Want to know how to successfully implement the requirements of ESRS E1? This standard is central to climate reporting in the EU and requires precise disclosures on emissions, risks, and opportunities. German companies in particular face the challenge of meeting both European and national requirements.
Key Points:
With a structured approach and close collaboration between teams, you can not only meet legal requirements but also remain competitive in the long term.
The ESRS E1 disclosure requirements form the core of European climate reporting. They require German companies to precisely capture their climate impacts and analyze the financial consequences of climate change on their business models. This involves not only emissions reporting but also a comprehensive assessment of climate-related risks.
This standard demands a structured approach that considers both the company's influence on the climate and the risks from climate change for the company. Companies are required to capture these aspects quantitatively. The following sections examine the specific requirements and implementation strategies in detail.
German companies must present detailed plans describing their measures for emissions reduction and climate change adaptation. These transition plans should be structured chronologically and contain clear interim targets for short-, medium-, and long-term implementation.
A central component is the documentation of adaptation strategies, which requires a well-founded analysis of physical climate risks. These include extreme weather events or temperature changes that can affect production sites, supply chains, and business processes.
For industry, it's particularly important to concretely present decarbonization measures. This includes investments in renewable energy, increasing energy efficiency, and converting production processes. These measures must not only be technically well-conceived but also embedded in the business strategy to remain competitive in the long term.
Besides strategic plans, the precise capture of greenhouse gas emissions plays a key role. Reporting according to ESRS E1 requires complete coverage of all three emission categories with clearly defined methods and standards established by the Greenhouse Gas Protocol.
For reporting, companies must state their emissions in tons of CO₂ equivalent. Data quality is crucial here, as reports undergo limited assurance. To meet requirements, robust systems and internal control mechanisms are necessary.
Collaboration between finance, sustainability, and risk teams is indispensable for quantitatively assessing the financial risks of climate change. Digital tools can facilitate data collection and reporting by ensuring consistency, traceability, and auditability.
Another central aspect is the quantification of financial risks and opportunities arising from climate change. The CSRD gradually introduces the obligation to assess these financial impacts. The goal is to encourage companies to integrate climate issues more strongly into their financial planning and business strategies.
Companies must analyze both physical and transition risks. These assessments should follow TCFD recommendations and consider at least two contrasting warming scenarios – with short-, medium-, and long-term perspectives.
The financial analysis should cover various aspects, including:
Additionally, companies must disclose what portion of their revenues comes from activities with physical or transition risk exposure. The share of financial risks covered by transition plans must also be quantified.
To successfully implement ESRS E1 requirements, you need a clear strategy that approaches all steps in a structured manner. It's best to start 18–24 months before the first reporting year to collect necessary data, adapt existing systems, and comply with German legal requirements. A central building block is the double materiality assessment, which serves as the foundation for all further measures.
The double materiality assessment is the first and central step in implementing ESRS E1. You analyze both your company's impacts on the climate (impact materiality or "inside-out" perspective) and climate-related risks that can influence your financial performance (financial materiality or "outside-in" perspective).
An important first step is defining and involving relevant stakeholders. This includes internal teams from sustainability, finance, and risk management as well as external partners like customers, suppliers, and investors.
The entire process comprises several steps: First, you assess your company's impacts on the climate and identify resulting risks and opportunities. Essential is establishing clear materiality thresholds that determine when an Impact, Risk, or Opportunity (IRO) is considered relevant. These thresholds should be aligned with your business objectives and stakeholder expectations.
"To claim that climate change is immaterial to your business (and therefore omit all disclosure requirements related to ESRS E1), you'd need to provide a detailed explanation of the conclusions of your materiality assessment. This explanation must also include a forward-looking analysis assessing whether climate change might become material for your business in the future."
Evaluate each relevant factor by severity and probability of occurrence. While actual IROs are assessed by their impact, potential IROs receive additional evaluation of their likelihood of occurrence. It's crucial to treat impact and financial materiality equally.
Integrating ESRS E1 into your existing ESG structures works best with a strategic approach that builds on existing systems. Start with an inventory to check which data sources and processes already exist.
You can use existing systems for capturing Scope 1, Scope 2, and Scope 3 data. Particularly challenging is the complete capture of Scope 3 data along the entire value chain – digital tools can help ensure consistency here.
