{"id":53920,"date":"2024-12-11T13:07:56","date_gmt":"2024-12-11T12:07:56","guid":{"rendered":"https:\/\/bpcc.org.pl\/?p=53920"},"modified":"2025-01-12T18:04:44","modified_gmt":"2025-01-12T17:04:44","slug":"csrd-requirements-on-value-chain-activities-a-challenge-for-reporting-entities","status":"publish","type":"post","link":"https:\/\/dev2.bpcc.org.pl\/pl\/csrd-requirements-on-value-chain-activities-a-challenge-for-reporting-entities\/","title":{"rendered":"CSRD requirements on value-chain activities \u2013 a challenge for reporting entities"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"53920\" class=\"elementor elementor-53920\">\n\t\t\t\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-7d296c46 elementor-section-content-middle elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"7d296c46\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-custom\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-33 elementor-top-column elementor-element elementor-element-5962b214\" data-id=\"5962b214\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-10422d7 elementor-widget elementor-widget-text-editor\" data-id=\"10422d7\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<style>\/*! elementor - v3.14.0 - 26-06-2023 *\/\n.elementor-widget-text-editor.elementor-drop-cap-view-stacked .elementor-drop-cap{background-color:#69727d;color:#fff}.elementor-widget-text-editor.elementor-drop-cap-view-framed .elementor-drop-cap{color:#69727d;border:3px solid;background-color:transparent}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap{margin-top:8px}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap-letter{width:1em;height:1em}.elementor-widget-text-editor .elementor-drop-cap{float:left;text-align:center;line-height:1;font-size:50px}.elementor-widget-text-editor .elementor-drop-cap-letter{display:inline-block}<\/style>\t\t\t\t<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-54351\" src=\"https:\/\/bpcc.org.pl\/wp-content\/uploads\/2024\/12\/Krzemien-Tarkowska3-300x200.png\" alt=\"\" width=\"300\" height=\"200\" srcset=\"https:\/\/dev2.bpcc.org.pl\/wp-content\/uploads\/2024\/12\/Krzemien-Tarkowska3-300x200.png 300w, https:\/\/dev2.bpcc.org.pl\/wp-content\/uploads\/2024\/12\/Krzemien-Tarkowska3-391x260.png 391w, https:\/\/dev2.bpcc.org.pl\/wp-content\/uploads\/2024\/12\/Krzemien-Tarkowska3.png 601w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<div class=\"elementor-column elementor-col-33 elementor-top-column elementor-element elementor-element-4a28e8bd\" data-id=\"4a28e8bd\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-29e9dbdb elementor-widget elementor-widget-text-editor\" data-id=\"29e9dbdb\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><strong>By Marta Tarkowska-Losik, lawyer in the Energy and Infrastructure practice and Dr Marcin Krzemie\u0144, associate in the Energy and Infrastructure practice, CMS<\/strong><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<div class=\"elementor-column elementor-col-33 elementor-top-column elementor-element elementor-element-3be6a3db\" data-id=\"3be6a3db\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-afe2ffb elementor-widget elementor-widget-image\" data-id=\"afe2ffb\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<style>\/*! elementor - v3.14.0 - 26-06-2023 *\/\n.elementor-widget-image{text-align:center}.elementor-widget-image a{display:inline-block}.elementor-widget-image a img[src$=\".svg\"]{width:48px}.elementor-widget-image img{vertical-align:middle;display:inline-block}<\/style>\t\t\t\t\t\t\t\t\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"556\" height=\"442\" src=\"https:\/\/dev2.bpcc.org.pl\/wp-content\/uploads\/2023\/06\/CMS-Contact.png\" class=\"attachment-large size-large wp-image-32035\" alt=\"\" srcset=\"https:\/\/dev2.bpcc.org.pl\/wp-content\/uploads\/2023\/06\/CMS-Contact.png 556w, https:\/\/dev2.bpcc.org.pl\/wp-content\/uploads\/2023\/06\/CMS-Contact-300x238.png 300w\" sizes=\"auto, (max-width: 556px) 100vw, 556px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-d21eec6 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"d21eec6\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-6e1209d\" data-id=\"6e1209d\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-4f490d7 elementor-widget elementor-widget-text-editor\" data-id=\"4f490d7\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-8c5bb69 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"8c5bb69\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-45193c9\" data-id=\"45193c9\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-973cae9 elementor-widget elementor-widget-text-editor\" data-id=\"973cae9\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>One of the main requirements introduced by the Directive on corporate sustainability reporting (CSRD), as part of the sustainability reporting obligations, is reporting on events in the \u2018value chain\u2019 of the reporting entity. Reporting on an entity\u2019s or group\u2019s value chain may concern events taking place outside the scope of its own (or the group\u2019s) operations that affect the process of manufacturing its products or providing its services, including the operations of its contractors and entities that are part of its supply chain.