ESG Consulting

Ecoterrae is a ESG Consulting committed to helping organizations achieve environmental, social and governance (ESG) excellence. committed to helping organizations achieve environmental, social and governance (ESG) excellence.

Our collaborative approach has enabled us to be the trusted partner for companies that want to thrive in a sustainable way.

In this sense, the following are the main lines of work with which we provide value to our clients:

  • Sustainability reports (GRI, among other standards)
  • Non-financial information statements (NFS)
  • Corporate sustainability reporting according to the European Sustainability Reporting Standard (ESRS) within the framework of the CSRD.
  • Green taxonomy.
  • Not significant damage (DNSH)
  • Sustainability Indexes (SBTi, CDP, Dow Jones Sustainability Index, among others)
  • Due Diligence ESG (Corporate Sustainability Due Diligence Directive, CSDDD)
  • Análisis de doble materialidad (materialidad de impacto y materialidad financiera)
  • Análisis de riesgos climáticos según recomendaciones de Task force on climate-related financial disclosure (TCFD)
  • Planes de sostenibilidad
  • Localización de Objetivos de Desarrollo Sostenible (ODS)

The following are some of the questions that our clients often have on this subject:

Following the entry into force of Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial information and diversity information by certain large companies and certain groups, the member states transposed it into their respective legal systems.

This directive, also called the NFRD (Non Financial Reporting Directive) was transposed to Spain through Law 11/2018, of December 28, which amends the Commercial Code, the revised text of the Capital Companies Act approved by Royal Legislative Decree 1/2010, of July 2, and Law 22/2015, of July 20, on Account Auditing, in matters of non-financial information and diversity.

This Spanish law went beyond the requirements of the NFRD, significantly broadening the scope of application of companies obliged to perform what is known as a "risk assessment". Estado de Información no Financiera (EINF). La obligatoriedad comenzó en el año 2019 aplicando a las empresas que cumplieran los siguientes criterios:

The average number of employees employed by the capital company or by the companies of the group during the fiscal year exceeds 500.

They must either be considered public interest entities in accordance with auditing legislation, or, for two consecutive fiscal years, meet, at the closing date of each of them, at least two of the following circumstances:

The total of the consolidated asset items is greater than

0

The consolidated annual net sales must be more than

0

The average number of employees employed during the fiscal year is greater than

0

In this regard, according to the Transitional Provision of this law, three years after its entry into force, the scope of application of this law was extended to companies that met the following criteria, which are those that currently apply before the law is repealed by the transposition of the CSRD, which will be discussed in subsequent questions:

More than 250 workers who:

Or have the status of public interest entities in accordance with the legislation on auditing of accounts, with the exception of entities that have the qualification of small and medium-sized enterprises in accordance with Directive 34/2013,

Or, during two consecutive fiscal years, they meet, at the closing date of each of them, at least one of the following circumstances:

  • That the total of the asset items exceeds 20,000,000 euros.
  • The net amount of the annual turnover exceeds 40,000,000 euros.

It is noteworthy that this law, in addition to broadening the scope of application, has also incorporated important points with respect to the NFRD, such as, for example, the obligation of verification by an independent entity, although it does not detail exactly the competencies of this figure or the accreditation required to be able to act as a verifier.

  • The CSRD (Directive 2022/2464/EU) amends, among others, the NFRD Directive in order to correct some of the deficiencies detected in non-financial reporting and to expand the number of companies required to report on sustainability issues.

    The typology of the companies will determine the date on which they will be obliged to report in accordance with the CSRD Directive. The timeline for the application of the regulation is as follows:

    Type of company

    Year of commencement of mandatory

    Large public interest enterprises with more than 500 employees subject to the NFRD Directive

    January 1, 2025. 2024 data report

    Large companies not subject to NFRD, i.e. more than 250 employees and/or net turnover of 40 M€ and/or balance sheet total of 20 M€.

    January 1, 2026. 2025 data report

    Listed SMEs, small financial institutions and captive insurance and reinsurance companies

    January 1, 2027. 2026 data report

    Third-country companies with subsidiaries or branches in the European Union

    January 1, 2028. 2027 data report

    It is noteworthy that for fiscal years prior to January 1, 2028, listed SMEs may choose not to adopt the obligations provided for in the Directiva CSRDprovided that they briefly justify it in their management report.

The CSRD seeks homogeneity in the reporting of sustainability information, and is therefore developing, through EFRAG (European Financial Reporting Advisory Group), the so-called European Sustainability Reporting Standards (ESRS), which will be the mandatory methodological framework for the preparation of corporate sustainability reports.

Dates to keep in mind regarding ESRS:

  1. By June 30, 2023, cross-cutting standards on sustainability issues. On November 22, EFRAG published its work on this first set of standards.
  2. By June 30, 2024, specific standards for certain sectors of activity, standards adapted for listed SMEs and standards for third country companies that exceed the thresholds established by the EU. It should be noted that there is expected to be a delay in the approval of these sectoral ESRS.