Collaboration between different teams is indispensable: finance, sustainability, and risk management departments must work hand in hand to precisely assess the financial impacts of climate change. This often means adapting existing reporting channels and creating new communication structures.
Another critical point is data quality assurance. Internal control mechanisms help you ensure the accuracy and completeness of captured information. After system integration comes adaptation to German legal requirements.
Implementing ESRS E1 requires compliance with the CSR Directive Implementation Act (CSR-RUG) and other relevant regulations. The final German version of ESRS E1 was published on July 31, 2023, as part of the EU Commission's delegated act.
You must ensure that all required data is captured in the legally prescribed form to guarantee compliance with German law.
A particularly important point is sanctions for violations. If reporting obligations are violated, fines between €50,000 and €10 million or up to 5% of annual group turnover are threatened.
As mentioned, it's advisable to begin implementation at least 18–24 months before the first reporting year. This early start ensures that necessary data is collected timely and in accordance with ESRS standards.
Another aspect is coordination with existing reporting obligations under the Commercial Code (HGB) and other relevant regulations. This ensures consistent and contradiction-free reporting that meets German legal system requirements.
Implementing ESRS E1 brings a wealth of climate-related data that must be captured and evaluated. In total, over 1,100 data points must be considered, composed of 10 topics, 37 sub-topics, and 72 sub-sub-topics of the ESRS framework – a clear structure is therefore essential.
A central indicator is CO₂ intensity (t CO₂e/million € revenue), which relates climate impacts to economic performance. Equally important are energy consumption in MWh, the share of renewable energy, and the capture of greenhouse gas emissions.
Three categories, the so-called scopes, are distinguished:
You can find more details in the "GHG Emissions Reporting" section. These metrics are not only reporting obligations but also the basis for specialized tools that simplify data management and analysis.
To efficiently manage the multitude of KPIs, specialized software solutions come into play. These tools handle complex tasks, ensure compliance, and help keep costs for data collection, management, and reporting in view.
Many of these programs offer modules specifically tailored to ESRS E1, including:
Another advantage: Such solutions can often be seamlessly integrated into existing systems and support standards like the Greenhouse Gas Protocol (GHGP). This not only increases data reliability but also facilitates audits.
Precise capture of these KPIs is crucial for better evaluating climate-related risks and opportunities later. With the right tools and a clear strategy, implementing ESRS E1 becomes much more manageable.
After defining reporting metrics, the next step is managing the associated climate risks and opportunities. Systematic assessment and management of these risks and opportunities is central to implementing ESRS E1. Based on the double materiality analysis, German companies face the challenge of meeting both short-term compliance requirements and remaining resilient in the long term.
Well-structured risk management begins with identifying relevant climate factors for your business model. ESRS E1 distinguishes between acute physical risks like floods or heat waves, chronic physical risks like sea level rise or long-term temperature changes, and transformation risks arising from regulatory changes, technological developments, or market shifts. Risks are assessed across three time periods: short-term (up to 5 years), medium-term (5–15 years), and long-term (over 15 years).
Physical risks depend heavily on geographic location. Floods, heat waves, or drought periods can affect production sites to varying degrees. Protective measures must therefore be individually tailored to respective locations. At the same time, you should keep the vulnerability of your entire supply chain in view, as this often has indirect impacts on the company.
Transformation risks arise from the transition to a climate-neutral economy. Regulatory risks include, for example, stricter emission requirements or new CO₂ pricing systems. Technological risks occur when established business models are displaced by more sustainable alternatives. Changed customer preferences or new competitive structures can also bring market risks.
Good risk management combines quantitative and qualitative approaches and should be embedded in your existing risk management systems. This way, climate risks are perceived as part of the company's overall risk profile.
More and more companies are using internal CO₂ prices, which often range between €25 and €200 per ton. These prices are based on external references like the EU Emissions Trading System, supplemented by company-specific factors to better reflect climate-related costs.
For greenhouse gas reduction, the rule is avoidance before efficiency before substitution. This means: first, unnecessary emissions are avoided, then energy efficiency is increased, and finally fossil fuels are replaced with renewable alternatives. Particularly with Scope 3 emissions – indirect emissions from the supply chain – close collaboration with your partners is crucial, as this is often where the greatest savings potential lies.
