The European Sustainability Reporting Standards (ESRS) serve as a robust framework for ensuring that European enterprises embrace and promote sustainable practices. As part of this expansive framework, water, a critical and finite resource, emerges as a focal point of concern and regulation.
An enterprise’s interaction with water, be it as a direct resource or an environmental stakeholder, is multifaceted. On one hand, water is essential for various production processes, and on the other, it stands as a testament to the environmental impact of industrial operations. The ESRS recognizes these intertwined roles of water and establishes guidelines to ensure that businesses report their water consumption and impact transparently.
Undertakings are held accountable for their actions, especially when their business activities result in contamination of water sources. This accountability extends beyond the primary enterprise to encompass those providing financial support. If a business activity, funded through loans or other financial instruments, leads to adverse environmental impacts, the lending enterprise might find itself bearing the brunt of the responsibility.
The ESRS emphasizes the principle of materiality in its guidelines. Enterprises are urged to disclose the most significant environmental, social, and governance (ESG) impacts, risks, and opportunities. For businesses dependent on water as a primary resource, any change in its quality, availability, or pricing can pose considerable risks. Thus, understanding and disclosing these risks becomes paramount. The guidelines suggest that organizations should measure their total water consumption in cubic meters (m³) per net revenue. This metric serves as an indicator of the efficiency and sustainability of water usage in operations.
In the broader context of pollution, water emerges as a significant concern. Contaminated water not only affects the immediate environment but also has far-reaching implications on the health and well-being of communities and ecosystems. The ESRS touches upon this by highlighting the need for entities to develop specific disclosures on material impacts. Thus, the pollution of water sources, whether through direct contamination or as a result of other pollutants, becomes a matter of significant disclosure.
To aid businesses in their disclosure journey, the ESRS provides a structured approach to assess materiality. Tools like the “Flowchart for determining disclosures to be included” guide enterprises in their evaluation process, ensuring that the most relevant and impactful information reaches stakeholders.
Water’s role in the value chain is also pivotal. From sourcing to production, and even in post-production phases, water plays an indispensable part. The ESRS, recognizing the extensive value chain implications, delves deep into the impacts on value chain workers and affected communities, emphasizing ethical practices across all operations.
Transparency in reporting is balanced with the need to protect sensitive information. Enterprises are guided on classifying and managing information that might relate to intellectual property or other sensitive domains, ensuring that while the essence of the disclosure remains intact, proprietary knowledge is safeguarded.