EU Water Sustainability Disclosure Policy
CDP releases a report on the EU water sustainability disclosure policy, aiming to summarize the information disclosure requirements related to water resources in the EU’s sustainable regulatory policies and provide reporting guidance for enterprises.
CDP believes that water resources are a material issue for many enterprises, and sustainable regulatory policies involve sustainable disclosure of water resources.
Related Post: CDP Releases Global Water Report
Introduction to EU Water Sustainability Disclosure Policy
The EU water sustainability disclosure policy comes from the following regulations:
Sustainable Financial Disclosure Regulation
The Sustainable Finance Disclosure Regulation, which came into effect in March 2021, aims to enhance the transparency of sustainable information in the financial industry. The regulation requires financial market participants to disclose how ESG is incorporated into investment decision-making processes and report based on Principal Adverse Impact (PAI) indicators. There are five mandatory and voluntary indicators related to water resources, namely:
Mandatory PAI indicator:
- Emissions to water.
Voluntary PAI indicators:
- Water usage and recycling.
- Investments in companies without water management strategies.
- Exposure to areas of high-water stress.
- Investments in companies without sustainable oceans/seas practices.
EU Taxonomy
The EU Taxonomy, which came into effect in July 2020, aims to provide a definition of sustainable economic activities. These sustainable economic activities need to comply with one of the six environmental goals. Water resources are related to the following environmental goals:
- Goal 3: Sustainable use and protection of water and marine resources.
- Goal 4: Transition to a circular economy.
- Goal 5: Pollution prevention and control.
- Goal 6: Protection and restoration of biodiversity and ecosystems.
Goal 3 is directly related to water resources, while the other goals involve requirements related to water resources.
Corporate Sustainability Reporting Directive
The Corporate Sustainability Reporting Directive (CSRD), which came into effect in January 2023, aims to require companies to disclose information based on the European Sustainability Reporting Standards (ESRS). Water resources in sustainable standards are as follows:
- ESRS E2 Pollution: Requires setting water resource discharge targets.
- ESRS E3 Water and Marine Resources: Focus on water resource information disclosure and risk opportunities.
- ESRS E4 Biodiversity and ecosystems: Provides indicators related to freshwater use.
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