the environment and people.

Process to provide or cooperate in remediation

Processes to provide or cooperate in remediation refer to formalised approaches through which the undertaking responds to harms identified, whether they are identified through formal channels for raising concerns or needs or through other means. Such processes typically include steps or criteria that are followed to ensure that concerns or needs are adequately addressed and, if applicable, provision or cooperation in remediation for actual impacts. Processes to provide or cooperate in remediation may be connected to one or more channels through which stakeholders are able to raise their concerns or needs.

Product

Products are any physical goods that are placed on the market or put into service.

Purchased or acquired electricity, heat, steam, or cooling

When the undertaking has received its electricity, heat, steam, or cooling from a third party. The term ‘acquired’ reflects circumstances where a company may not directly purchase electricity (e.g. a tenant in a building), but where the energy is brought into the undertaking’s facility for use.

Recognised quality standards for carbon credits

Quality standards for carbon credits that are verifiable by independent third parties, make requirements and project reports publicly available and at a minimum ensure additionality, permanence and avoidance of double counting, and provide rules for calculation, monitoring and verification of the project’s GHG emissions and removals.

Recordable work-related accident

A work-related accident is a discrete occurrence in the course of work which leads to physical or mental harm. Such an occurrence is recordable if it results in death or more than three days of absence from work.

Recordable work-related ill health

A case of work-related ill health is any illness caused or made worse by workplace factors or caused primarily by exposure at work to a physical, organisational, chemical or biological risk factor or to a combination of these factors. Such a case is recordable if it results in death or absence from work.

Recovery

(waste)

Any operation of which the principal output is waste that can serve a useful purpose by replacing other materials which would otherwise have been used to fulfil a particular function, or waste being prepared to fulfil that function, in the plant or in the wider economy (see Waste Framework Directive (2008/98/EC)).

Recycling

Any recovery operation by which waste materials are reprocessed into products, materials or substances whether for the original or other purposes. It includes the reprocessing of organic material but does not include energy recovery and the reprocessing into materials that are to be used as fuels or for backfilling operations (see Waste Framework Directive (2008/98/EC)).

Remedy / remediation

Restoration of the affected person or persons, communities or environment to a situation equivalent or as close as possible to the situation they would have been in had an actual negative impact not occurred, including by financial or non-financial compensation provided by the company to a person or persons affected by the actual adverse impact.

Renewable energy

Energy from renewable non-fossil sources, namely wind, solar (solar thermal and solar photovoltaic) and geothermal energy, ambient energy, tide, wave and other ocean energy, hydropower, biomass, landfill gas, sewage treatment plant gas, and biogas (Article 2(1) Directive (EU) 2018/2001).

Renewable material

Sustainably sourced materials, most often demonstrated by internationally recognised certification schemes, that, after extraction, return to their previous stock levels by natural growth or replenishment processes at a rate in line with use cycles. Therefore, they are replenished or regrown at a faster rate than harvested or extracted.

Repairable

Product ’s ability to be restored to a functional state through the availability of spare parts over its entire possible life span, the simplicity of disassembly, and the accessibility of repair information.

Resource inflow

Physical materials (e.g. substances and products) entering an undertaking’s operations for production, consumption, maintenance, or service delivery. This includes virgin and non-virgin raw materials (including marine resources, energy carriers used for material purposes), semi-finished goods, and components, regardless of whether they are purchased, reused, or internally recovered. The scope of resource inflows also reflects the undertaking’s reliance on natural resources, its resource efficiency and circularity.

Resource outflow

Physical materials (e.g. substances and products) that leave an undertaking’s operations as a result of its activities, including outputs such as products sold, by-products, waste, emissions, and materials intended for reuse, recycling, or disposal.

Resource use

Resource use refers to the way physical materials, specifically technical materials and biological materials, are sourced, consumed, transformed, reused, or disposed of by the undertaking across its operations and value chain. It encompasses both:

Reuse

(waste)

Any operation by which products or components of products that are not waste are used again for the same purpose for which they were conceived. This may involve cleaning or small adjustments, so it is ready for the next use without significant pre-processing.

Risk

Refer to the definition of sustainability-related risk.

Scenario

A plausible description of how the future may develop based on a coherent and internally consistent set of assumptions about key driving forces (e.g. rate of technological change, prices) and relationships. Note that scenarios are neither predictions nor forecasts but are used to provide a view of the implications of developments and actions.

Scenario analysis

A process for identifying and assessing a potential range of outcomes of future events under conditions of uncertainty, using a single or multiple scenarios.

Scope 1 GHG emissions

Direct GHG emissions from sources that are owned or controlled by the undertaking.

Scope 2 GHG emissions

Indirect emissions from the generation of purchased or acquired electricity, steam, heat or cooling consumed by the undertaking.