<\/p><p>The purpose of this reporting is to examine the overall impact that an entity or group has on the environment \u2013 not only through its direct activities, but also indirectly, through its business partners such as suppliers or subcontractors. At the level of the CSRD, the concept of a value chain is not defined, however the Regulation on the European Sustainability Reporting Standards (ESRS Regulation) defines a value chain as \u201cthe full range of activities, resources and relationships related to an entity\u2019s business model and the external environment in which the entity operates. The value chain includes the activities, resources and relationships that an entity uses and relies on to create its products or services from conception to realisation, consumption and end-of-life.\u201d<\/p><p>The concept of value chain is broad. It covers all the activities, resources and relationships an entity (or group) uses to deliver its products and services to the market, as well as its environment. It is not limited to an entity\u2019s direct business partners and includes both upstream and downstream entities. In addition, depending on the type of business, an entity might be part of several value chains.<\/p><p>Thus, it will depend on the specifics of a particular entity\u2019s operations whether and how it should report on its value chain at all, as well as how to relate the definition to it. This is because the entity is supposed to disclose all the significant impacts of the risks and opportunities it creates on the environment, including through the value chain. The analysis of value chain issues should therefore be an important part of the entity\u2019s dual materiality analysis process; that is, as part of this process, the entity should analyse the specifics of its value chain, involve its representatives (suppliers, subcontractors, consumers, local community representatives) in the process, and identify value chain-related material impacts, risks and opportunities. As part of this exercise, the entity should focus on value-chain-related areas where it considers that impacts, risks and opportunities may occur based on the nature of operations, business relationships, geographic regions and other factors (ESRS 1). Thus, there is no obligation for an entity to make disclosures on all value chain-related issues (which is not advisable). It is sufficient for it to focus on material issues. According to ESRS 2, an entity should disclose the extent to which it has considered value chain issues in its sustainability statement. Similarly, in the scope of risks and impacts identified in the value chain, the reporting entity should be able to show how it exercises adequate due diligence (managing and mitigating these risks and negative impacts).<\/p><p>Therefore, an entity will only have to report broadly on material opportunities, risks and impacts it causes to the environment through the value chain. In practice, the extent of such reporting will be the result of the entity\u2019s due diligence and double-materiality analysis, for which the ESRS Regulation formulates specific expectations and related disclosures about these processes and their results. CSRD-based reports \u2013 and therefore the company\u2019s own due diligence processes and double materiality analyses \u2013 will be subject to mandatory auditing. It is thus to be expected that entities will not be able to approach the analysis of their value chains lightly if they want to receive a positive assessment under attestation.<\/p><p>For example, a CSRD-reporting entity may need to analyse pollution, waste management or employment practices in its value chain, depending on which topics prove material under the double materiality assessment. How the reporting entity should obtain information from its partners in the value chain is a separate topic. Entities in the value chain may not have the relevant data at their disposal, or may be unwilling to share it with the reporting entity. CSRD and ESRS anticipate this and provide that during the first three years of reporting, the reporting entities may, if necessary, use estimates (based on industry data for example) if they are unable to collect source data. In such cases, the reporting entities still need to exercise due diligence in that area by showing that they made an effort to collect the source data, albeit unsuccessfully. What will happen after these first three years is unclear. EFRAG, the EU advisory body which is working on the draft ESRS, is currently working on voluntary ESG reporting standards for SMEs. However, such voluntary standards will by their nature probably not be able to ensure the accessibility of the necessary value chain data.<\/p><p>In contrast, sustainability reporting that takes into account the value chain will require reporting companies to obtain information from their suppliers and subcontractors, which could be an issue. This is because entities unaffected by the CSRD do not, in principle, have to make reporting disclosures or collect data in this regard, unless required to do so by separate, specific regulations.