The European taxonomy is a classification system used to identify economic activities that are environmentally sustainable. This system determines which activities are considered sustainable and which are not.

The European Taxonomy is closely linked to the Sustainable Finance Disclosure Regulation (SFDR), and its main objective is to provide investors with detailed information about the organizations in which they wish to invest, as well as their level of sustainability and social responsibility.

In addition, this taxonomy also serves as a guide for companies, helping them to align with the Sustainable Development Goals (SDGs) of the 2030 agenda, and thus contribute to building a sustainable future.

In June 2020, the Taxonomy Regulation (2020/852/EU), which contains the criteria for determining whether an activity is considered environmentally sustainable and refers to the disclosure of environmental information. It indicates the six objectives of the taxonomy, which are as follows:

  1. Climate change mitigation
  2. Adaptation to climate change
  3. The sustainable use and protection of water and marine resources
  4. The transition to a circular economy
  5. Pollution prevention and control
  6. Protection and restoration of biodiversity and ecosystems

As of January 1, 2022, the provisions of the Taxonomy Regulation that allow determining whether an activity contributes to climate change mitigation and adaptation are directly applicable in all EU Member States. In order to develop this regulation, the following delegated regulations have been adopted and are applicable as of the same date:

  1. Climate Taxonomy Delegated Regulation (2021/2139/EU), which makes it possible to determine when an activity contributes to climate change mitigation or adaptation.
  2. Delegated Regulation containing the technical rules for the implementation of Art. 8 of the Taxonomy Regulation (2021/2178/EU), which specifies how companies must report on their environmentally sustainable economic activities.

It should be noted that the delegated regulation that will regulate the rest of the taxonomy objectives is under development.

In this regard, to find out if your company is within the scope of this regulation and has to report taxonomy you should check if your organization complies with the provisions of Article 1 of the Taxonomy Regulation (2020/852/EU):

  1. a) measures adopted by Member States or by the Union imposing on financial market participants or issuers any requirements in respect of financial products or corporate bond issues that are offered as environmentally sustainable;
  2. b) financial market participants offering financial products;
  3. (c) undertakings which are subject to the obligation to publish non-financial statements or consolidated non-financial statements pursuant to Articles 19a or 29a of Directive 2013/34/EU of the European Parliament and of the Council, respectively.

It is noteworthy that the obligation to report the taxonomy is linked to the entry into force of the transposition of the CSRD, which will oblige companies that have to prepare a corporate sustainability report to include the taxonomy report in said document.

If your company meets these criteria, you will need to take the following steps:

  1. Identification of the activities carried out in the company. Not only the main CNAE, but all the sub-activities that are developed in all the productive processes.
  2. An eligibility analysis must be performed according to the criteria established in the taxonomy.
  3. In the case of eligible activities, an alignment analysis must be carried out, which involves the development of a series of sub-phases detailed below:
    1. Substantial contribution analysis to one or more of the taxonomy objectives.
    2. Analysis of no significant harm to other taxonomy targets (DNSH)
    3. Analysis of minimum social safeguards.
  4. If the above criteria are met, the activity is considered to be aligned with the taxonomy and the collection of indicators will proceed, which according to the Regulations include the Business Volume, Capex and Opex of such activities.

The concept of "significant detriment" is defined in detail in Article 17 of the Taxonomy Regulation, in relation to the six environmental objectives defined therein.

This is a principle that should be evaluated in all projects and activities that are interested in receiving funding or subsidies, since the ultimate goal is to channel both public and private funds to activities that are considered to be strictly sustainable.

In this sense, an economic activity is considered to cause significant harm:

1) to the objective of the climate change mitigation, where the activity results in significant greenhouse gas emissions;

2) to the objective of the adaptation to climate change, when the activity causes an increase in the adverse effects of current and expected future climatic conditions on itself or on people, nature or assets;

3) to the objective of sustainable use and protection of water and marine resources, when the activity is detrimental:

  1. (i) of the good ecological status or potential of bodies of water, including surface and groundwater, or
  2. ii) of the good ecological status of marine waters;

to the objective of circular economy, especially to the prevention and recycling of waste, when:

  1. (i) such activity generates significant inefficiencies in the use of materials or in the direct or indirect use of natural resources, such as non-renewable energy sources, raw materials, water or soil in one or more phases of the life cycle of the products, in particular in terms of durability and the possibility of repairing, upgrading, reusing or recycling the products,
  2. (ii) the activity results in a significant increase in the generation, incineration or disposal of waste, except for the incineration of non-recyclable hazardous waste; or

(iii) the long-term disposal of waste is likely to cause significant and long-term harm to the environment;

to the objective of the pollution prevention and controlwhere the activity results in a significant increase in emissions of pollutants to air, water or land, compared to the situation before the start of the activity, or

6) to the objective of protection and restoration of biodiversity and ecosystems, when the activity:

  1. (i) is largely detrimental to good ecosystem condition and resilience, or
  2. (ii) is detrimental to the conservation status of habitats and species, particularly those of interest to the Union.