Scope 3 GHG emissions

All indirect GHG emissions (not included in Scope 2 GHG emissions) that occur in the value chain of the reporting undertaking, including both upstream and downstream emissions. Scope 3 GHG emissions can be broken down into Scope 3 categories.

Scope 3 category

One of the 15 types of Scope 3 GHG emissions identified by the GHG Protocol Corporate Accounting and Reporting Standard (2004) and detailed by the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (Version 2011). Undertakings that choose to account for their Scope 3 emissions based on the indirect GHG emissions categories of ISO 14064-1:2018 may also refer to the category defined in Clause 5.2.4 (excluding indirect GHG emissions from imported energy) of ISO 14064-1:2018.

Secondary resource

Materials previously used (non-virgin: those that are recovered from waste streams or other sources as well as materials found in used products or components) and reintroduced into production cycles, reducing reliance on primary resources and minimising environmental impacts. For example, recycled materials as well as re-used, repaired, refurbished, or remanufactured products or components.

Site

Sites are physical locations:

Social dialogue

All types of negotiation, consultation or simply exchange of information between, or among, representatives of governments, employers, their organisations and workers’ representatives, on issues of common interest relating to economic and social policy. It can exist as a tripartite process, with the government as an official party to the dialogue or it may consist of bipartite relations only between workers’ representatives and management (or trade unions and employers’ organisations).

Social protection

The set of measures designed to reduce and prevent poverty and vulnerability across the life cycle.

The major life events addressed in ESRS in relation to social protection include sickness, unemployment starting from when the own worker is working for the undertaking, employment injury and acquired disability and maternity leave.

Soil

The top layer of the Earth’s crust situated between the bedrock and the surface. The soil is composed of mineral particles, organic matter, water, air and living organisms (see Directive (EU) 2010/75).

Soil sealing

Covering soil in a way that makes the covered area impermeable (e.g. a road). This non-permeability can create environmental impacts as described in Commission Regulation (EU) 2018/2026 (Commission Regulation (EU) 2018/2026 of 19 December 2018 amending Annex IV to Regulation (EC) No 1221/2009 of the European Parliament and of the Council on the voluntary participation by organisations in a Community eco-management and audit scheme (‘EMAS’) (OJ L 325, 20.12.2018, p. 18, ELI: http://data.europa.eu/eli/reg/2018/2026/oj).²).

Stakeholder

Those who can affect or be affected by the undertaking. There are two main groups of stakeholders:

Some, but not all, stakeholders may belong to the two groups.

Stakeholder engagement

An ongoing process of interaction and dialogue between the undertaking and its stakeholders that enables the undertaking to hear, understand and respond to their interests and concerns.

Standard payment terms

Standard payment terms refer to terms which have been formulated in advance for several transactions involving different parties and which have not been individually negotiated by the parties. These terms are usually offered/proposed to suppliers. They may stem from an undertaking’s policy or procedure, or they may be calculated as an average or mean of terms in contracts with suppliers.

Stranded asset

Stranded assets (including ‘strandable assets’) are those assets or investments (both active or firmly planned) which, at some time prior to the end of their economic life, are no longer able to earn an economic return as a result of changes in regulation, market forces, technological innovation, or environmental factors (including climate change and the transition to a low-carbon economy). These typically include assets that have suffered (or are expected to suffer) from unanticipated or premature write-downs, devaluations, or conversion to liabilities; as well as assets with significant locked-in GHG emissions over their operating lifetime. The term ‘stranded assets’ focuses on what has already occurred at the date of the disclosures and might already be reflected in the financial statements (in which case these can be cross-referenced), while the term ‘strandable assets’ refers to a forward-looking assessment that takes into account a given future scenario.

Strategic raw materials

A subset of critical raw materials that are essential for green and digital technologies, defence, and space applications (see Annex I, Section 1, Regulation (EU) 2024/1252).

Substance

Any chemical element and its compounds, in the natural state or obtained by any manufacturing process, including any additive necessary to preserve its stability and any impurity deriving from the process used, but excluding any solvent which may be separated without affecting the stability of the substance or changing its composition and with the exception of the following substances:

Besides substances on their own, there are also substances present in mixtures, which are solutions composed of two or more substances.

Substances of concern (SoC)

A substance that:

Substances of very high concern (SVHCs)

Substances that meet the criteria laid down in Article 57 of Regulation (EC) No 1907/2006 (REACH) and were identified in accordance with Article 59(1) of that Regulation.

Supplier

Entity upstream from the undertaking (i.e. in the undertaking’s supply chain), which provides a product or service that is used in the development of the organisation’s own products or services. A supplier can have a direct business relationship with the undertaking (often referred to as a first-tier supplier) or an indirect business relationship.

