ESRS E1, explained: how to master CSRD’s climate change disclosure

ESRS E1 is a European sustainability reporting standard focused on climate change and a key component of the broader European Sustainability Reporting Standards (ESRS) framework set by the European Union. It plays a crucial role in guiding companies’ sustainability reporting under the Corporate Sustainability Reporting Directive (CSRD).

You can think of it this way: if disclosing your business’s sustainability metrics is like building a house, then the CSRD is the rules and regulations for construction, while the ESRS are the blueprint guiding the actual construction process. ESRS E1 would then be a specific section of the blueprint – a complicated but important section, perhaps the kitchen!

ESRS E1 is a vital element of CSRD reporting, but also a particularly challenging one due to its wide scope, which requires reporting businesses to source data from many different functions. However, broken down into its component parts, ESRS E1 becomes much easier to manage!

The following is a straightforward explanation of ESRS E1 and how to meet each of its nine subcategories.

An overview of ESRS E1: “Climate change”

The ESRS E1 standard requires companies to disclose their climate-related impacts and risks. These include greenhouse gas emissions, energy use, and transition plans towards net zero. 

ESRS E1 is particularly relevant because climate change affects virtually all businesses and sectors, making it a critical component in sustainability reporting. 

Materiality & comparability

Under the CSRD’s double materiality principle, ESRS E1 is likely to be material for most companies from both impact and financial perspectives: nearly every business contributes to climate change through greenhouse gas emissions, while also facing climate-related risks and opportunities that can significantly affect their financial performance. 

Given this dual relevance, ESRS E1 disclosures are crucial for providing a comprehensive view of a company’s climate change impacts and vulnerabilities.

In addition, ESRS E1’s standardization of reported metrics enables better comparability of climate-related data and strategies, not just across the EU market but potentially worldwide. 

By providing a common language for climate reporting, ESRS E1 aims to increase transparency, drive meaningful corporate action on climate change, and offer investors and stakeholders decision-useful information that is becoming increasingly comparable across companies and sectors.

Beyond compliance

Your company’s ESRS E1 reporting work can have benefits beyond compliance – it also positions you to better manage climate-related risks, identify opportunities, and contribute to the global effort to combat climate change.

While the standard can appear dizzyingly complex at first sight, it becomes much more manageable when broken down into its component parts!

Breaking down ESRS E1’s nine subcategories

E1-1: Transition plan for climate change mitigation

This requires companies to outline their strategic approach to reducing greenhouse gas emissions and aligning with the Paris Agreement goals. It involves setting time-bound targets and detailing specific actions to achieve them.

For example, a manufacturing company might commit to reducing its scope 2 emissions by 50% by 2030 through investments in renewable energy and energy-efficient technologies.

How to report:

Share your business’s strategy for identifying, assessing, and managing climate change impacts. Describe your transition plan to a net-zero economy, including key steps and resources allocated.

Don’t have a net-zero plan in place yet? Check out our high-level guide to creating and delivering on net-zero commitments. 

E1-2: Policies related to climate change mitigation and adaptation

This disclosure requires companies to detail their formal policies for addressing climate change impacts, both in terms of reducing emissions (mitigation) and preparing for climate-related risks (adaptation).

For example, a company might have a policy to prioritize suppliers with lower carbon footprints or to climate-proof its facilities against extreme weather events.

How to report:

List and detail your policies for climate change mitigation, adaptation, energy efficiency, and renewable energy use. Ensure these policies are realistic and achievable for your business.

E1-3: Actions and resources in relation to climate change policies

This disclosure requires companies to outline the concrete steps they are taking to implement their climate change policies. It focuses on the specific actions and resources allocated to address climate change issues.

For example, a company might detail its investments in energy-efficient equipment, employee training programs on sustainability, or research and development efforts for low-carbon technologies.

How to report: 

Describe key actions for climate change adaptation, mitigation, and emissions reduction. Be as specific as possible, detailing decarbonization levers and financial impacts.

E1-4: Targets related to climate change mitigation and adaptation

This disclosure requires companies to establish and report on specific, measurable goals related to climate change mitigation and adaptation. It focuses on setting clear sustainability targets with defined timelines.

