2 Navigate the value chain under CSRD and ESRS – Complete comprehensive read

CSRD art 19(a)(3) and 29(a)(3)/ESRS 1.5 Value chain require that reported information relates to a company’s own operations and its upstream and downstream Value Chain (VC), including its products and services, its business relationships and its supply chain.

What is the difference between value chain and supply chain?
In short, the VC includes the supply chain. The supply chain is the actors in the VC upstream from the reporting entity. However, VC also includes downstream entities along with the supply chain.

The supply chain provides products or services that are used in the development of the undertaking’s products or services. Depending on the position in the VC, an undertaking’s supply chain can be part of the downstream VC of another undertaking.

In some industries, upstream or downstream refers to specific points in the chain rather than with reference to the reporting undertaking’s position in the chain.

Navigating the value chain under CSRD and ESRS
How to identify the reporting boundaries?

Reporting boundaries for sustainability reporting

The reporting boundaries would be based on the financial statements (For example, when reporting for a group where the parent company prepares consolidated financial statements, the consolidated financial and sustainability statements will be prepared for the parent and its subsidiaries.) –but expanded to cover material impacts, risks and opportunities related to the upstream and downstream value chain.

Associates or joint ventures –accounted for under the equity method or proportionally consolidated –may form part of the upstream or downstream value chain, if they are to be considered as business partners of the reporting company.

When determining impact metrics, the data of associates or joint ventures are not limited to the equity share held but should be taken into account on the basis of the impacts that are directly linked to the company’s products and services through its business relationship.

Most of the metrics in the sector-agnostic standards are limited to the own operations (no value chain). If information on the value chain cannot be obtained, in the first three years of applicable the draft ESRSs would allow transitional measures.

Disclosures – General requirements

The general requirements relating to all disclosures on VC can be found in ESRS 1 General requirements:

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