ESRS E4 Biodiversity and ecosystems – requirements explained

01

What ESRS E4 is about

ESRS E4 is guided by, among others, the Kunming-Montreal Global Biodiversity Framework, which aims to halt and reverse the loss of biodiversity, the EU Biodiversity Strategy, the EU nature directives and the Nature Restoration Regulation. The disclosures should show users of the sustainability statement where the company affects biodiversity and ecosystems, especially at sites in or near biodiversity-sensitive areas and in the value chain, and how it avoids and reduces these impacts, restores damage or compensates for it.

02

The 5 disclosure requirements at a glance

The disclosure requirements show whether the company aligns its strategy with protecting biodiversity (E4-1), how it manages the topic (E4-2 to E4-4) and where it affects nature (E4-5).

• E4-1 Transition plan: If the company has a plan that aligns its business model and strategy with the global goal of halting and reversing biodiversity loss, and it has published the plan's key features, it describes them. Otherwise the disclosure does not apply. The plan can also be part of a broader transition plan, for example for climate change mitigation
• E4-2 Policies: The policies on biodiversity and ecosystems, in particular on the traceability of products, components and raw materials with material impacts in the value chain and on own sites in or near biodiversity-sensitive areas. Where relevant, the company must state whether the policies address sustainable land or agriculture practices, sustainable ocean or sea practices and deforestation
• E4-3 Actions and resources: Which actions the company takes and plans, and which resources it allocates to them. If biodiversity offsets are used, their aim, financial effects, area, type, quality criteria and the standards applied must be described
• E4-4 Targets: Which targets the company has set and, if offsets contribute to them, how
• E4-5 Metrics: Which of its own sites material impacts, risks or opportunities relate to, which biodiversity-sensitive areas are affected there (name and type) and which activities have material negative impacts there, plus metrics on the material impacts

03

Phase-in: what must still be disclosed

E4 is the only environmental standard that may be deferred entirely:

• First wave: now only for financial year 2026. This includes companies that must first report for financial year 2026. Companies that, at the balance sheet date, do not exceed at least one of the two thresholds (EUR 450 million net turnover or an average of 1,000 employees) may omit all topical standards for this financial year anyway if they already apply the new set
• Other companies (required to report only for financial years from 2027): for their first 2 reporting years, so for financial years 2027 and 2028 if the duty starts with financial year 2027. What counts is the legal duty, not the date of national transposition

The deferral is not entirely free. The company must state whether biodiversity is material. If it is, the company must briefly describe: the material topic or sub-topic and the link to its business model and strategy, time-bound targets with their progress and whether the biodiversity targets are based on conclusive scientific evidence, and policies and actions with their results. It must disclose the relevant metrics.

04

Sites in or near biodiversity-sensitive areas

Biodiversity-sensitive areas are, on the one hand, areas protected through legal or other effective means, including Natura 2000 sites, UNESCO Natural World Heritage Sites, Ramsar sites and other protected areas, for example under national law. On the other hand, they include scientifically recognised areas, even without protected status: Key Biodiversity Areas, Ecologically or Biologically Significant Marine Areas, areas on the IUCN Red List of Ecosystems and habitats of species on the IUCN Red List of Threatened Species.

• Determining “near”: Whether a site outside such an area is “near” it must be determined by the company defining the site's area of influence. Buffer distances that fit the activity can be used for this, based on regulatory requirements, science-based recommendations and industry practice
• Setting priorities: The focus is on sites where the company's own operations have material negative impacts on such an area
• Grouping instead of listing: Not every site has to be named individually. Sites with similar impacts, risks or opportunities can be grouped, for example by the same area or by several areas in a region that are affected by multiple sites. The grouping must not obscure material information

05

Metrics: what is measured

E4 does not prescribe a fixed set of metrics. The metrics depend on the material sub-topics:

• Drivers, for example land take or land-use change
• State of species, for example extinction risk
• Extent and condition of ecosystems, for example the condition of a site or a landscape
• Ecosystem services

In addition, the company must indicate which material impacts concern land degradation, desertification, soil sealing or threatened species and ecosystems. The best data basis is primary data on the state of nature, collected on site or by remote sensing, especially at sites in or near biodiversity-sensitive areas; estimates based on impact drivers or secondary data are permitted. When selecting metrics, the company must consider the monitoring frequency, the baseline condition or value and the baseline year, and whether the metrics show how they relate to the material impacts.

06

Typical data sources in the company

The starting point is the sites, not the metrics:

• Site lists and property management provide coordinates and areas, split into sealed and unsealed land
• Permits, environmental conditions and environmental impact assessments for sites, extensions and raw material extraction show known impacts, affected species and habitats, and conditions imposed
• Procurement provides the origin and certificates of raw materials from agriculture and forestry, such as timber, paper, palm oil, soy or cocoa. Anyone who places commodities covered by the EU Deforestation Regulation (EUDR) on the EU market or exports them also collects, for the due diligence statement, the geolocation of the plots of land and evidence that no deforestation took place there
• Tools such as the Integrated Biodiversity Assessment Tool (IBAT), the WWF Biodiversity Risk Filter or ENCORE show whether sites are in or near biodiversity-sensitive areas and which ecosystem services the business depends on

07

Link to the VS standard

In its Basic module, the VS standard only requires sites in or near biodiversity-sensitive areas to be listed with the name of the area. It contains no further biodiversity metrics.

08

Typical mistakes

These points often come up in practice:

• Treating the phase-in as a pause. It is meant to give time for preparation, not to signal that the topic only becomes relevant later. If biodiversity is material, companies must already briefly describe targets, policies and actions during the phase-in and disclose relevant metrics. Companies that collect no data during this time have no basis once it ends
• Underestimating dependencies in the value chain. Biodiversity loss is advancing worldwide on a scale that affects raw materials, yields and supply chains: more than half of global economic output is moderately or highly dependent on nature and its services (WEF, Nature Risk Rising, 2020). Dependencies must be considered when assessing risks and opportunities. Companies that do not assess their dependence on ecosystem services such as pollination, water availability or soil fertility may overlook material financial risks