At present, there is much uncertainty about the methodology to be followed to assess the DNSH of the various objectives of the taxonomy. In this regard, one can rely on the questionnaire published by the Ministry in the framework of the Recovery, Transformation and Resilience Plan (PRTR), on the "Technical guide on the application of the "no significant harm" principle under the Recovery and Resilience Mechanism Regulation" published by the European Commission through a Communication by the Commission or, finally, the UNE 0076 standard that develops a "guide for the self-assessment of the no significant harm principle (DNSH principle)".

The concept of Dual Materiality was first formally proposed by the European Commission in its Non-Financial Reporting Guidelines. Dual Materiality refers to the impact of a company's activities on both the external environment and the company's own financial performance. This concept encourages companies to analyze materiality from two perspectives:

  • Impact materiality: Information on the company's impact on the economy, environment and people for the benefit of multiple stakeholders. GRI requires Impact Materiality.

  • Financial materiality: Also called "outside-in", it is the information on the impact of the different sustainability issues analyzed on the company's results, taking into account costs, losses, etc., as well as the creation of economic value.

It is noteworthy that all companies that are forced to publish a Corporate Sustainability Report according to the CSRD must use the ESRS (European Sustainability Reporting Standard), which includes a requirement to use the Doble Materialidad for determining the material topics on which information will be reported.

In this sense, and doing a brief review of both types of materiality:

  • Impact materiality: This type of materiality is the one developed by GRI 2021, for which an established methodology must be followed that consists of the following steps (Source: Global Reporting Initiative, GRI):

The participation of interest groups is very important in this type of analysis, as they should participate both in the identification of impacts and in their evaluation.

On the other hand, it is notable that organizations that develop activities with GRI sector standards have a lot of advanced work in this regard, since GRI has already carried out an identification and real and potential, negative and positive impacts for certain sectors.

Currently, GRI 11, 12 and 13 are in force and GRI 14 in draft, which correspond to the Oil and Gas (11), Coal (12), Agriculture, Aquaculture and Fishing (13) and Mining (14) sectors. respectively.

  • Financial materiality: In this materiality phase, the impacts evaluated in the impact materiality are analyzed and how these can affect the organization's results both actually and potentially and both negatively and positively. For example, how global warming can influence the performance of a company or how the circular economy can be an opportunity to optimize the use of raw materials and, therefore, the company's costs. The interest groups that usually show the most interest in this part of materiality are the organization's own shareholders and investors.

The huge amount of regulations and market pressure regarding sustainability constitute one of the biggest turning points in the history of our society. It is beginning to be stated that companies “will be sustainable or they will not be”, as a reference to the fact that the viability of companies in the short term is questioned if they do not align with the trend of including sustainability criteria in the development of their operations. activities.

In this sense, the importance of having a sustainability plan is notable. As in all aspects that are taken into account for decision making in organizations, sustainability requires the establishment of objectives, a list of concrete actions, as well as a panel of monitoring indicators to monitor the degree of implementation. of these measures and the achievement of the objectives.

In this way, at Ecoterrae we advise our clients in the development of these sustainability plans, forming part or being an extension of the department responsible for sustainability in the organization. We feel and make ourselves feel like one more in the company.

As a non-exhaustive summary, the phases that make up a sustainability plan development project are shown. If you want more information, you can consult our specific section on the website (include link):

  • Initial diagnostic in which the baseline is established from which this roadmap towards sustainability is started. In this diagnosis, it is advisable to carry out a materiality analysis to determine the material issues on which to propose actions. This analysis must involve the participation of interest groups, as discussed in previous questions.
  • Sustainability policy and definition of purpose, mission, vision and values of the organization, integrating sustainability.
  • Establishment of strategic and specific objectives and development of focused measures to achieve them in the short, medium or long term.
  • Development of a control panel monitoring the degree of implementation of measures and the trend in achieving the set objectives.

Finally, the role that this type of plan plays in the localization of the Sustainable Development Goals (SDG) is notable. It is advisable to link the objectives and measures of the plan with the SDGs in order to make a report on how the organization is contributing to compliance with the SDGs of the 2030 Agenda.

On 23 February 2022, the Commission adopted a proposal for a Directive on corporate sustainability due diligence. The objective of this Directive is to encourage sustainable and responsible business behavior and to anchor human rights and environmental considerations in the operations and corporate governance of companies. The new rules will ensure that companies address the adverse impacts of their actions, including on their value chains within and outside Europe.