Supply chain

The full range of activities or processes carried out by entities upstream or downstream from the undertaking, which provide products or services that are used in the development and production of the undertaking’s own products or services. This includes upstream entities with which the undertaking has a direct relationship (often referred to as a first-tier supplier) and entities with which the undertaking has an indirect business relationship.

Surface water

Inland waters, except groundwater; transitional waters and coastal waters, except in respect of chemical status for which it shall also include territorial waters. Also defined as all water on the surface of the earth, including freshwater and other water as distinguished from water from the subsurface (groundwater).

Sustainability-related impact

(or impact)

The effect the undertaking has or could have on the environment and people, including effects on their human rights, connected with its own operations and upstream and downstream value chain, including through its products and services, as well as through its business relationships. The impacts can be actual or potential, negative or positive, intended or unintended, and reversible or irreversible. They can arise over the short, medium, or long term. Impacts indicate the undertaking’s contribution, negative or positive, to sustainable development.

Sustainability-related opportunity

(or opportunity)

Uncertain environmental, social or governance events or conditions that, if they occur, could cause a potential material positive effect on the undertaking’s business model or strategy and on its capability to achieve its goals and targets and to create value, and therefore may influence its decisions and those of its business partners with regard to sustainability topics. Like any other opportunity, sustainability-related opportunities are measured as a combination of magnitude and the probability of occurrence.

Sustainability-related risk

(or risk)

Uncertain environmental, social or governance events or conditions that, if they occur, could cause a potential material negative effect on the undertaking’s business model or strategy and on its capability to achieve its goals and targets and to create value, and therefore may influence its decisions and those of its business partners with regard to sustainability topics. Like any other risk, sustainability-related risks are measured as a combination of magnitude and the probability of occurrence.

Sustainability statement

The dedicated section of the undertaking’s management report where the information about sustainability topics and sub-topics prepared in accordance with Directive (EU) 2022/2464 and ESRS is presented.

Systemic risk

Risks arising from the breakdown of the entire system, rather than the failure of individual parts. They are characterised by modest tipping points combining indirectly to produce large failures with cascading of interactions of physical and transition risks (contagion), as one loss triggers a chain of others, and with systems unable to recover equilibrium after a shock. An example is the loss of a keystone species, such as sea otters, which have a critical role in ecosystem community structure. When sea otters were hunted to near extinction in the 1900s, the coastal ecosystems flipped, and biomass production was greatly reduced.

Target

Measurable, outcome-oriented and time-bound goals that the undertaking aims to achieve in relation to material impacts, risks or opportunities. They may be set voluntarily by the undertaking or derive from legal requirements on the undertaking. A target can encompass not only improvements but also the maintenance of achieved results or the preservation of consistent performance levels.

Technical material

Materials that cannot be processed by the biological cycle and therefore accumulate as waste because they cannot break down and return to nature as nutrients.

Threatened species or ecosystems

Threatened species refer to endangered species, including flora and fauna, listed in the European Red List or the IUCN Red List of Threatened Species, as referred to in Section 7 of Annex II to Commission Delegated Regulation (EU) 2021/2139. Threatened ecosystems refer to the ecosystems categorised as critically endangered, endangered and vulnerable by the IUCN Red List of Ecosystems.

Topic

ESRS use the terms sustainability ‘topic’ and ‘sub-topic’ understood as synonymous with the terms ‘sustainability matters’ or ‘sustainability factors’. Disclosures in ESRS are structured into topics. A topic is further disaggregated in sub-topics. In ESRS, the term ‘topic’ is used to indicate either a topic or a sub-topic, depending on the most appropriate level of granularity needed to meet the respective disclosure objective.

Training

Initiatives put in place by the undertaking aimed at the maintenance and/or improvement of skills and knowledge of its own workforce. It can include different methodologies, such as on-site training, and online training.

Transition plan

A specific type of action plan that is adopted by the undertaking in relation to a strategic decision and that addresses:

Transition plan for climate change mitigation

An aspect of an undertaking’s overall strategy that lays out the undertaking’s targets, actions and resources for its transition towards a lower-carbon economy, including actions such as reducing its GHG emissions with regard to the objective of limiting global warming to 1,5 °C and climate neutrality.

Transition risk

Risks that result from a misalignment between an organisation’s or investor’s strategy and management and the changing regulatory, policy or societal landscape in which it operates. Developments aimed at halting or reversing damage to the climate or to nature, such as government measures, technological breakthroughs, market changes, litigation and changing consumer preferences can all create or change transition risks.

