The roll-out of the Corporate Sustainability Reporting Directive (CSRD) marks a major milestone towards improving the quality of corporate sustainability information across Europe.

It also puts more than 50,000 companies into unfamiliar territory with its complex reporting requirements.

If your business is one of them, getting your head around the European Sustainability Reporting Standards (ESRS) – including ESRS E4 on biodiversity and ecosystems – should be a top priority. Besides regulatory compliance, it's a powerful tool to shape a more sustainable future for your business and the planet.

But what exactly is ESRS E4 and why is it so important? What are its core requirements? And how can you implement ESRS E4 effectively? Read on for everything you need to know to manage this standard with confidence.

What is ESRS E4 exactly?

ESRS E4 focuses on biodiversity and ecosystems, highlighting their essential role in sustainability. Biodiversity supports critical ecosystem services like pollination, water purification, and climate regulation, yet it is under severe threat from deforestation, habitat destruction, overexploitation, and climate change. These pressures jeopardize both ecological health and economic stability.

ESRS E4 requires companies to report on their impacts and dependencies on biodiversity and ecosystems, covering areas such as land use, habitat restoration, and species protection. This ensures alignment with global biodiversity goals while increasing transparency and accountability.

Ecosystem conservation is equally critical in ESRS E4, as healthy ecosystems sustain biodiversity and underpin resilience against environmental and economic risks. By addressing impacts and opportunities through ESRS E4, businesses can adopt sustainable practices, mitigate risks, and support global ecological goals.

The ESRS E4 Disclosure Requirements

General Disclosures

To align ESRS 2 general disclosures with ESRS E4 for biodiversity and ecosystems, companies should focus on the following key areas belonging to ESRS 2:

1. Governance (ESRS 2 Chapter 2): Describe board oversight and responsibility structures for biodiversity, including any committees or dedicated teams managing these issues.
2. Strategy (ESRS 2 Chapter 3): Outline the transition plan (E4-1) detailing how biodiversity goals are integrated into long-term strategy, including timelines, targets, and key initiatives.
3. Impact, risk, and opportunity management (ESRS 2 Chapter 4): Disclose processes for identifying, assessing, and managing biodiversity risks, including methodologies used and any significant impacts identified.
4. Optional topical disclosures (ESRS 2 SBM-3): Companies may choose to present biodiversity risks, impacts, and opportunities alongside their business model to highlight alignment with sustainability objectives.

This structured approach helps companies embed biodiversity into governance, strategy, and risk management, providing stakeholders with a comprehensive view of their environmental commitments.

Strategy

Disclosure Requirement E4-1: Transition plan for biodiversity and ecosystems

Under ESRS E4-1, companies must disclose how biodiversity and ecosystem-related impacts, risks, and opportunities shape their strategy and business model. This disclosure demonstrates the resilience of their approach and its alignment with local, national, and global biodiversity goals.

Key elements to disclose include:

1. Resilience assessment: Evaluate and report how the current business model and strategy respond to biodiversity-related risks (physical, transitional, and systemic).
2. Scope of analysis: Define the scope across operations and value chains to show where biodiversity risks impact the business.
3. Assumptions and time horizons: Share key assumptions and the time frames considered in the analysis.
4. Results: Summarize findings from the resilience analysis, highlighting vulnerabilities and readiness.
5. Stakeholder engagement: Describe engagement with relevant stakeholders, including indigenous and local knowledge holders.

Companies may cross-reference disclosures with ESRS 2 SBM-3 if applicable and are encouraged to align their plans with frameworks like the Kunming-Montreal Global Biodiversity Framework and the EU Biodiversity Strategy for 2030. This approach provides transparency on how biodiversity considerations integrate into long-term business planning.

Disclosure Requirement SBM-3: Material impacts, risks, and opportunities in strategy and business model

Under SBM-3, companies must disclose how their operations impact biodiversity-sensitive areas. This includes providing a list of significant sites under operational control, detailing:

1. Activities affecting biodiversity-sensitive areas: Identify activities at each site that negatively impact sensitive ecosystems.
2. Impact and dependency breakdown: Classify sites based on identified impacts and dependencies, noting the ecological baseline conditions of each area.
3. Biodiversity-sensitive areas: Specify these areas to allow users to identify their location and relevant authorities involved.

Companies must also disclose whether their activities contribute to land degradation, desertification, or soil sealing, and if they have operations impacting threatened species. This enables stakeholders to assess environmental vulnerabilities and biodiversity risks directly associated with the business model.