This Directive establishes a corporate duty of due diligence. The central elements of this duty are to identify, end, prevent, mitigate and account for negative impacts on human rights and the environment in the company's own operations, its subsidiaries and its value chains. Additionally, certain large companies need to have a plan to ensure that their business strategy is compatible with limiting global warming to 1.5°C in line with the Paris Agreement. Directors have incentives to contribute to sustainability and climate change mitigation goals.

The Directive also introduces duties for directors of EU companies affected by this regulation. These functions include establishing and overseeing the implementation of due diligence processes and integrating due diligence into corporate strategy. Furthermore, in fulfilling their duty to act in the best interests of the company, directors must take into account the consequences of their decisions on human rights, climate change and the environment.

The affected companies must have the following characteristics:

  • Large EU limited liability companies:
    • Group 1: +/- 9,400 companies. More than 500 employees and more than 150 million euros of net turnover worldwide.
    • Group 2: +/- 3,400 companies in high-impact sectors. More than 250 employees and a net turnover of more than 40 million euros worldwide, and operating in defined high-impact sectors, e.g. textiles, agriculture, mineral extraction. For this group, the rules start to apply two years later than for group 1.
  • Companies outside the EU: +/- 2,600 companies in Group 1 and +/- 1,400 in Group 2
    • Companies from third countries active in the EU with billing threshold aligned with Group 1 and 2, generated in the EU.
  • Pymes
    • Micro-businesses and SMEs are not affected by the proposed rules. However, the proposal provides for support measures for SMEs, which could be indirectly affected.

As for next steps, the proposal will go to the European Parliament and the Council for approval. Once adopted, Member States will have two years to transpose the Directive into national legislation and communicate the relevant texts to the Commission.

To enter these indices, certifications and initiatives, and remain in them, companies must undergo a rigorous analysis process that takes into account, among other things, that their decisions take into account ESG criteria.

First of all, regarding the main sustainability indices, they are the Dow Jones Sustainability Index (DJSI) and the FTSE4Good Index, but there are many more.

  • The Dow Jones Sustainability Index o DJSI was created in 1999 and is a key reference point for investors. This index recognizes the best practices of listed companies based on environmental, social and economic criteria.

To be part of this index, companies must pass an analysis carried out by the company RobecoSAM, which focuses on the economic, social and environmental dimensions. In total, this analysis adds up to 600 indicators, which are collected through a questionnaire of approximately 150 questions that are weighted differently depending on the sector. Companies obtain a score between 0 and 100 and it is based on this result that analysts decide whether or not to enter the index.

The DJSI questionnaire is considered one of the most demanding worldwide.

  • The FTSE4Good is one of the indices of the global provider FTSE Russell. This index brings together companies from around the world that have strong ESG practices.

The evaluation to be part of the FTSE4Good is carried out with public information from companies and consists of more than 14 topics and 300 indicators that are included in environmental, social and corporate governance factors. To ensure that companies maintain good practices, information is reviewed every six months.

  • The Carbon Disclosure Project (CDP) analyzes the commitment in the fight against climate change. CDP is a non-profit charity that manages the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts. The global economy views CDP as the well-recognized standard of environmental reporting with the richest and most comprehensive data set on corporate action.

There is a huge demand for environmental disclosure in the market that is constantly growing. According to CDP's official website, 746 investors with more than US$136 trillion in assets and more than 280 large buyers with more than US$6.4 trillion in acquisition spending are asking thousands of companies to disclose their environmental data. through CDP.

On the other hand, there are also certifications and initiatives that are of interest to organizations that are interested in highlighting their efforts in terms of sustainability, such as, for example:

  • Science Based Targets initiative (SBTi). Science-based targets provide companies with a clearly defined path to reducing emissions in line with the goals of the Paris Agreement. More than 4,000 companies around the world are already working with SBTi.

Targets are considered “science-based” if they are in line with what the latest climate science considers necessary to meet the goals of the Paris Agreement: limiting global warming to well below 2°C above. of pre-industrial levels and make efforts to limit warming to 1.5°C.

The SBTi is particularly interested in companies in the highest-emitting sectors, which play a crucial role in ensuring the transition to a zero-carbon economy. It does not currently evaluate targets for cities, local governments, public sector institutions, educational institutions, or nonprofit organizations.

  • B corporations, or B Corps, are companies verified by B Lab to meet high standards of social and environmental performance, transparency and accountability.

The B Impact Assessment evaluates a company's practices and results in five categories: governance, workers, community, environment and customers.

For this evaluation, B Corp makes available to interested companies a free digital tool that can help companies measure, manage and improve performance with a positive impact on the environment, communities, customers, suppliers, employees and shareholders, used by more than 150,000 organizations.

It is noteworthy that the first step to B Corp certification is to receive a minimum verified score of 80 points in said evaluation.

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ESG Consulting

Ecoterrae es una consultoría de sostenibilidad comprometida en ayudar a las organizaciones a lograr la excelencia ambiental, social y de gobernanza (ESG, por sus siglas en inglés).

