Minimum disclosure requirements for Policies, Actions and Targets – Overview and practical application

published on 17 February 2025 | reading time approx. 5 minutes

After completing the materiality analysis required as part of CSRD reporting, companies are faced with the task of preparing their sustainability report in accordance with the ESRS. As part of the data point reporting in the topic standards companies should also address existing policies, actions and targets in line with the minimum disclosure requirements (MDR) of the ESRS 2. But what are these minimum disclosure requirements? And how are they connected to the impacts, risks and opportunities (IROs) of the materiality analysis? The following article is intended to answer this question by using an example.

The following IRO was identified for a sample company:

IRO	Kind of IRO	Topic	Subtopic
Inadequate occupational safety measures in the production lead to a high injury rate.	Negative Impact	S1 Own Workforce	Working conditions

The following section explains how this IRO could be addressed by policies, actions and targets.

MDR-P – Policies adopted to manage material sustainability matters

The ESRS glossary defines a policy as follows: „a set or framework of general objectives and management principles that the undertaking uses for decision-making.” Typical policies in companies are for example a Code of corporate values, a greenhouse gas reduction strategy or a Supplier Code of Conduct.

The minimum disclosure requirements for policies include the following data points:

a description of the key contents and general objectives of the policy
a description of the monitoring process
the related IRO(s)
a description of the scope of the policy (whole company, certain business segments, certain countries, etc.)
most senior level in the company that is accountable for the implementation of the policy
if relevant: references to third-party standards or initiatives the policy is addressing
if relevant: a description of how stakeholders' interests are taken into account
if relevant: a description how the policy is made available for affected stakeholders

In this example, the sample company has drawn up a health and safety guideline in response to the inadequate occupational safety measures in production. The policy defines the company's general approach to workplace safety, hygiene regulations and reporting obligations in the event of an accident. Regular feedback meetings between the HR and safety departments and monthly safety inspections ensure that the health and safety guideline is implemented effectively. All production employees and locations have been defined as the scope of the policy. The most senior level in the company that is accountable for the implementation of the guideline is the head of the personnel department. The health and safety guideline can be accessed on the intranet of the model company.

If the company has no policies to deal with their material sustainability issues, it shall disclose this information and provide reasons, why this is the case for example because of lacking financial resources or because the topic is new (ESRS 2, Paragraph 62). Additionally, a timeframe can be defined to implement a new policy.

MDR-A – Actions and resources in relation to material sustainability matters

Building on policies (see MDR-P) the company shows “the list of key actions taken in the reporting year and planned for the future” (ESRS 2, Paragraph 68a). The sum of all measures is referred to as the action plan.

For every single action the company has to publish the following minimum disclosure requirements:

the expected outcome
a description, how the action supports the implementation of a policy
a description of the scope of the action (whole company, certain business segments, certain countries, etc.)
the time horizon until the completion of the action
if applicable: quantitative and qualitative information showing the progress of the action

Additional information shall be provided, if the implementation of an action plan requires significant operational expenditures (Opex) and/or capital expenditures (Capex). This could be the case if the company plans to switch its production process from fossil to green energy. An example could be the steel industry when a company decides to change the production process from blast furnace (coal) to direct reduction (hydrogen) of iron. In such a case, the following information must be provided

the type of financing (own financial resources, green bonds etc.)
the amount of current financial resources + the relation to other investments
the amount of future financial resources

In this example, the model company introduces health information days for employees in production to inform them about possible health and safety risks at work and how to prevent them. The company hopes that this action will reduce the number of accidents at work. The measure will be tested over the next year. After this phase, an evaluation is planned by representatives of the HR department. As the action is new, it is not yet possible to report on progress. The costs of implementing this measure are so low that no additional information due to OpEx or CapEx needs to be reported.

If the company has no actions to deal with their material sustainability issues, it shall disclose this information and provide reasons, why this is the case for example because of lacking financial resources or because the topic is new (ESRS 2, Paragraph 62). Additionally, a timeframe can be defined to implement actions.

MDR-T – Tracking effectiveness of policies and actions through targets

To ensure that the defined policies and actions are implemented effectively, companies are required to formulate corresponding targets. The ESRS glossary defines them as follows: “Measurable, outcome-oriented and time-bound goals that the undertaking aims to achieve in relation to material impacts, risks or opportunities.”

Targets have the following minimum disclosure requirements:

a description how the targets relate to the objectives of the subordinate policy
a defined target value and the unit it is measured in
a description of the scope of the target (whole company, certain business segments, certain countries, etc.)
a baseline value and a base year
a time horizon to achieve the goal
methodologies and significant assumptions behind the target
for environmental targets: if the target value is based on conclusive scientific evidence (the Paris 1.5 degree target, ecological thresholds, etc.)
a description of stakeholder participation due to the target setting process
changes in the target value or the underlying methodologies and assumptions compared to the previous year
the actual performance against the target
information to the monitoring process

In this example, the company has set itself the target for the coming year of reducing the average number of sick days in production by 15% compared to the previous year. Such an improvement is in line with the health and safety policy (see chapter MDR-P). Sick days are recorded centrally by the HR department as soon as a sick note is received. The target was set during the management's annual meeting with the works council. As the target is being measured for the first time, there were no changes to the target value or the methods and assumptions compared to the previous year. The target figure is collected monthly and continuously monitored by the HR department.

If the company concerned has no targets, it must state whether it tracks the effectiveness of its policies and actions in any other way. If that is the case information about these procedures needs to be disclosed (ESTS 2, Paragraph 81).

Conclusion

If companies report about their policies, actions and targets to tackle the identified IROs of the double materiality analysis, they need to address the minimum disclosure requirements of ESRS 2 in addition to the information of the topical standard. As a consequence, it makes a lot of sense to screen the current policies, actions and targets in the company to see if they are in line with the MDRs. If gaps are identified, it is advisable to adopt suitable countermeasures.