Impact, risk, and opportunity management

Disclosure Requirement related to ESRS 2 IRO-1: Identification of biodiversity and ecosystem-related impacts, risks, and dependencies

Under ESRS 2 IRO-1, companies are required to outline their processes for identifying and assessing biodiversity and ecosystem impacts, risks, dependencies, and opportunities. Key requirements include:

1. Impact and risk assessment: Companies must assess how their activities and supply chain impact biodiversity, including potential disruptions to ecosystem services. This assessment should cover transition, physical, and systemic risks.
2. Community engagement: Firms must engage with affected communities, especially when:
   • Raw material sourcing might harm biodiversity or communities.
   • Communities are likely to be impacted and were included in the materiality assessment.
   • Operations could affect ecosystem services, with mitigation plans to minimize these impacts if they are unavoidable.
3. Scenario analysis: Companies should disclose if they use biodiversity scenario analysis to assess risks over different time horizons. This includes explaining why specific scenarios were chosen and whether they align with international expectations and scientific guidance.
4. Sensitive area reporting: Companies must report if their sites are located near biodiversity-sensitive areas or protected habitats. They should also disclose whether biodiversity protection measures, such as compliance with EU Directives and international standards, have been implemented to mitigate negative impacts on natural habitats and species.

Disclosure Requirement E4-2: Policies related to biodiversity and ecosystems.

Under ESRS E4-2, companies must disclose policies for managing material impacts, risks, dependencies, and opportunities associated with biodiversity and ecosystems. This includes specifying how these policies address:

1. Scope of policies: Coverage of biodiversity impacts, dependencies, risks, and opportunities, including those specified in ESRS E4 AR 4, and relevant aspects within the value chain.
2. Traceability and sourcing: Mechanisms for tracking products, components, and raw materials that impact biodiversity, ensuring sustainable sourcing, and monitoring ecosystem health.
3. Social impact: How the company’s biodiversity policies consider social consequences.

Additionally, companies must confirm if they have specific policies covering:

• Biodiversity and ecosystem protection for sites near biodiversity-sensitive areas,
• Sustainable land and agriculture practices,
• Sustainable ocean and marine practices, and
• Deforestation mitigation policies.

These disclosures provide transparency on a company's commitment to sustainable ecosystem management and responsible resource use across operations and supply chains.

Disclosure Requirement E4-3: Actions and resources dedicated to biodiversity and ecosystems.

Under ESRS E4-3, companies are required to disclose their biodiversity and ecosystems-related actions and the resources allocated to implement them. This requirement provides insight into how the company’s actions support biodiversity and ecosystem policy objectives and targets.

Key elements to disclose include:

1. Description of actions and resources: Companies must describe key actions and resources in alignment with the mandatory content defined in ESRS 2 MDR-A (Actions and resources in relation to material sustainability matters). This ensures a structured approach to reporting on actions taken and resources committed.
2. Mitigation hierarchy application: Companies may disclose how they have applied the mitigation hierarchy in managing biodiversity impacts. This includes:
   • Avoidance: Preventing impacts before they occur.
   • Minimization: Reducing the severity of unavoidable impacts.
   • Restoration/rehabilitation: Restoring ecosystems after impacts have occurred.
   • Compensation or offsets: Compensating for impacts that cannot be avoided, minimized, or restored.
3. Biodiversity offsets: If biodiversity offsets are included in the action plan, companies must disclose:
   • The aim of each offset and the key performance indicators (KPIs) used to assess its effectiveness.
   • The financing effects (both direct and indirect costs) of the biodiversity offsets in monetary terms.
   • A description of offsets, including the area, type, quality criteria, and standards that the offsets meet.
4. Incorporation of local and indigenous knowledge: Companies should describe whether and how they have integrated local and indigenous knowledge and nature-based solutions into their biodiversity actions. This emphasizes the importance of using region-specific knowledge and sustainable practices to enhance biodiversity conservation efforts.

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Metrics and targets

Disclosure Requirement E4-4: Targets related to biodiversity and ecosystems.

Under ESRS E4-4, companies must disclose the biodiversity and ecosystem-related targets they have set. This requirement helps stakeholders understand how these targets support biodiversity policies and address material impacts, dependencies, risks, and opportunities.