User

Users of sustainability statements are primary users of general-purpose financial reporting (existing and potential investors, lenders and other creditors including asset managers, credit institutions, insurance undertakings), as well as other users, including the undertaking’s business partners, trade unions and social partners, civil society and non-governmental organisations.

User of articles

Any natural or legal person who uses an article during their industrial or professional activities. For the purposes of these standards, the notion of ‘user’ is adapted from Regulation (EC) No 1907/2006 (REACH) downstream users.

User of substances

Any natural or legal person, other than the manufacturer, formulator, or importer, who uses a substance, either on its own or in a mixture, during their industrial or professional activities, excluding the final consumer. For the purposes of these standards, this notion is adapted from Regulation (EC) No 1907/2006 (REACH) downstream users.

Value chain

The full range of activities, resources and relationships related to the undertaking’s business model and the external environment in which it operates. A value chain encompasses the activities, resources and relationships the undertaking uses and relies on to create its products or services from conception to delivery, consumption and end-of-life. Relevant activities, resources and relationships include:

Value chain includes actors upstream and downstream from the undertaking. Actors upstream from the undertaking (e.g. suppliers) provide products or services that are used in the development of the undertaking’s products or services. Entities downstream from the undertaking (e.g. distributors, customers) receive products or services from the undertaking.

ESRS use the term ‘value chain’ in the singular, although it is recognised that undertakings may have multiple value chains.

Wage

Gross wage, excluding variable components such as overtime and incentive pay, and excluding allowances unless they are guaranteed.

Waste

Any substance or object which the holder discards, intends to discard, or is required to discard (see Directive 2008/98/EC).

Waste stream

A particular mass flow of waste from a process, activity, facility or industry, often grouped by material (e.g. plastic, metal, organic), origin (e.g. household, industrial), or hazard (e.g. hazardous v non-hazardous).

Water consumption

The amount of water drawn into the boundaries of the undertaking and not discharged back to the water environment or a third party over the course of the reporting period.

Water discharge

The sum of effluents and other water leaving the boundaries of the undertaking and released to surface water, groundwater, or third parties over the course of the reporting period.

Water recycled and reused

Water and wastewater (treated or untreated) that has been used more than once before being discharged from the undertaking’s boundary, so that water demand is reduced. This may be in the same process (recycled) or in a different process within the same facility (own or shared with other undertakings) or in another of the undertaking’s facilities (reused).

Water scarcity

Refers to the volumetric abundance, or lack thereof, of freshwater resources. Scarcity is human driven; it is a function of the volume of human water consumption relative to the volume of water resources in a given area. As such, an arid region with very little water but no human water consumption would not be considered scarce, but rather arid. Water scarcity is a physical, objective reality that can be measured consistently across regions and over time. Water scarcity reflects the physical abundance of freshwater rather than whether that water is suitable for use. For instance, a region may have abundant water resources (and thus not be considered water scarce) but have such severe pollution that those supplies are unfit for human or ecological uses.

Water stored

Water held in water storage facilities or reservoirs.

Water stress

The ability, or lack thereof, to meet the human and ecological demand for water. Water stress is an inclusive concept that considers several physical aspects related to water resources, including water availability, water quality, and the accessibility of water (i.e. whether people are able to make use of physically available water supplies), which is often a function of the sufficiency of infrastructure and the affordability of water, among other things.

Water withdrawal

The sum of all water drawn into the boundaries of the undertaking from all sources for any use over the course of the reporting period.

Worker in the value chain

An individual performing work in the value chain of the undertaking, regardless of the existence or nature of any contractual relationship with the undertaking. In ESRS, the scope of workers in the value chain includes all workers in the undertaking’s upstream and downstream value chain who are or can be materially impacted by the undertaking. This includes impacts that are connected to the undertaking’s own operations, and value chain, including through its products or services, as well as through its business relationships. This includes all workers who are not in the scope of ‘own workforce’ (‘own workforce’ includes people who are in an employment relationship with the undertaking (‘employees’) and non-employees who are either individual contractors supplying labour to the undertaking (‘self-employed people’) or people provided by undertakings primarily engaged in employment activities (NACE Code O78).

Workers’ representatives

Workers’ representatives means:

Work-life balance

Satisfactory state of equilibrium between an individual’s work and private life. Work-life balance in a broader sense encompasses not only the balance between work and private life given family or care responsibilities, but also time allocation between time spent at work and in private life beyond family responsibilities.

(²)  Commission Regulation (EU) 2018/2026 of 19 December 2018 amending Annex IV to Regulation (EC) No 1221/2009 of the European Parliament and of the Council on the voluntary participation by organisations in a Community eco-management and audit scheme (‘EMAS’) (OJ L 325, 20.12.2018, p. 18, ELI: http://data.europa.eu/eli/reg/2018/2026/oj).