⚙️ Basis of Operation (BP‑1 & BP‑2)

🧩 General Basis of Preparation

Disclosure BP‑1 requires undertakings to explain whether sustainability statements are prepared on a consolidated or individual basis, and to confirm that the consolidation scope aligns with financial statements.

Companies must disclose:

• Which subsidiaries are exempted from reporting obligations.
• The degree to which the sustainability statement covers the value chain.
• Any instances where information is omitted due to intellectual property or confidentiality concerns.

🧾 Disclosures in Relation to Specific Circumstances

Under BP‑2, entities describe how specific circumstances affect preparation—such as:

• Deviations from standard time horizons.
• Use of indirect proxies for value‑chain data and their accuracy.
• Measurement uncertainty and estimation assumptions.
• Corrections of prior‑period errors and methodological changes.
  Smaller undertakings (fewer than 750 employees) enjoy phased‑in requirements for the first two years but must still present a minimum set of material sustainability topics.

🏛️ Governance (GOV‑1 to GOV‑5)

The governance disclosures ensure that oversight and accountability for sustainability reporting are transparent.

👥 Roles and Responsibilities

• GOV‑1 outlines the composition and diversity of the Administrative, Management, and Supervisory Bodies (AMSB), the qualifications relevant to sustainability goals, and gender representation.

• GOV‑2 explains how the AMSB is informed about material impact, risk, and opportunity (IRO) topics, due diligence, and progress toward sustainability targets.

💼 Integration with Incentives and Internal Controls

• GOV‑3 requires companies to disclose how sustainability performance is linked to incentive schemes and variable pay components.

• GOV‑4 and GOV‑5 focus on due‑diligence mapping, risk assessment, and internal control systems for sustainability information, ensuring that governance processes are verifiable and consistent with financial‑reporting controls.

🚀 Strategy and Business Model (SBM‑1 and SBM‑3)

The strategy component demonstrates how sustainability aligns with long‑term resilience and value creation.

🌐 SBM‑1 – Strategy, Business Model and Value Chain

Companies disclose key business elements—including headcount, geographic distribution, value‑chain characteristics, and operating sectors.

They must also identify exposure to sensitive industries (fossil fuels, chemicals, controversial weapons, tobacco) and explain how their business model supports sustainable value Creation.

💡 SBM‑3 – Material IRO Interaction

Undertakings describe the material impacts, risks, and opportunities identified during the materiality assessment, their concentration within the organization, and their financial implications.

Disclosures must cover:

• Anticipated short‑, medium‑, and long‑term effects on strategy and cash flows.
• Qualitative and quantitative analyses of resilience.
• The way strategies adapt to mitigate negative impacts or capture new opportunities.

📉 Impact, Risk and Opportunity Management (IRO‑1)

Disclosure IRO‑1 lays out the methodologies and assumptions underpinning the materiality process.

It requires a transparent explanation of:

• How impacts, risks, and opportunities are identified and prioritized.
• Stakeholder consultations and expert inputs used.
• Integration into risk‑management and decision‑making processes.
  The ESRS framework references the LEAP approach (Locate, Evaluate, Assess, Prepare), guiding companies from identification through to reporting and ensuring consistency across topical standards (E1 to E5 and G1).

🧭 Minimum Disclosure Requirements (MDRs)

🧾 MDR‑P – Policies

Entities must describe adopted policies addressing material sustainability matters, including objectives, scope, and implementation responsibilities.

Policies should reference applicable third‑party standards and reflect engagement with key stakeholders.

If certain policies are not yet in place, the company must explain why and indicate adoption timelines.

⚙️ MDR‑A – Actions and Resources

Disclosures highlight significant actions, progress status, and financial commitments (CapEx and OpEx).

Information covers expected outcomes, time horizons, and alignment with policy objectives.

Entities also report whether successful implementation depends on external factors such as regulations or public support.

📊 MDR‑M – Metrics

Companies must disclose performance metrics used to evaluate effectiveness and progress.

Each metric should be well‑defined, methodologically consistent, and, where possible, validated by an independent body.

Currency and unit‑of‑measure consistency with financial statements are mandatory.

🎯 MDR‑T – Targets

Targets represent measurable, outcome‑oriented commitments connecting policies and actions.

Key expectations include:

• Defined target levels, horizon, and base year.
• Alignment with scientific evidence and policy goals.
• Stakeholder participation in target‑setting.
• Regular evaluation of progress and explanation of deviations or methodological changes.
  Performance against disclosed targets must be tracked continuously and reported in comprehensive tables for transparency.

🤝 How ComplyMarket Supports ESRS 2 Compliance

Complying with ESRS 2 demands rigorous data integration, structured documentation, and alignment between sustainability and financial information.

ComplyMarket assists international organizations by:

• Mapping ESRS 2 requirements and developing structured reporting frameworks.
• Reviewing governance, risk, and IRO identification processes.
• Assisting in policy design, action planning, and metric validation.
• Ensuring audit‑readiness and cross‑standard alignment under the CSRD.

Partnering with ComplyMarket enables companies to build transparent, reliable, and consistent sustainability disclosures—enhancing regulatory compliance and investor confidence.