IRO-1 – Description of the processes to identify and assess material water and marine resources-related impacts, risks and opportunities

🗂️ ESRS E3 Water and Marine Resources, page <number>

The undertaking shall describe the process to identify material impacts, risks and opportunities and shall provide information on:

(a) whether and how the undertaking it has screened its assets and activities in order to identify its actual and potential water and marine resources-related impacts, risks and opportunities in its own operations and its upstream and downstream value chain, and if so the methodologies, assumptions and tools used in the screening;

(b) whether and how it has conducted consultations, in particular, with affected communities.

Application Requirements

AR 1. When conducting a materiality assessment on environmental subtopics, the undertaking shall assess the materiality of water and marine resources in its own operations and its upstream and downstream value chain, and may consider the four phases below, also known as the LEAP approach:

(a) Phase 1: locate where in its own operations and along the value chain the interface with nature takes place;

(b) Phase 2: evaluate the dependencies and impacts;

(d) Phase 4: prepare and report the results of the materiality assessment.

AR 2. The materiality assessment for ESRS E3 corresponds to the first three phases of this LEAP approach, the fourth phase addresses the outcome of the process.

AR 3. The processes to assess the materiality of impacts, risks and opportunities shall consider the provisions in ESRS 2 IRO-1 Description of the processes to identify and assess material impacts, risks and opportunities, and IRO-2 Disclosure Requirements in ESRS covered by the undertaking’s sustainability statement.

AR 4. The sub-topics related to water and marine resources covered by the materiality assessment include:

(a) water, which encompasses the consumption of surface water, groundwater, as well as withdrawals and discharges of water; and

(b) marine resources, which encompasses the extraction and use of such resources and associated economic activities.

AR 5. In phase 1, to locate where there are areas at water risk, and areas where there is an interface with marine resources that could lead to material impacts and dependencies in its own operations and along its upstream and downstream value chain, the undertaking may consider:

(a) the locations of direct assets and operations and related upstream and downstream activities across the value chain;

(b) the sites located in areas at water risk, including areas of high-water stress; and

AR 6. The undertaking shall consider river basins as the relevant level for assessment of locations and combine that approach with an operational risk assessment of its facilities and the facilities of suppliers with material impacts and risks.

AR 7. The undertaking shall consider the criteria for defining the status of water bodies according to the relevant Annexes of Directive 2000/60/EC (Water Framework Directive) as well as the guidance documents provided for implementation of the Water Framework Directive. The list of guidance documents can be accessed under the European Commission’s Environment home page.

AR 8. In phase 2, to evaluate its impacts and dependencies for each priority location identified under AR 5, the undertaking may:

(a) identify business processes and activities that lead to impacts and dependencies on environmental assets and ecosystem services;

(b) identify water and marine resources-related impacts and dependencies across the undertaking’s value chain; and

AR 9. For the identification of water and marine resources-related dependencies, the undertaking may rely on international classifications such as the Common International Classification of Ecosystem Services (CICES).

AR 10. When identifying its marine resources-related dependencies, the undertaking shall consider if it depends upon key marine resources-related commodities, including but not limited to gravels and seafood products.

AR 11. Marine resources are defined according to their use by human societies and must be considered in relation to the pressure they are subject to. Some of the pressure indicators are presented in other ESRS, namely microplastics and emissions to water in ESRS E2 and plastic waste in ESRS E5.

AR 12. Examples of marine resources dependencies which may be considered by the undertaking are:

(a) dependencies on commercially exploited fish and shellfish in its own operations and its upstream and downstream value chain; and

(b) fishing activity that involves mobile bottom trawling, which can also have negative impacts on the seabed.

AR 13. In Phase 3, to assess its material risks and opportunities based on the results of Phases 1 and 2, the undertaking may :

(a) identify transition risks and opportunities in its own operations and its value chain by the categories of:

i. policy and legal: e.g., introduction of regulation or policy (e.g., changes such as increased water protection, increased quality of water regulations, regulation of flows of water supply), ineffective governance of water bodies or marine resources, in particular across boundaries (e.g., transboundary governance and cooperation) resulting in water or oceans degradation, exposure to sanctions and litigation (e.g., non-respect of permits or allocations; negligence towards or killing of threatened marine species), enhanced reporting obligations on marine ecosystems and related services;

ii. technology: e.g., substitution of products or services by products or services with a lower impact on water and marine resources, transition to more efficient and cleaner technologies (i.e., with lower impacts on oceans and water), new monitoring technologies (e.g., satellite), water purification, flood protection;

iii. market: e.g., shifting supply, demand and financing, volatility or increased costs of water or marine resources;

iv. reputation: e.g., changing societal, customer or community perceptions as a result of an organisation’s impact on water and marine resources; and

v. contribution to systemic risks via its own operations and its upstream and downstream value chain, including the risks that a marine ecosystem collapses or the risks that a critical natural system no longer functions (e.g., tipping points are reached, summing physical risks);

(b) identify physical risk including water quantity (water scarcity, water stress), water quality, infrastructure decay or unavailability of some marine resources-related commodities (e.g. the rarefaction of some species of fish or other underwater marine living organisms sold as products by the undertaking) leading for instance to the impossibility of running operations in certain geographical areas; (c) identify opportunities categorised by:

i. resource efficiency: e.g., transition to more efficient services and processes requiring less water and marine resources;

ii. markets: e.g., development of less resource-intense products and services, diversification of business activities;

iii. financing: e.g., access to green funds, bonds or loans; iv. resilience: e.g., diversification of marine or water resources and business activities (e.g., starting a new business unit on ecosystem restoration), investing in green infrastructures, nature-based solutions, adopting recycling and circularity mechanisms that reduce the dependencies on water or marine resources; and

v. reputation: positive stakeholder engagement as a result of a proactive stance on managing nature-related risks (e.g., leading to preferred partner status).

AR 14. The undertaking may rely on primary, secondary or modelled data collection or other relevant approaches to assess material impacts, dependencies, risks and opportunities, including Commission Recommendation 2021/2279 on the use of the Environmental Footprint methods to measure and communicate the life cycle environmental performance of products and organisations (Annex I – Product Environmental Footprint; Annex III – Organisation Environmental Footprint).

AR 15. When providing information on the outcome of the materiality assessment, the undertaking shall consider:

(a) a list of geographical areas where water is a material issue for the undertaking’s own operations and its upstream and downstream value chain;

(b) a list of marine resources-related commodities used by the undertaking which are material to the good environmental status of marine waters as well as for the protection of marine resources; and