Our collaborative approach has enabled us to be the trusted partner for companies that want to thrive in a sustainable way.

In this sense, the following are the main lines of work with which we provide value to our clients:

  • Sustainability reports (GRI, among other standards)
  • Non-financial information statements (NFS)
  • Corporate sustainability reporting according to the European Sustainability Reporting Standard (ESRS) within the framework of the CSRD.
  • Green taxonomy.
  • Not significant damage (DNSH)
  • Sustainability Indexes (SBTi, CDP, Dow Jones Sustainability Index, among others)
  • Due Diligence ESG (Corporate Sustainability Due Diligence Directive, CSDDD)
  • Análisis de doble materialidad (materialidad de impacto y materialidad financiera)
  • Análisis de riesgos climáticos según recomendaciones de Task force on climate-related financial disclosure (TCFD)
  • Planes de sostenibilidad
  • Localización de Objetivos de Desarrollo Sostenible (ODS)

The following are some of the questions that our clients often have on this subject:

Following the entry into force of Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial information and diversity information by certain large companies and certain groups, the member states transposed it into their respective legal systems.

This directive, also called the NFRD (Non Financial Reporting Directive) was transposed to Spain through Law 11/2018, of December 28, which amends the Commercial Code, the revised text of the Capital Companies Act approved by Royal Legislative Decree 1/2010, of July 2, and Law 22/2015, of July 20, on Account Auditing, in matters of non-financial information and diversity.

Esta ley española fue más allá de las exigencias de la NFRD, ampliando significativamente el ámbito de aplicación de empresas obligadas a realizar lo que se conoce como un Estado de Información no Financiera (EINF). La obligatoriedad comenzó en el año 2019 aplicando a las empresas que cumplieran los siguientes criterios:

The average number of employees employed by the capital company or by the companies of the group during the fiscal year exceeds 500.

They must either be considered public interest entities in accordance with auditing legislation, or, for two consecutive fiscal years, meet, at the closing date of each of them, at least two of the following circumstances:

The total of the consolidated asset items is greater than

0

The consolidated annual net sales must be more than

0

The average number of employees employed during the fiscal year is greater than

0

In this regard, according to the Transitional Provision of this law, three years after its entry into force, the scope of application of this law was extended to companies that met the following criteria, which are those that currently apply before the law is repealed by the transposition of the CSRD, which will be discussed in subsequent questions:

More than 250 workers who:

Or have the status of public interest entities in accordance with the legislation on auditing of accounts, with the exception of entities that have the qualification of small and medium-sized enterprises in accordance with Directive 34/2013,

Or, during two consecutive fiscal years, they meet, at the closing date of each of them, at least one of the following circumstances:

  • That the total of the asset items exceeds 20,000,000 euros.
  • The net amount of the annual turnover exceeds 40,000,000 euros.

It is noteworthy that this law, in addition to broadening the scope of application, has also incorporated important points with respect to the NFRD, such as, for example, the obligation of verification by an independent entity, although it does not detail exactly the competencies of this figure or the accreditation required to be able to act as a verifier.

  • The CSRD (Directive 2022/2464/EU) amends, among others, the NFRD Directive in order to correct some of the deficiencies detected in non-financial reporting and to expand the number of companies required to report on sustainability issues.

    The typology of the companies will determine the date on which they will be obliged to report in accordance with the CSRD Directive. The timeline for the application of the regulation is as follows:

    Type of company

    Year of commencement of mandatory

    Grandes empresas de interés público con más de 500 trabajadores sujetas a NFRD

    January 1, 2025. 2024 data report

    Grandes empresas no sujetas de NFRD, es decir, más de 250 empleados y/o volumen de negociosneto de 40 M€ y/o total del balance de 20 M€

    January 1, 2026. 2025 data report

    Listed SMEs, small financial institutions and captive insurance and reinsurance companies

    January 1, 2027. 2026 data report

    Third-country companies with subsidiaries or branches in the European Union

    January 1, 2028. 2027 data report

    Es destacable que para los ejercicios anteriores al 1 de enero de 2028 las PYMES cotizadas podrán optar por no adoptar las obligaciones previstas en la Directiva CSRD, siempre que lo justifiquen brevemente en su informe de gestión.

The CSRD seeks homogeneity in the reporting of sustainability information, and is therefore developing, through EFRAG (European Financial Reporting Advisory Group), the so-called European Sustainability Reporting Standards (ESRS), which will be the mandatory methodological framework for the preparation of corporate sustainability reports.

Dates to keep in mind regarding ESRS:

  1. By June 30, 2023, cross-cutting standards on sustainability issues. On November 22, EFRAG published its work on this first set of standards.
  2. By June 30, 2024, specific standards for certain sectors of activity, standards adapted for listed SMEs and standards for third country companies that exceed the thresholds established by the EU. It should be noted that there is expected to be a delay in the approval of these sectoral ESRS.