For example, a company might set a target to reduce its greenhouse gas emissions by 500% by 2030 or to source 100% of its electricity from renewable sources by 2026. These targets help stakeholders assess the company’s commitment and progress in addressing climate change.

How to report:

Share your business’s sustainability targets, including emissions reduction, energy efficiency, and risk mitigation goals. Align these with the Paris Agreement and consider validation through frameworks like the Science-Based Targets initiative. 

For guidance, consult Normative’s expert-informed article on reducing emissions which includes guidance on setting and validating climate targets. 

E1-5: Energy consumption and mix

This disclosure requires companies to report on their total energy consumption and the types of energy sources they use. It provides a detailed picture of a business’s energy use profile.

For example, a company might disclose that it used 1 million kWh of electricity in the reporting year (the consumption), with 60% coming from renewable sources like solar and wind and 40% from non-renewable sources like natural gas (the mix). This information helps stakeholders understand the company’s energy efficiency and its progress toward using cleaner energy sources.

How to report:

Report your total energy use, detailing renewable and non-renewable sources. Include any initiatives to increase energy efficiency.

E1-6: Gross scopes 1, 2, 3 and total GHG emissions

This disclosure requires companies to report their greenhouse gas (GHG) emissions across all scopes. Scope 1 covers direct emissions from owned or controlled sources, scope 2 includes indirect emissions from purchased energy, and scope 3 encompasses all other indirect emissions in a company’s value chain. You can learn more about the emissions scopes in our explainer article.

For example, a manufacturing company might report 10,000 tonnes of CO2e for scope 1 (from its factories), 5,000 tCO2e for scope 2 (from purchased energy), and 50,000 tCO2e for scope 3 (from suppliers and product use), totaling 65,000 tCO2e.

How to report:

Calculate and report your emissions across all scopes, broken down by location and market. Include emissions intensity based on net revenue.

E1-7: GHG removals and GHG mitigation projects financed through carbon credits

This disclosure requires companies to report on their efforts to remove greenhouse gases from the atmosphere and any carbon credit projects they’re financing. It covers both direct removal activities and indirect mitigation through carbon credits.

For example, a company might disclose that it has invested in biochar projects that lock away 300 tons of carbon. This information helps stakeholders understand the company’s overall climate impact beyond emissions reduction.

How to report:

Disclose any investments in carbon removal or offsetting projects, also known as “climate investment.” While these are not a substitute for reduction efforts, they should still be reported. 

Our climate investment explainer article gives guidance on selecting high-quality carbon removal options. 

E1-8: Internal carbon pricing

This disclosure requires companies to report on any internal systems they use to assign a cost to carbon emissions in their decision-making processes. It covers how businesses incorporate the financial impact of carbon emissions into their operations and investments.

For example, a company might disclose that it uses an internal carbon price of €140 per tonne of CO2e when evaluating new projects or making purchasing decisions. This information helps stakeholders understand how the company factors climate-related risks and opportunities into its business strategies.

How to report

If applicable, disclose your internal carbon pricing scheme and how it shapes policy and decision-making within your organization.

E1-9: Anticipated financial effects from material physical and transition risks and potential climate-related opportunities

This disclosure requires companies to report on the expected financial impacts of climate change on their business. It covers both risks (physical impacts like extreme weather and transition challenges like new regulations) and opportunities (such as new markets for low-carbon products).

For example, a coastal property company might disclose anticipated costs of $10 million for flood protection measures (physical risk) and projected revenue of $5 million from new energy-efficient building services (opportunity). This information helps stakeholders understand how climate change may affect the company’s future financial performance.

How to report:

Disclose how climate change might affect your business financially, including both risks and opportunities. Use your double materiality assessment to inform this disclosure.

Partner with Normative for E1 reporting – and beyond

Normative offers a comprehensive solution to simplify CSRD compliance and maximize its benefits to your business.

Our automated platform process simplifies data consolidation across your organization, while our expert guidance provides practical partnership from the beginning of data collection to the final CSRD reporting.

Moreover, Normative supports more than just reporting. Our platform allows you to turn data into action with detailed footprints for scopes 1, 2, and 3, and built-in reduction planning.

Partner with Normative to connect the dots between environmental data, supplier engagement, and your ESG targets – empowering you to stay compliant while honing your competitive edge.