The development of reduction pathways requires thorough analysis of emission sources. Science-based Targets provide a scientifically sound framework for aligning your goals with Paris Climate Agreement requirements.
A comprehensive decarbonization strategy considers all energy-related processes in your company. The first step is reducing energy consumption through efficiency measures. The remaining demand is then covered by renewable energy.
For particularly energy-intensive processes, advanced technologies like electrification of heating processes, use of green hydrogen, or carbon capture technologies often come into play. The timing of these measures is crucial to avoid so-called stranded assets – investments that are no longer usable – and achieve ambitious climate goals.
A well-thought-out decarbonization plan also includes the development of new business models and products. Sustainable innovations can not only contribute to emissions reduction but also open new revenue sources and strengthen your competitiveness. This way, climate protection becomes an opportunity for growth and progress.
Based on the previous implementation strategies, we summarize the central points that are significant for ESRS E1 compliance.
ESRS E1 requires a comprehensive approach from German companies that goes far beyond pure legal requirements. Given that over 15,000 companies in the EU will be affected by the CSRD from 2024, transparent reporting on climate topics becomes an important competitive factor.
Early double materiality analysis and review of existing ESG systems can give companies a clear advantage. The nine disclosure requirements (E1-1 to E1-9) go beyond capturing Scope 1 and Scope 2 emissions and require detailed analysis of Scope 3 emissions along the entire value chain.
The importance of Scope 3 emissions makes clear how important close collaboration with suppliers is. In many industries, these indirect emissions account for more than 70% of total greenhouse gas emissions. Strategic cooperation with suppliers is therefore essential.
Automated data collection tools are indispensable for efficient Scope 3 emissions reporting. Digital solutions can make the difference, especially in validating complex data.
Companies also face the challenge of transparently presenting the financial impacts of climate risks and opportunities. Internal CO₂ prices become an important management tool that must be disclosed if it exists. These financial assessments should be integrated into comprehensive business planning.
Open communication of climate goals to stakeholders not only strengthens credibility but also reduces the risk of greenwashing. Investors, customers, and business partners increasingly evaluate ESRS E1 compliance as crucial for competitiveness. Companies that invest early in decarbonization strategies can also benefit from better access to sustainable financing.
Integration into existing business processes is another central aspect: ESRS E1 should not be viewed as an isolated compliance task but as an integral part of business strategy. Clear responsibilities and regular training of involved teams create the foundation for successful implementation.
As regulatory requirements continue to evolve, continuous adaptation remains essential. Companies should establish processes to flexibly respond to changes in reporting standards – both at EU level and regarding national laws like the Supply Chain Due Diligence Act. Long-term embedding of these aspects in corporate strategy ensures not only compliance but also competitiveness.
Companies can successfully integrate double materiality into their processes by specifically examining both the impacts of their business activities on environment and society (impact materiality) and the influences of external sustainability factors on the company (financial materiality).
For this, it's important to create clear and comprehensible processes that identify, assess, and document relevant topics. These should be closely integrated with strategic planning, risk management, and sustainability reporting. Regular reviews and adjustments are also essential to ensure the assessment remains current and meets ESRS E1 requirements.
Such a structured approach not only provides security in complying with standards but also creates a solid foundation for specifically responding to opportunities and risks in the context of climate change.
To effectively capture and report Scope 3 emissions according to ESRS E1 requirements, specialized digital solutions play a central role. Such tools facilitate precise data collection along the entire value chain, simplify handling complex information, and support creating reports that meet requirements.
Particularly useful are software solutions specifically designed for analyzing and measuring indirect emissions. These often offer intuitive dashboards, automated data processing, and flexible customization options to address individual company needs. With these technologies, you can not only meet ESRS E1 requirements but also specifically pursue and strengthen your sustainability goals.
Companies can specifically integrate climate risks and opportunities into their business strategy by relying on scenario analyses and risk assessments. These methods enable better understanding of potential financial impacts of climate change and making informed decisions based on this understanding.
At the same time, numerous opportunities present themselves: Through efficiency improvements, sustainable innovations, and expanding climate-friendly business areas, companies can not only strengthen their resilience but also develop new growth areas.
Integrating climate and transition risks into strategic planning is essential. It not only ensures long-term financial stability but also helps meet regulatory requirements like ESRS E1.