The European taxonomy is a classification system used to identify economic activities that are environmentally sustainable. This system determines which activities are considered sustainable and which are not.

The European Taxonomy is closely linked to the Sustainable Finance Disclosure Regulation (SFDR), and its main objective is to provide investors with detailed information about the organizations in which they wish to invest, as well as their level of sustainability and social responsibility.

In addition, this taxonomy also serves as a guide for companies, helping them to align with the Sustainable Development Goals (SDGs) of the 2030 agenda, and thus contribute to building a sustainable future.

In June 2020, the Taxonomy Regulation (2020/852/EU), which contains the criteria for determining whether an activity is considered environmentally sustainable and refers to the disclosure of environmental information. It indicates the six objectives of the taxonomy, which are as follows:

  1. Climate change mitigation
  2. Adaptation to climate change
  3. The sustainable use and protection of water and marine resources
  4. The transition to a circular economy
  5. Pollution prevention and control
  6. Protection and restoration of biodiversity and ecosystems

As of January 1, 2022, the provisions of the Taxonomy Regulation that allow determining whether an activity contributes to climate change mitigation and adaptation are directly applicable in all EU Member States. In order to develop this regulation, the following delegated regulations have been adopted and are applicable as of the same date:

  1. Climate Taxonomy Delegated Regulation (2021/2139/EU), which makes it possible to determine when an activity contributes to climate change mitigation or adaptation.
  2. Delegated Regulation containing the technical rules for the implementation of Art. 8 of the Taxonomy Regulation (2021/2178/EU), which specifies how companies must report on their environmentally sustainable economic activities.

It should be noted that the delegated regulation that will regulate the rest of the taxonomy objectives is under development.

In this regard, to find out if your company is within the scope of this regulation and has to report taxonomy you should check if your organization complies with the provisions of Article 1 of the Taxonomy Regulation (2020/852/EU):

  1. a) measures adopted by Member States or by the Union imposing on financial market participants or issuers any requirements in respect of financial products or corporate bond issues that are offered as environmentally sustainable;
  2. b) financial market participants offering financial products;
  3. (c) undertakings which are subject to the obligation to publish non-financial statements or consolidated non-financial statements pursuant to Articles 19a or 29a of Directive 2013/34/EU of the European Parliament and of the Council, respectively.

It is noteworthy that the obligation to report the taxonomy is linked to the entry into force of the transposition of the CSRD, which will oblige companies that have to prepare a corporate sustainability report to include the taxonomy report in said document.

If your company meets these criteria, you will need to take the following steps:

  1. Identification of the activities carried out in the company. Not only the main CNAE, but all the sub-activities that are developed in all the productive processes.
  2. An eligibility analysis must be performed according to the criteria established in the taxonomy.
  3. In the case of eligible activities, an alignment analysis must be carried out, which involves the development of a series of sub-phases detailed below:
    1. Substantial contribution analysis to one or more of the taxonomy objectives.
    2. Analysis of no significant harm to other taxonomy targets (DNSH)
    3. Analysis of minimum social safeguards.
  4. If the above criteria are met, the activity is considered to be aligned with the taxonomy and the collection of indicators will proceed, which according to the Regulations include the Business Volume, Capex and Opex of such activities.

The concept of "significant detriment" is defined in detail in Article 17 of the Taxonomy Regulation, in relation to the six environmental objectives defined therein.

This is a principle that should be evaluated in all projects and activities that are interested in receiving funding or subsidies, since the ultimate goal is to channel both public and private funds to activities that are considered to be strictly sustainable.

In this sense, an economic activity is considered to cause significant harm:

1) to the objective of the climate change mitigation, where the activity results in significant greenhouse gas emissions;

2) to the objective of the adaptation to climate change, when the activity causes an increase in the adverse effects of current and expected future climatic conditions on itself or on people, nature or assets;

3) to the objective of sustainable use and protection of water and marine resources, when the activity is detrimental:

  1. (i) of the good ecological status or potential of bodies of water, including surface and groundwater, or
  2. ii) of the good ecological status of marine waters;

to the objective of circular economy, especially to the prevention and recycling of waste, when:

  1. (i) such activity generates significant inefficiencies in the use of materials or in the direct or indirect use of natural resources, such as non-renewable energy sources, raw materials, water or soil in one or more phases of the life cycle of the products, in particular in terms of durability and the possibility of repairing, upgrading, reusing or recycling the products,
  2. (ii) the activity results in a significant increase in the generation, incineration or disposal of waste, except for the incineration of non-recyclable hazardous waste; or

(iii) the long-term disposal of waste is likely to cause significant and long-term harm to the environment;

to the objective of the pollution prevention and controlwhere the activity results in a significant increase in emissions of pollutants to air, water or land, compared to the situation before the start of the activity, or

6) to the objective of protection and restoration of biodiversity and ecosystems, when the activity:

  1. (i) is largely detrimental to good ecosystem condition and resilience, or
  2. (ii) is detrimental to the conservation status of habitats and species, particularly those of interest to the Union.

