Danish technical paper on the need for developing ESG-methodologies
European companies are increasingly required to measure and report on ESG-data due to new sustainability
regulatory frameworks and growing stakeholder demands. Both large companies and SMEs spend substantial
resources on understanding the new sustainability regulations and subsequently collecting, handling, and sharing
the necessary sustainability related data throughout their value chain. Hence, supporting companies in their work
with ESG-data is essential, both to ease the burden of compliance and enable their sustainable transition.
However, one key barrier in this regard is the substantial uncertainty and unevenness in maturity across the
various ESG-elements in the ESRS and the underlying calculation- and testing standards and methodologies. It is
necessary to ensure European harmonisation of ESG-methodologies and ideally subsequently also promote their
recognition and applicability at international level. Standardised ESG-methodologies are crucial to ensure
reliability, comparability, proportionality and transparency of ESG-data, which can be a means to alleviate
administrative burdens on European companies stemming from the CSRD. The absence of well-established ESG-
methodologies means that companies resort to different sustainability assessment frameworks, as well as endless
surveys and initiatives on sharing data with stakeholders, sometimes with different applied methodologies.
In some areas ESG-methodologies are well developed and widely accepted among economic operators and
stakeholders e.g., the GHG Protocol, that provides a standardised methodology to measure and manage
greenhouse gas emissions for companies. This approach enhances accountability, consistency, comparability, data
sharing and helps organizations report on topics, if deemed material.
However, there are several key areas where the absence of standardised ESG-methodologies poses a hurdle,
hence tasking regulators and other relevant stakeholders to support companies in identifying and developing
standardised ESG-methodologies where these are needed. One of the most prominent topics is biodiversity, which
is subject to increasing public scrutiny, but where the immaturity of ESG-methodologies and the complexity of the
topic makes it burdensome for companies to consistently define, measure, assess and report biodiversity impacts
in a proportional manner. The lack of ESG-methodologies also poses a challenge within other sustainability related
areas such as circular economy.
In order to solve the challenge of lacking ESG-methodologies we encourage the Commission to:
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Engage with companies and stakeholders to identify where standards are lacking to assess and report on
the ESG-topics covered by the ESRS for large undertakings as well as the forthcoming LSME and VSME.
•
Subsequently to the abovementioned identification, the Commission should facilitate, and support
the development of lacking ESG-methodologies and guidance needed by companies through e.g., action
grants to the relevant European standardisation organisations.
•
Ensure that, when developing standards and ESG-methodologies, due consideration is given to
digitalisation and automation of corporate data management.
•
Recognise and promote emerging standards to ensure that the new methodologies will be widely used
and are applicable among all European companies, e.g., by referencing recognised ESG-methodologies in
future revisions of the ESRS. The forthcoming ESG-methodologies will only have value if they are generally
accepted among companies and are easy to use in practise.
The Danish Business Authority is available to further discuss the elements proposed. For more information, please
contact: