Why is the CSRD's ESRS E1 standard crucial for fashion brands?

The Corporate Sustainability Reporting Directive (CSRD) is a European directive adopted to enhance the transparency and consistency of corporate sustainability reporting.

It extends non-financial reporting obligations to a wider range of companies, encouraging them to disclose detailed information on their environmental, social and governance (ESG) impacts.

ESRS E1 standard on climate change: definition

As part of the CSRD, European Sustainability Reporting Standards (ESRS) have been developed to provide a set of harmonized standards.

The ESRS E1 is part of the European Sustainability Reporting Standards (ESRS) and deals specifically with climate change issues. It applies to all companies concerned by the directive.

For fashion brands, a sector particularly exposed to environmental pressure, the adoption of ESRS E1 represents both a challenge and an opportunity to align their business model with long-term sustainability objectives.

Why is ESRS E1 crucial for fashion brands?

High-impact sector:

The fashion industry is responsible for significant quantities of GHG emissions, water consumption and pollution.

According to ADEME, the textile industry is responsible for 8% of global greenhouse gas emissions (including clothing and footwear). ESRS E1 is therefore a key standard for this sector.

Consumer requests:

The shift in consumer behavior towards more sustainable products is driving companies to better understand, control and communicate their environmental impact.

Regulation and sanctions:

Not only is this standard mandatory for companies involved in CSRD, it also imposes legal and financial risks in the event of non-compliance.

Penalties in the event of infringement are defined by each member state.
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France currently provides for:
- a fine of 3,750 euros in the event of non-publication of the report or publication of partial or erroneous information
- a fine of 30,000 euros and up to 2 years' imprisonment in the event of non-audit of the non-financial report
- a fine of 75,000 euros and up to 5 years' imprisonment in the event of obstruction of auditors' verifications or controls

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The main objectives of ESRS E1 :

The main objective of this standard is to enable users of sustainability claims to understand :

• How the company impacts climate change, both positively and negatively.
• The company's current and future mitigation efforts, in line with the Paris Agreement, in particular limiting global warming to 1.5°C.
• The company's ability to adapt its business model for a transition to a sustainable economy, compatible with carbon neutrality by 2050.
• Concrete actions taken to prevent or correct negative climate-related impacts.
• The climate risks and opportunities to which the company is exposed, as well as the potential financial impact in the short, medium and long term.

ESRS E1 requirements for companies

• Measuring GHG emissions: The standard requires quantification of direct emissions (Scope 1), energy-related indirect emissions (Scope 2) and other indirect emissions along the value chain (Scope 3).
• Emissions reduction plans: Companies need to define clear, quantifiable targets for reducing their environmental impact.
• Adapting to climate change: ESRS E1 requires brands to assess their exposure to climate risks and implement adaptation strategies.

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What information must be collected/disclosed for ESRS E1?

What are Disclosure Requirements?

Like all ESRS standards, the climate change standard imposes both qualitative and quantitative reporting requirements. This means that data must be collected, analyzed and, if necessary, published. The European Commission refers to these obligations as Disclosure Requirements (DR).

Disclosure Requirements refer to the obligation for companies and other organizations to reveal specific information. In the context of CSRD, these disclosures concern key aspects of the company, including its financial, social, environmental and governance performance.

By meeting disclosure requirements through their reporting, organizations not only comply with the legal obligations of the CSRD. They also build confidence and transparency in their activities, enhance their reputation and demonstrate their commitment to social and environmental responsibility.

The 9 ESRS E1 Disclosure Requirements

The ESRS E1, dedicated to the theme of climate change, includes 9 specific disclosure requirements (DRs) that assess the commitment and impact of companies in the face of climate change.

ESRS E1.1: Transition plan for climate change mitigation

This section requires the company to publish a transition plan to reduce its GHG emissions, in order to ensure that its strategy is compatible with international climate objectives, in particular the Paris Agreement. The company must detail its past, present and future efforts to achieve warming limited to 1.5°C, with carbon neutrality targets for 2050.

The transition plan must include precise actions and allocated resources to reduce environmental impact.

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ESRS E1.2: Climate change mitigation and adaptation policies

The company must describe the policies it has adopted to manage its significant impacts related to climate change mitigation and adaptation. This includes a description of the objectives of these policies, internal responsibilities for their implementation, and how these policies are monitored and reviewed to ensure their effectiveness.