At present, there is much uncertainty about the methodology to be followed to assess the DNSH of the various objectives of the taxonomy. In this regard, one can rely on the questionnaire published by the Ministry in the framework of the Recovery, Transformation and Resilience Plan (PRTR), on the "Technical guide on the application of the "no significant harm" principle under the Recovery and Resilience Mechanism Regulation" published by the European Commission through a Communication by the Commission or, finally, the UNE 0076 standard that develops a "guide for the self-assessment of the no significant harm principle (DNSH principle)".

The concept of Dual Materiality was first formally proposed by the European Commission in its Non-Financial Reporting Guidelines. Dual Materiality refers to the impact of a company's activities on both the external environment and the company's own financial performance. This concept encourages companies to analyze materiality from two perspectives:

  • Impact materiality: Information on the company's impact on the economy, environment and people for the benefit of multiple stakeholders. GRI requires Impact Materiality.

  • Financial materiality: Also called "outside-in", it is the information on the impact of the different sustainability issues analyzed on the company's results, taking into account costs, losses, etc., as well as the creation of economic value.

Es destacable que todas las empresas que se vean obligadas a publicar un Infrome de Sostenibilidad Corporativa según la CSRD deberán utilizar el ESRS (European Sustainability Reporting Standard), el cual incluye como requisito utilizar la Doble Materialidad para la determinación de los temas materiales sobre los que se reportará la información.

In this sense, and doing a brief review of both types of materiality:

  • Impact materiality: This type of materiality is the one developed by GRI 2021, for which an established methodology must be followed that consists of the following steps (Source: Global Reporting Initiative, GRI):

The participation of interest groups is very important in this type of analysis, as they should participate both in the identification of impacts and in their evaluation.

On the other hand, it is notable that organizations that develop activities with GRI sector standards have a lot of advanced work in this regard, since GRI has already carried out an identification and real and potential, negative and positive impacts for certain sectors.

Currently, GRI 11, 12 and 13 are in force and GRI 14 in draft, which correspond to the Oil and Gas (11), Coal (12), Agriculture, Aquaculture and Fishing (13) and Mining (14) sectors. respectively.

  • Financial materiality: In this materiality phase, the impacts evaluated in the impact materiality are analyzed and how these can affect the organization's results both actually and potentially and both negatively and positively. For example, how global warming can influence the performance of a company or how the circular economy can be an opportunity to optimize the use of raw materials and, therefore, the company's costs. The interest groups that usually show the most interest in this part of materiality are the organization's own shareholders and investors.

The huge amount of regulations and market pressure regarding sustainability constitute one of the biggest turning points in the history of our society. It is beginning to be stated that companies “will be sustainable or they will not be”, as a reference to the fact that the viability of companies in the short term is questioned if they do not align with the trend of including sustainability criteria in the development of their operations. activities.

In this sense, the importance of having a sustainability plan is notable. As in all aspects that are taken into account for decision making in organizations, sustainability requires the establishment of objectives, a list of concrete actions, as well as a panel of monitoring indicators to monitor the degree of implementation. of these measures and the achievement of the objectives.

In this way, at Ecoterrae we advise our clients in the development of these sustainability plans, forming part or being an extension of the department responsible for sustainability in the organization. We feel and make ourselves feel like one more in the company.

As a non-exhaustive summary, the phases that make up a sustainability plan development project are shown. If you want more information, you can consult our specific section on the website (include link):

  • Initial diagnostic in which the baseline is established from which this roadmap towards sustainability is started. In this diagnosis, it is advisable to carry out a materiality analysis to determine the material issues on which to propose actions. This analysis must involve the participation of interest groups, as discussed in previous questions.
  • Sustainability policy and definition of purpose, mission, vision and values of the organization, integrating sustainability.
  • Establishment of strategic and specific objectives and development of focused measures to achieve them in the short, medium or long term.
  • Development of a control panel monitoring the degree of implementation of measures and the trend in achieving the set objectives.

Finally, the role that this type of plan plays in the localization of the Sustainable Development Goals (SDG) is notable. It is advisable to link the objectives and measures of the plan with the SDGs in order to make a report on how the organization is contributing to compliance with the SDGs of the 2030 Agenda.

On 23 February 2022, the Commission adopted a proposal for a Directive on corporate sustainability due diligence. The objective of this Directive is to encourage sustainable and responsible business behavior and to anchor human rights and environmental considerations in the operations and corporate governance of companies. The new rules will ensure that companies address the adverse impacts of their actions, including on their value chains within and outside Europe.