<\/p><p>It may therefore be the case that an SME that\u2019s not required to report under the CSRD will be indirectly affected by its requirements, due to counterparties that report under the CSRD and for whom they are part of the value chain. However, standards for listed SMEs (LSMEs) are under development providing guidance on sustainability disclosures for SMEs not covered by full reporting. They will provide an information cap \u2013 the maximum amount of information that other entities can require to be disclosed to those in their value chain. The LSME standards are in the consultation phase and are expected to be effective from 2026. The LSME standards are not, however, the only draft SME sustainability reporting standards recently published by EFRAG. A draft of the \u2018Voluntary SME (VSME) standards\u2019, voluntary guidelines for SMEs not required to report under the CSRD, was published in January 2024. The voluntary VSME standards are expected to be simplified compared to the LSME standards. However, this solution does not solve the basic problem noted above: a situation in which the value chain of an entity reporting under the CSRD includes entities that are not themselves required to collect the necessary data for it.<\/p><p>The value chain perspective is crucial to sustainability reporting, \u00a0to examine and present the actual and potential impact an entity has on the environment in a comprehensive manner. The ESRS Regulation requires reporting entities to conduct relevant processes (due diligence and double materiality analysis) and present relevant data depending on the results of these processes. For the first three years of reporting, reporting entities will generally not be required to obtain value chain data directly from entities in the value chain. This is expected to change after the transition period.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-bcf8f2f elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"bcf8f2f\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-dcd381e\" data-id=\"dcd381e\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>By Marta Tarkowska-Losik, lawyer in the Energy and Infrastructure practice and Dr Marcin Krzemie\u0144, associate in the Energy and Infrastructure practice, CMS \/*! elementor &#8211; v3.14.0 &#8211; 26-06-2023 *\/ .elementor-widget-image{text-align:center}.elementor-widget-image a{display:inline-block}.elementor-widget-image a img[src$=&#8221;.svg&#8221;]{width:48px}.elementor-widget-image img{vertical-align:middle;display:inline-block} One of the main requirements introduced by the Directive on corporate sustainability reporting (CSRD), as part of the sustainability reporting obligations, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":32035,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[76],"tags":[],"ppma_author":[600],"class_list":["post-53920","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-contact-magazine","author-cms","et-has-post-format-content","et_post_format-et-post-format-standard"],"acf":[],"authors":[{"term_id":600,"user_id":0,"is_guest":1,"slug":"cms","display_name":"CMS","avatar_url":{"url":"https:\/\/dev2.bpcc.org.pl\/wp-content\/uploads\/2022\/08\/CMS_Logo_LawTaxFuture_Maxi_RGB.png","url2x":"https:\/\/dev2.bpcc.org.pl\/wp-content\/uploads\/2022\/08\/CMS_Logo_LawTaxFuture_Maxi_RGB.png"},"first_name":"","last_name":"","user_url":"","description":"Founded in 1999, CMS is an integrated, multi-jurisdictional organisation of law firms that offers full-service legal and tax advice. With 81 offices in 45 countries across the world and more than 5,000 lawyers, CMS has long-standing expertise both in advising in its local jurisdictions and across borders. From major multinationals and mid-caps to enterprising start-ups, CMS provides the technical rigour, strategic excellence and long-term partnership to keep each client ahead in its chosen markets. \r\n\r\nThe CMS member firms provide a wide range of expertise across 19 practice areas and sectors, including Corporate \/ M&amp;A, Energy &amp; Climate Change, Funds, Life Sciences &amp; Healthcare, TMC, Tax, Banking &amp; Finance, Commercial, Antitrust, Competition &amp; Trade, Dispute Resolution, Employment &amp; Pensions, Intellectual Property and Real Estate. \r\n\r\nFor more information, please visit cms.law \r\n"}],"_links":{"self":[{"href":"https:\/\/dev2.bpcc.org.pl\/pl\/wp-json\/wp\/v2\/posts\/53920","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dev2.bpcc.org.pl\/pl\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dev2.bpcc.org.pl\/pl\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dev2.bpcc.org.pl\/pl\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dev2.bpcc.org.pl\/pl\/wp-json\/wp\/v2\/comments?post=53920"}],"version-history":[{"count":48,"href":"https:\/\/dev2.bpcc.org.pl\/pl\/wp-json\/wp\/v2\/posts\/53920\/revisions"}],"predecessor-version":[{"id":55048,"href":"https:\/\/dev2.bpcc.org.pl\/pl\/wp-json\/wp\/v2\/posts\/53920\/revisions\/55048"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dev2.bpcc.org.pl\/pl\/wp-json\/wp\/v2\/media\/32035"}],"wp:attachment":[{"href":"https:\/\/dev2.bpcc.org.pl\/pl\/wp-json\/wp\/v2\/media?parent=53920"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dev2.bpcc.org.pl\/pl\/wp-json\/wp\/v2\/categories?post=53920"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dev2.bpcc.org.pl\/pl\/wp-json\/wp\/v2\/tags?post=53920"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/dev2.bpcc.org.pl\/pl\/wp-json\/wp\/v2\/ppma_author?post=53920"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}