Key elements of the disclosure include:

1. Alignment with ecological thresholds:
   • Specify if ecological thresholds and impact allocations were applied when setting targets.
   • Detail the identified ecological thresholds, the methodology used to determine them, and whether thresholds are entity-specific.
   • Explain how responsibility for meeting these thresholds is distributed within the company.
2. Alignment with global and national frameworks:
   • Indicate if targets are informed by or aligned with frameworks like the Kunming-Montreal Global Biodiversity Framework, the EU Biodiversity Strategy for 2030, and relevant biodiversity and ecosystem policies or legislation.
3. Relation to biodiversity impacts:
   • Describe how the targets address biodiversity and ecosystem impacts, dependencies, risks, and opportunities across the company’s operations and within its value chain.
4. Geographical scope:
   • Define the geographical scope of the targets, where relevant, to contextualize the reach and focus of biodiversity efforts.
5. Use of biodiversity offsets:
   • Disclose if biodiversity offsets were factored into target-setting, specifying their role in achieving the targets.
6. Application of the mitigation hierarchy:
   • Clarify how targets align with steps in the mitigation hierarchy, including avoidance, minimization, restoration, rehabilitation, compensation, or offsets.

Disclosure Requirement E4-5: Impact metrics tracking biodiversity and ecosystem change.

Under ESRS E4-5, companies must report metrics to assess their material impacts on biodiversity and ecosystem changes. This includes:

1. Sensitive areas: Disclose the number and area (in hectares) of sites owned or managed near biodiversity-sensitive areas that are impacted.
2. Land-use and ecosystem condition: Report metrics on land-use changes, condition, and ecosystem structure, such as:
   • Land conversion over time (e.g., deforestation).
   • Management changes in ecosystems (e.g., agricultural intensification).
   • Landscape fragmentation and changes in habitat connectivity.
3. Functional and structural connectivity: Measure metrics like species movement across habitats and the physical arrangement of habitat patches.
4. Invasive species: If relevant, disclose metrics on pathways and management of invasive species risks.
5. Species-specific metrics: Report on metrics related to species health, including:
   • Population size and extinction risk.
   • Species status and habitat conditions for threatened species.
6. Ecosystem state metrics: Disclose metrics on:
   • Ecosystem coverage and quality, like habitat cover.
   • Multi-species indicators and ecosystem health relative to a reference state.
   • Functional connectivity across ecosystems.

These metrics provide insight into the company’s biodiversity impacts, addressing both direct operational influences and ecosystem health changes.

Disclosure Requirement E4-6: Anticipated financial effects from material biodiversity and ecosystem-related risks and opportunities

Under ESRS E4-6, companies must disclose the anticipated financial effects of material biodiversity and ecosystem-related risks and opportunities. This disclosure is intended to provide insight into how these environmental factors may impact a company’s financial position, performance, and cash flows over short-, medium-, and long-term horizons.

Key elements of the disclosure include:

1. Anticipated financial effects of risks:
   • Disclose financial impacts due to biodiversity-related risks and dependencies. Describe how these risks could materially influence financial performance and cash flows across different time horizons.
2. Anticipated financial effects of opportunities:
   • Report any potential financial benefits due to biodiversity-related opportunities that could positively influence the company’s financial performance.
3. Quantification of financial effects:
   • Where possible, quantify the anticipated financial effects in monetary terms. If quantification is not feasible without significant effort, provide qualitative information.
   • Quantification may be expressed as a single amount or a range, adhering to ESRS 1’s qualitative standards if exact values cannot be determined.
4. Description of impacts and dependencies:
   • Detail the specific impacts and dependencies related to the anticipated financial effects and the relevant time frames.
5. Assumptions and uncertainty:
   • Outline critical assumptions used in estimating financial effects and note any sources or levels of uncertainty associated with these estimates.

This structured disclosure under E4-6 ensures stakeholders can understand the potential financial implications of biodiversity and ecosystem-related risks and opportunities, enhancing transparency in the company’s approach to environmental sustainability.

7 practical steps for implementing ESRS E4 Disclosure Requirements

1. Conducting a double materiality assessment for ESRS E4

To effectively implement ESRS E4, companies need to conduct a double materiality assessment focused - among other things - on biodiversity and ecosystem-related issues. This is built around the four sub-topics of ESRS E4:

• Direct impact drivers of biodiversity loss
• Impacts on the state of species
• Impacts on the extent and condition of ecosystems
• Impacts and dependencies on ecosystem services

For each sub-topic, evaluate whether your company has identified any impacts, risks, and opportunities (IROs) associated with it. Assessing the materiality of these IROs will help determine if ESRS E4 qualifies as a material topic. Below is an overview of each sub-topic to guide your assessment of IROs in these areas.

