ACT Assessment and the CSRD
The European CSRD (Corporate Sustainability Reporting Directive) is a framework regulation drawn up by the European Commission as part of the Green Deal. It aims to harmonise extra-financial reporting by companies by proposing a common framework for communicating data on governance, social and environmental issues.
The ultimate aim of this directive is to encourage companies to question their business model and transform it to meet ecological and social challenges.
Although it is seen by some as a constraint because of the reporting burden it places on companies, CSRD can and should above all be seen as an opportunity for transformation.
Broken down into 12 cross-cutting and thematic standards (five of which relate to environmental issues) known as the European Sustainability Reporting Standards (ESRS), it calls on companies to design their strategies and management processes using a global approach, based on risk and opportunity analyses, while integrating stakeholders into their thinking and actions.
These 12 thematic standards, or ESRSs, deal with cross-cutting subjects and social, environmental and governance issues. Each ESRS is organised into different categories called Disclosure Requirement (DR), grouping together a certain number of qualitative and quantitative data points, also known as Data Point (DP).
The CSRD includes a total of 1,200 RFPs, including 219 for the ESRS E1 standard on climate change.
ACT Assessment
The ACT Assessment methodology aims to provide a framework for the climate accountability of companies’ transition plans. It was created in the wake of COP 21 to provide assurance that companies that set greenhouse gas (GHG) emission reduction targets will achieve them.
ACT helps companies to evaluate their climate strategy and its implementation. The methodology is based on a three-dimensional score:
–A performance score made up of 9 modules: five purely qualitative and four incorporating quantitative components. The various indicators that make up these modules fall within 3 time scales: past, present and future.
–A narrative score : this allows us to distance ourselves from the performance score by carrying out an overall analysis of the coherence of the whole. The following dimensions are explored: business model and strategy, coherence and credibility, reputation and risk.
– A trend score that assesses the direction in which the company’s climate strategy seems to be heading – “Will it score better or worse in a few years’ time?
Quantitative modules
- Reduction targets
- Material investments
- Intangible investments
- Sold product performance
Quality modules
5. Management
6. Suppliers engagment
7. Customers engagment
8. Policy engagment
9. Business model
Mapping between ACT Assessment and the CSRD
In order to identify the data to be published by companies subject to the CSRD in an ACT assessment, a mapping exercise was carried out between the E1 ESRSs, and certain ESRSs linked to the methodology and the ACT indicators.
This mapping has several objectives:
– Objectivise the percentage of overlap between E1 and ACT ESRSs,
– To maximise the use of ESRSs to complete an ACT assessment and thus facilitate scoring on the basis of public data,
– To check whether the information required in the ESRS corresponds to ACT and to identify how the ACT methodology can be updated to better integrate other aspects.
The cross-check was based on the Excel document published by EFRAG listing the ESRS datapoints. The relevant elements analysed are first and foremost the ESRS E1 climatic report, but also the ESRS 2 report, which provides generic rules for the publication of key information on policies, actions and targets, as well as the S1 and G1 reports, which contain certain relevant information (particularly concerning lobbying activities). This work was carried out on the Generic methodology as well as on six sectoral methodologies, namely Auto, Retail, Electric Utilities, Real Estate, Oil and Gas and Transport. The results presented below relate to the Generic methodology, which reflects a representative level of overlap. The divergences between the sector methodologies are presented below and in a dedicated webinar (replay and slides).
Cross-referencing of indicators between ACT Assessment and the CSRD
-The majority of ACT Generic indicators overlap at least partially with one or more ESRS data points (87%).
-However, it is emphasised that it is the actual implementation of the first reports that will make it possible to verify the interpretation of certain regulatory requirements, with an impact on the actual availability of data.
-The ACT methodologies will begin to be updated from 2025 to better match the information required for the ESRS, particularly in terms of data formatting.
