ESRS E1 Climate Standard: A Practical Deep-Dive for Enterprise Teams

What Is ESRS E1?

ESRS E1 (Climate Change) is the first and most comprehensive standard in the environmental pillar of the European Sustainability Reporting Standards under CSRD. Effective through Commission Delegated Regulation 2023/2772, ESRS E1 requires companies to disclose their climate impact, risks, opportunities, and transition strategy.

ESRS E1 is mandatory when climate is identified as material in the double materiality assessment. In practice, however, climate is material for the vast majority of large companies (EFRAG, 2023).

Disclosure Requirements (E1-1 through E1-9)

E1-1: Transition Plan

A transition plan for climate change mitigation — must align with the Paris Agreement's 1.5°C target:

• Decarbonization levers and actions
• Investment plans and capital allocation
• Targets and milestones
• Dependencies and assumptions

E1-2: Policies

Policies on climate change mitigation and adaptation.

E1-3: Actions and Resources

This disclosure goes beyond listing initiatives — it requires companies to quantify the financial resources allocated to climate actions and link them to specific outcomes. Auditors will look for consistency between the transition plan (E1-1) and the actions reported here. If your transition plan calls for EUR 50 million in energy efficiency investment over five years, E1-3 should show what has actually been spent and delivered. This creates accountability between commitments and execution.

E1-4: Targets

Climate change mitigation and adaptation targets must be reported with specificity:

• Absolute and intensity-based targets — both are recommended, as they tell different stories (absolute shows total impact reduction; intensity shows efficiency improvement)
• Base year and target year — the base year must be fixed and recalculated for structural changes
• Alignment with science-based targets (SBTi reference) — if your targets are SBTi-validated, state this explicitly; if not, explain the methodology
• Breakdown by scope — Scope 1, 2, and 3 targets must be presented separately, with Scope 3 category-level detail where material

E1-5: Energy Consumption and Mix

Total energy consumption, disaggregated by renewable and non-renewable sources, with energy intensity metrics. This disclosure is critical because it bridges climate disclosures with operational data. Companies must report both absolute consumption (in MWh or GJ) and the share of renewable sources. For companies with renewable energy PPAs or green tariffs, the contractual instruments must be documented to support market-based Scope 2 claims.

E1-6: GHG Emissions (Scope 1, 2, 3)

The most detailed disclosure requirement:

The GHG Protocol Corporate Standard is designated as the reference methodology (Commission Delegated Regulation 2023/2772, ESRS E1).

E1-7: Carbon Removals and Reduction Projects

Disclosures on carbon credits and carbon removal projects. A critical requirement: these must be reported separately from emission reduction targets and cannot be used to claim progress toward E1-4 targets. This separation prevents "greenwashing through offsets" — ensuring that emission reduction claims are based on actual decarbonization, not purchased credits. Companies must disclose the type of credits (avoidance vs removal), certification standard, and volume.

E1-8: Internal Carbon Pricing

If the company uses internal carbon pricing mechanisms, these must be disclosed — including the price level (EUR/tCO2), scope of application (investment decisions, operational budgets, or shadow pricing), and how the price is determined. For companies operating in jurisdictions with carbon pricing (EU ETS, TR-ETS), the relationship between internal and regulatory carbon prices should be explained.

E1-9: Financial Effects

This is arguably the most challenging E1 disclosure. Companies must quantify the monetary impacts of climate change on their financial position — including both physical risks (asset impairment from flooding, heat stress, water scarcity) and transition risks (stranded assets from policy changes, technology obsolescence, market shifts). The disclosure requires forward-looking estimates, which means working closely with finance teams to model climate scenarios against asset portfolios. First-wave reporters found this to be the most time-consuming E1 requirement.

Practical Implementation Guide

Step 1: Double Materiality Link

ESRS E1 disclosures are directly linked to climate findings in the double materiality assessment. Impacts, risks, and opportunities (IROs) identified in the assessment form the foundation of E1 disclosures.

Step 2: GHG Protocol-Aligned Inventory

ESRS E1-6 requires a GHG inventory aligned with the GHG Protocol Corporate Standard. Both location-based and market-based reporting is mandatory for Scope 2.

Step 3: Transition Plan Preparation

The E1-1 transition plan should include a decarbonization strategy aligned with SBTi targets. The GFANZ (Glasgow Financial Alliance for Net Zero) transition plan framework provides a useful reference.

Step 4: Financial Impact Assessment

E1-9 is a critical requirement that calls for reflecting climate risks in financial statements. Physical risks (asset value impairment) and transition risks (stranded assets) must be assessed.

ESRS E1 and Other Frameworks

A company that achieves ESRS E1 compliance will also largely satisfy CDP's questionnaire and ISSB's climate disclosures.

Action Item: ESRS E1 is the most data-intensive standard under CSRD. Compliance is impossible without a GHG Protocol-aligned inventory and a transition plan — start with these two components.