Direct drivers of impact loss: Identify specific business activities that directly cause biodiversity loss, such as land use changes, pollution, resource extraction, or emissions. Assess how these drivers affect local and global biodiversity, particularly within the company’s operational and supply chain footprint.

Impact on the state of species: Evaluate how company operations impact species diversity and population health, especially for endangered or vulnerable species. This includes analyzing habitat disturbance, mortality risks, and species displacement due to business activities.

Impact on the extent and condition of ecosystems: Assess the effect of operations on the size, quality, and connectivity of ecosystems, such as forests, wetlands, and marine environments. This includes tracking changes in ecosystem integrity, degradation, or fragmentation caused by business processes.

Impact and dependencies on ecosystem services: Identify the ecosystem services the company relies on, such as pollination, water purification, and climate regulation, and evaluate how its activities impact these services. Understanding dependencies can help the company mitigate risks associated with the loss or degradation of these services.

By focusing on these sub-topics, companies can prioritize biodiversity and ecosystem issues most material to their operations and develop effective strategies for managing their impact and dependencies on natural resources.

2. Develop policies addressing biodiversity and ecosystem conservation

To meet ESRS E4-2, companies should establish policies focused on biodiversity protection, ecosystem restoration, and degradation prevention. These policies should outline how the company addresses biodiversity impacts, risks, and opportunities, and include commitments to avoid, minimize, and remediate harm across its operations and value chain. 

3. Create an action plan for biodiversity and ecosystems

To comply with ESRS E4-3, companies should develop an action plan detailing specific steps and resource allocations to support biodiversity conservation and ecosystem health. This plan should include targeted actions such as habitat restoration, species protection initiatives, and measures to minimize biodiversity impacts across operations. Key actions may involve implementing the mitigation hierarchy—avoidance, minimization, restoration, and, where necessary, offsets—to address biodiversity impacts effectively. The action plan should also specify funding, timeframes, and responsible teams, ensuring that resources are dedicated to achieving measurable outcomes. Incorporating local and indigenous knowledge, as well as nature-based solutions, can enhance these efforts. By outlining clear actions and resource commitments, companies provide transparency and demonstrate their proactive approach to biodiversity and ecosystem management.

4. Set Clear biodiversity and ecosystem targets

To align with ESRS E4-4, companies should establish clear, measurable targets for biodiversity preservation and ecosystem restoration. These targets should address key issues such as reducing habitat disturbance, enhancing ecosystem connectivity, increasing protected green areas, or restoring degraded ecosystems. 

Targets should be specific and trackable, linked to the company’s biodiversity policies and aligned with frameworks like the Kunming-Montreal Global Biodiversity Framework or the EU Biodiversity Strategy for 2030.

5. Monitor and report on biodiversity and ecosystem metrics

To comply with ESRS E4-5, companies should regularly monitor and report on biodiversity and ecosystem metrics to assess their impacts and track progress toward conservation goals. Key metrics might include land-use changes, habitat restoration, species population trends, and ecosystem health indicators such as connectivity or resilience. 

These metrics should be tied to the company’s material impacts and dependencies, addressing biodiversity-sensitive areas, threatened species, or critical ecosystem services. 

6. Assess and disclose financial risks and opportunities

To align with ESRS E4-6, companies should assess and disclose the financial implications of biodiversity-related risks and opportunities, focusing on how ecosystem changes or conservation efforts may affect their financial performance, position, and cash flows. 

This includes evaluating risks such as biodiversity loss, resource scarcity, or regulatory changes, as well as opportunities like sustainable resource use or ecosystem restoration initiatives. Companies should quantify these financial effects, where possible, in monetary terms or provide qualitative insights if quantification is not feasible. 

Disclosures should specify the critical assumptions and timeframes considered in the analysis, offering a clear view of how biodiversity impacts are integrated into financial planning and decision-making. 

7. Select the right CSRD Software for biodiversity and ecosystem management

To enhance compliance with ESRS E4 requirements, organizations should implement advanced tools and software for efficient data collection, analysis, and reporting on water and marine resources.

By automating data processes and integrating analytics, organizations can make informed, proactive decisions that improve water management practices and support sustainability goals, ultimately simplifying the reporting process and enhancing transparency. Coolset helps users achieve CSRD compliance by simplifying the reporting process and enhancing transparency in reporting data points. Try out our software below, or book a demo here.

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