For textile companies, this can mean optimizing production processes, sustainable sourcing, and measuring and managing product life cycles.

ESRS E1.3: Policy actions and resources

This section requires the company to publish the actions taken and resources allocated to mitigating and adapting to climate change. The aim is to understand how companies actually implement their policies, particularly in terms of emissions reduction, and what financial and human resources are deployed to achieve these objectives.

ESRS E1.4: Climate objectives related to climate change mitigation and adaptation

The company must specify the impact reduction targets it has set itself in support of its policies to combat climate change.

These targets must be measurable and form part of an overall strategy to reduce GHG emissions. Targets can be short-, medium- or long-term, and must be aligned with international commitments such as the Paris Agreement.

ESRS E1.5: Energy consumption and mix

The company must provide information on its total energy consumption and the share of renewable energies in its energy mix. This transparency on the use of energy resources makes it possible to monitor progress in energy transition and efficiency. Companies must also declare their exposure to fossil fuels such as coal, oil and gas.

ESRS E1.6: Gross GHG emissions from scopes 1, 2, and 3

The company must publish information on its gross GHG emissions, including :

• Scope 1: direct emissions (e.g. on-site fossil fuel combustion).
• Scope 2: indirect emissions associated with the consumption of electricity or heat.
• Scope 3: all other indirect emissions along the value chain.

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For fashion brands, Scope 3 emissions (upstream and downstream) often account for the bulk of total emissions, particularly in the supply chain (textile production, transport, distribution).

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ESRS E1.7: GHG absorptions and mitigation projects financed with carbon credits

The company must declare the GHG absorption or storage projects it runs or finances, as well as the carbon credits it has purchased. This includes disclosing efforts to finance external projects that capture or reduce GHG emissions, both within and outside its value chain.

ESRS E1.8: Internal carbon pricing

If the company applies an internal carbon price, it must publish the details, including how this mechanism is integrated into the company's decision-making process. The aim is to show how the company encourages the adoption of emission reduction policies and targets through internal financial measures such as an internal carbon tax.

ESRS E1.9: Anticipated financial impact of climate-related physical and transition risks

The company must publish the potential financial impact of physical risks (such as extreme weather events) and transition risks (such as regulatory or market changes linked to the transition to a low-carbon economy). This also includes the financial opportunities that better climate risk management could bring to the company.

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How do I prepare for the ESRS E1?

Mapping environmental impacts:

Identify and analyze all sources of impact along the value chain, from the production of raw materials to the end-of-life of products.

Set up measurement tools:

Adopt software solutions like those offered by Waro to measure emissions and build a transition plan aligned with CSRD expectations and your operational constraints.

Engaging stakeholders:

Collaborate with your suppliers, logistics partners, and other stakeholders to ensure proper data flow and management, to ensure accurate figures and enable an overall reduction in environmental impact.

In-house training:

Raise your teams' awareness of the importance of environmental data and emission reduction targets to facilitate regulatory compliance with CSRD (and other forthcoming regulations).

Drawing up a low-carbon transition plan:

Set clear short-, medium- and long-term reduction targets, and monitor progress on an ongoing basis.

Here are a few tips for developing a decarbonization trajectory:

1. Draw up a GHG emissions balance based on established data and methods,
2. Identify both direct and indirect decarbonization levers for each significant source of emissions (energy and materials efficiency, reducing consumption, switching to non-fossil fuels, using low-carbon energies, discontinuing or replacing products or industrial processes).
3. Define the relevant business scenarios (business volume forecasts) and climate scenarios that will determine the contribution of the various internal and external levers of action.
4. Model the GHG emissions reduction target over different time horizons, taking into account the scenarios, as well as the costs and investments required (reduction percentages are generally increasingly costly, as the most accessible levers are exploited first).
5. Carry out sensitivity analyses (variations in key parameters such as climate scenarios, customer preferences, technical developments, etc., which can influence the results obtained) to determine scopes (scopes 1, 2, 3 in absolute value or intensity), periods (base year and milestones, eventually 2030, then every 5 years) and ambitions (percentage of gross emissions reduction).

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