This Directive establishes a corporate duty of due diligence. The central elements of this duty are to identify, end, prevent, mitigate and account for negative impacts on human rights and the environment in the company's own operations, its subsidiaries and its value chains. Additionally, certain large companies need to have a plan to ensure that their business strategy is compatible with limiting global warming to 1.5°C in line with the Paris Agreement. Directors have incentives to contribute to sustainability and climate change mitigation goals.

The Directive also introduces duties for directors of EU companies affected by this regulation. These functions include establishing and overseeing the implementation of due diligence processes and integrating due diligence into corporate strategy. Furthermore, in fulfilling their duty to act in the best interests of the company, directors must take into account the consequences of their decisions on human rights, climate change and the environment.

The affected companies must have the following characteristics:

  • Large EU limited liability companies:
    • Group 1: +/- 9,400 companies. More than 500 employees and more than 150 million euros of net turnover worldwide.
    • Group 2: +/- 3,400 companies in high-impact sectors. More than 250 employees and a net turnover of more than 40 million euros worldwide, and operating in defined high-impact sectors, e.g. textiles, agriculture, mineral extraction. For this group, the rules start to apply two years later than for group 1.
  • Companies outside the EU: +/- 2,600 companies in Group 1 and +/- 1,400 in Group 2
    • Companies from third countries active in the EU with billing threshold aligned with Group 1 and 2, generated in the EU.
  • Pymes
    • Micro-businesses and SMEs are not affected by the proposed rules. However, the proposal provides for support measures for SMEs, which could be indirectly affected.

As for next steps, the proposal will go to the European Parliament and the Council for approval. Once adopted, Member States will have two years to transpose the Directive into national legislation and communicate the relevant texts to the Commission.

To enter these indices, certifications and initiatives, and remain in them, companies must undergo a rigorous analysis process that takes into account, among other things, that their decisions take into account ESG criteria.

First of all, regarding the main sustainability indices, they are the Dow Jones Sustainability Index (DJSI) and the FTSE4Good Index, but there are many more.

  • The Dow Jones Sustainability Index o DJSI was created in 1999 and is a key reference point for investors. This index recognizes the best practices of listed companies based on environmental, social and economic criteria.

To be part of this index, companies must pass an analysis carried out by the company RobecoSAM, which focuses on the economic, social and environmental dimensions. In total, this analysis adds up to 600 indicators, which are collected through a questionnaire of approximately 150 questions that are weighted differently depending on the sector. Companies obtain a score between 0 and 100 and it is based on this result that analysts decide whether or not to enter the index.

The DJSI questionnaire is considered one of the most demanding worldwide.

  • The FTSE4Good is one of the indices of the global provider FTSE Russell. This index brings together companies from around the world that have strong ESG practices.

The evaluation to be part of the FTSE4Good is carried out with public information from companies and consists of more than 14 topics and 300 indicators that are included in environmental, social and corporate governance factors. To ensure that companies maintain good practices, information is reviewed every six months.

  • The Carbon Disclosure Project (CDP) analyzes the commitment in the fight against climate change. CDP is a non-profit charity that manages the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts. The global economy views CDP as the well-recognized standard of environmental reporting with the richest and most comprehensive data set on corporate action.

There is a huge demand for environmental disclosure in the market that is constantly growing. According to CDP's official website, 746 investors with more than US$136 trillion in assets and more than 280 large buyers with more than US$6.4 trillion in acquisition spending are asking thousands of companies to disclose their environmental data. through CDP.

On the other hand, there are also certifications and initiatives that are of interest to organizations that are interested in highlighting their efforts in terms of sustainability, such as, for example:

  • Science Based Targets initiative (SBTi). Science-based targets provide companies with a clearly defined path to reducing emissions in line with the goals of the Paris Agreement. More than 4,000 companies around the world are already working with SBTi.

Targets are considered “science-based” if they are in line with what the latest climate science considers necessary to meet the goals of the Paris Agreement: limiting global warming to well below 2°C above. of pre-industrial levels and make efforts to limit warming to 1.5°C.

The SBTi is particularly interested in companies in the highest-emitting sectors, which play a crucial role in ensuring the transition to a zero-carbon economy. It does not currently evaluate targets for cities, local governments, public sector institutions, educational institutions, or nonprofit organizations.

  • B corporations, or B Corps, are companies verified by B Lab to meet high standards of social and environmental performance, transparency and accountability.

The B Impact Assessment evaluates a company's practices and results in five categories: governance, workers, community, environment and customers.

For this evaluation, B Corp makes available to interested companies a free digital tool that can help companies measure, manage and improve performance with a positive impact on the environment, communities, customers, suppliers, employees and shareholders, used by more than 150,000 organizations.

It is noteworthy that the first step to B Corp certification is to receive a minimum verified score of 80 points in said evaluation.

Success stories

Objetivos principio DNSH

Qué es el principio DNSH

Para aquellas empresas y organizaciones que buscan participar en iniciativas como el Plan de Recuperación, Transformación y Resiliencia (PRTR) y acceder a fondos europeos, el

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