VALUE CHAIN

29) ESRS require undertakings to use estimates if they cannot obtain all necessary value chain information after having made reasonable efforts to do so (ESRS 1, General requirements, paragraph 69). What constitutes ‘reasonable effort’? The concept of ‘reasonable effort’ is used to determine when an undertaking shall report an estimate of value chain information instead of reporting information collected from actors in its value chain. Paragraph 65 of ESRS 1 (General requirements) sets out the purpose of including value chain information in the sustainability statement. It states that ‘ the undertaking shall include material value chain information when this is necessary to: (a) allow users of sustainability statements to understand the undertaking’s material impacts, risks and opportunities; and/or (b) produce a set of information that meets the qualitative characteristics of information (see Appendix B of this Standard) ’. Paragraph 68 of ESRS 1 (General requirements) states: ‘ The undertaking’s ability to obtain the necessary upstream and downstream value chain information may vary depending on various factors, such as the undertaking’s contractual arrangements, the level of control that it exercises on the operations outside the consolidation scope and its buying power. When the undertaking does not have the ability to control the activities of its upstream and/or downstream value chain and its business relationships, obtaining value chain information may be more challenging.’ Paragraph 69 of ESRS 1 (General requirements) states: ‘ There are circumstances where the undertaking cannot collect the information about its upstream and downstream value chain as required by paragraph 63 after making reasonable efforts to do so. In these circumstances, the undertaking shall estimate the information to be reported about its upstream and downstream value chain, by using all reasonable and supportable information, such as sector-average data and other proxies. ’ Paragraph 70 of ESRS 1 (General requirements) recognises that it may be challenging to obtain value chain information when the relevant actor in the value chain is an SME or another undertaking that is itself not subject to the reporting requirements of the Corporate Sustainability Reporting Directive. Paragraph 71 of ESRS 1 (General requirements) makes a distinction between reporting on policies, actions and targets, and reporting on metrics. With regard to policies, actions and targets, it states that the undertaking shall report value chain information ‘ to the extent that those policies, actions and targets involve actors in the value chain ’. With reference to metrics, it states that ‘ in many cases, in particular for environmental matters for which proxies are available, the undertaking may be able to comply with the reporting requirements without collecting data from the actors in its upstream and downstream value chain, especially from SMEs, for example, when calculating the undertaking’s GHG Scope 3 emissions ’. Paragraph 72 clarifies that: ‘ The incorporation of estimates made using sector-average data or other proxies shall not result in information that does not meet the qualitative characteristics of information (see chapter 2 and section 7.2 Sources of estimation and outcome uncertainty of this Standard). ’ The undertaking should determine reasonable effort as referred to in paragraph 69 of ESRS 1 (General requirements) taking into consideration its specific facts and circumstances as well as the conditions of the external environment in which it operates. What constitutes reasonable effort is therefore likely to vary from undertaking to undertaking. It is expected that undertakings will more frequently have recourse to the use of estimates in the first years of application of the reporting requirements and that the use of estimates will become less common as the ability of undertakings and the actors in their value chains to share sustainability information improves over time. In all cases the undertaking should consider whether the use of estimates is likely to affect the quality of the reported information. The use of estimates could, in some circumstances, enhance the quality of reported information, for example if it helps to ensure that information about the impacts, risks and opportunities is neutral, or if the collected information would not be of the appropriate reliability. In these circumstances the use of estimates would contribute to a more faithful representation of the phenomena that the information purports to represent and the reporting undertaking is therefore more likely to use estimates. In other circumstances the use of estimates could reduce the quality of the reported information, for example if it results in information that is less accurate and/or less complete and therefore results in a less faithful representation of the phenomena that it purports to represent. When considering the specific facts and circumstances of the undertaking and the conditions of the external environment in which it operates in order to determine reasonable effort, the following criteria could offer useful guidance. Any one of these criteria could on its own be sufficient to determine that reasonable effort has been made, or the criteria could be applied in combination. — The size and resources of the reporting undertaking in relation the scale and complexity of its value chain. What constitutes reasonable effort for a larger, well-resourced undertaking might not be considered reasonable for a smaller, typically less well-resourced undertaking. The size and resources of the undertaking should also be considered in relation to the scale and complexity of its value chain. For example, what constitutes reasonable effort for a larger undertaking with a large number of suppliers for multiple different products, and/or with supply chains that comprise many tiers, might be considered unreasonable for a smaller undertaking with a similarly complex value chain. — The technical readiness of the reporting undertaking to collect value chain information. For example, what constitutes reasonable effort for a very large undertaking with substantial prior experience of collecting sustainability information from actors in its value chain might not be considered reasonable in the case of a smaller undertaking with no such prior experience. The technical readiness of undertakings to collect value chain information is expected to improve over time. — The availability of tools to access and share