-The ACT indicators not covered (13%) can be explained and contextualised. In particular, R&D and training aspects (ACT module 3) are not covered. However, they can be covered in other ways (Google Patent for patents) and often have a low weighting. In addition, public commitment aspects (module 8) are most often analysed by external sources (see below).
Generic ACT indicators have a reference in the ESRSs
Details of the overlap level
The “Objectives” module shows a significant correspondence, but the evaluator may, given the current state of the methodologies, be confronted with a presentation of the data that does not allow for direct evaluation: different units, different perimeters, Scope 3 objectives grouped together in one and not split up between upstream and downstream, etc. The “Objectives” module shows a significant correspondence, but the evaluator may, given the current state of the methodologies, be confronted with a presentation of the data that does not allow for direct evaluation.
Some indicators operate in a quantitative manner (e.g. ACT GE 2.3 Share of low carbon capital expenditure) where there is no guarantee that the company, under the CSRD framework, will provide information in exactly this way. However, it is reasonably expected that the indicators will work on an aggregate basis, applying proxies where appropriate.
The “Political commitment” module is poorly covered by the ESRS, mainly because it aims to measure the distance between a company’s words and its lobbying activities. In practice, therefore, it relies mainly on external sources.
For sectoral methodologies, there is logically no alignment with sectoral aspects, as the ESRS are generic at this stage.
This work will therefore enable ADEME to propose positions for the construction of sectoral ESRSs that are consistent with the ACT framework.
Sector-specific features of mapping work
| Retail | Transport | Oil & Gas | |
| Sector specificities | –Targets expressed in terms of emissionsintensity per value added -Waste reduction strategy relating to E5 Use of resources and circular economy | – Emissions must be broken down by mode of transport -The Transport methodology focuses on “spot” transport contracts -Some references toE1-5 Energy mix | -The outlook for demand reduction, an aspect addressed by several indicators in the Oil&Gas methodology, is absent from the CSRD. -Recommend sectoral aspects in the future ESRS: share of unapproved projects, references to CDR, CCS and CCU. |
| Electric utilities | Real estate | Auto | |
| Sector specificities | Several aspects need to be taken into account in the sector ESRS: the share of energy efficiency services, interventions to reduce emissions from low-carbon assets throughout their life cycle, etc. | -Data of interest : Contractual instruments and property assets by energy efficiency class –High level of granularity of data required in ACT (owned buildings, managed buildings, newly acquired buildings, etc.) | Aspects relating to low-carbon vehicles could be integrated into the sectoral ESRS. |
How will ACT Assessment evolve?
Mapping directly accessible in the methodologies
As is already the case today with the CDP questionnaires, the ACT methodologies will henceforth include an explicit correspondence with the main relevant CSRD data points in order to facilitate the analyst’s work.
Objectives and trends
As the CSRD E1 is sector agnostic, it requires targets to be expressed in terms of absolute emissions, whereas several ACT methodologies currently work in terms of emissions intensity. The ACT methodologies/tools will be updated if necessary to explicitly include absolute emissions. It should be noted that for the sectors concerned, an orientation in terms of intensity remains necessary, which will be taken into account on a qualitative basis.
Explicit reference to Taxonomy
Some aspects related to low carbon products/services (e.g. ind. 9.2 in ACT GE) are not explicitly linked to the EU taxonomy, whereas this information will be systematically provided. Without limiting the definition of “low carbon” to the EU taxonomy alone, a more explicit link will be established so that the assessor can rely at least on the taxonomy reports.
Future emissions trend
To date, these indicators have hardly been completed due to the lack of forward-looking data. The CSRD’s minimum requirements on the description of policy levers may make it possible to develop a more reliable bottom-up approach in the ACT to the development of the expected future GHG trajectory.
Risk versus impact perspective
ACT assessments are mainly carried out from an “impact” perspective. Without changing the philosophy, it is planned to strengthen the assessment of the risk aspect in module 5/the narrative note, given the amount of relevant information provided in the CSRD.