value-chain information. What constitutes reasonable effort may be influenced by the availability of efficient and commonly used tools, including digital tools, to share value chain information between undertakings. The availability of such tools is likely to be limited in the first years of applying the ESRS but should improve over time, including as a result of the voluntary SME sustainability reporting standards currently being developed by EFRAG (VSME). This means that undertakings are more likely to have recourse to the use of estimates in the first years of applying the ESRS than they will do in later reporting cycles. — The size and resources of the actor in the value chain. What constitutes reasonable effort may be influenced by the size and resources of the actor in the value chain from which information is expected. SMEs in particular may not have the necessary resources to easily and quickly provide the information that may be of interest to the reporting undertaking, which in turn makes it harder for the reporting undertaking to gather the necessary value chain information from SMEs. Where the value chain actor is an SME, the reporting undertaking is therefore more likely to have recourse to the use of estimates. In general, the application of reasonable effort by the reporting undertaking should not result in expectations on the actor in the value chain to apply unreasonable effort. — The technical readiness of the actor in the value chain. What constitutes reasonable effort may be influenced by the technical readiness of the actor in the value chain to provide sustainability information. The technical readiness of actors in the value chain should improve over time, which implies that undertakings are more likely to have recourse to the use of estimates in the first years of applying the ESRS than they will do in later reporting cycles. — Level of influence and buying power. What constitutes reasonable effort may be influenced by the existing level of control of the reporting undertaking over the actor in the value chain and by the relative buying power of the reporting undertaking compared to other undertakings. For example, less effort may be required to obtain information from an actor in the value chain that is partly owned by the reporting undertaking or that generates a high proportion of its own turnover through sales to the reporting undertaking. This means that undertakings are more likely to have recourse to the use of estimates in the case of actors in the value chain which they do not partly own or for which they only represent a small proportion of turnover. — Connected to the level of influence, the ‘proximity’ of the actor in the value chain. The ‘proximity’ of the actor in the value chain to the reporting undertaking may be a consideration in determining what constitutes reasonable effort, since less effort is usually required to obtain information from a tier 1 supplier or a direct customer than from other actors in the value chain. This means that undertakings are more likely to have recourse to the use of estimates in the case of actors in the value chain that are not tier 1 suppliers or direct customers. 30) What should an SME expect to receive in terms of requests for sustainability information as a consequence of the CSRD and ESRS? Paragraphs 132 and 133 of ESRS 1 (General requirements) set out transitional provisions that limit the value chain information that undertakings within the scope of the CSRD have to report and/or collect from actors in their value chain during the first 3 years (98). The extent to which SMEs are asked to provide sustainability information by undertakings as a consequence of the CSRD and ESRS will, during the first 3 years of implementation, be strongly influenced by whether undertakings that fall within the scope of CSRD make use of these transitional provisions regarding value chain reporting. Notwithstanding the transitional provisions referred to above, SMEs should expect undertakings that fall under the scope of CSRD to apply ‘reasonable effort’ to collect from actors in their value chains the information they need in order to comply with ESRS. In accordance with the answer to the previous question, the size and resources, the technical readiness and the proximity of the actor in the value chain are among the criteria that can be used to establish what constitutes ‘reasonable effort’. Therefore, smaller SMEs that have never voluntarily reported sustainability information, that are not connected with severe negative impacts and are not 1st tier suppliers or customers of undertakings that fall within the scope of the CSRD should, at least during the first years of application of the reporting requirements, be less exposed to expectations to have and share sustainability information. Larger SMEs that have previously reported sustainability information (for example because they apply EMAS or other environmental or sustainability certification or reporting schemes) and SMEs that are 1st tier suppliers or customers of undertakings that fall within the scope of the CSRD may be exposed to higher expectations to have and share sustainability information. EFRAG is currently developing two sustainability reporting standards for SMEs: a mandatory one for listed SMEs (LSME ESRS) and a voluntary one for non-listed SMEs (VSME). LSME ESRS will establish the maximum level of sustainability information that ESRS can require an undertaking that falls within the scope of the CSRD to obtain from SMEs in its value chain. VSME will be designed to become a reference point for all actors in the market, to ensure that the reporting effort of CSRD and non-CSRD undertakings is proportionate. 31) Until when does the transitional period for the disclosure of information in the value chain apply? Should the commencement date for the three-year transitional period be different for each type of undertaking? Chapter 10.2 of ESRS 1 sets out transitional provisions related to chapter 5 on value chains. The transitional period for the disclosure of information required from the value chain applies for the first 3 financial years of application of the reporting requirements, for each undertaking. For example, if an undertaking falls within the scope of Articles 19a or 29a of the Accounting Directive as of financial year 2024, then it may avail of the transitional period for value chain reporting for financial years 2024, 2025 and 2026.

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Source: EUR-Lex (Cellar) · retrieved 2026-09-07