ESRS E4 Practical guide to implementing the CSRD
Discover the ESRS E4 practical guide from the Michael Otto Environmental Foundation, including strategies and tools for CSRD reporting.
- ESRS E4 requires companies to systematically report their dependencies and impacts on biodiversity and ecosystems.
- The Michael Otto Environmental Foundation's practical guide provides concrete steps for conducting a nature-related materiality assessment.
- Digital tools such as ENCORE, IBAT and the WWF Risk Filter make site-level analysis faster and more data-driven.
- Stakeholder involvement and regular updates to the analysis are essential for reliable reporting.
- Nature-based reporting is both a compliance requirement and a strategic opportunity to build long-term resilience.
The ESRS E4 standard of the Corporate Sustainability Reporting Directive (CSRD) focuses specifically on biodiversity and ecosystems and presents companies with the challenge of systematically recording their dependencies on ecosystems and their risks and opportunities.
In cooperation with numerous partners, including NABU, Deloitte, PwC and many more, the Michael Otto Environmental Foundation has developed a comprehensive practical guide that supports companies in meeting these CSRD requirements and at the same time integrating nature as a core value into strategic corporate management. This article highlights the key messages and pragmatic steps for implementing the CSRD under ESRS E4.
Why nature and biodiversity are important for companies
The importance of nature and biodiversity for economic activities is often underestimated. Numerous companies are directly or indirectly dependent on ecosystem services, be it through access to clean water resources, fertile soils or natural climate and pollutant management. The loss of biodiversity and the associated ecological changes pose considerable risks not only to the environment, but also to companies.
Source: Practical guide from the Michael Otto Environmental Foundation for the ESRS E4 of the CSRD
Physical risks from biodiversity loss
- Natural disasters and resource shortages can disrupt production processes and lead to high costs.
- Damage to soil fertility: Monocultures, erosion and chemical pollution cause soil to lose its fertility, threatening the agricultural and food industries and raising costs for fertilizers and alternative cultivation methods.
- Pests and diseases: The destruction of natural habitats can promote the spread of invasive species and pests, affecting crop yields and forest ecosystems and increasing production costs in agriculture, forestry and dependent industries.
- Increase in extreme weather events: The loss of forests and wetlands weakens natural climate buffers and increases the frequency and intensity of floods, droughts and storms, disrupting infrastructure and supply chains.
At the same time, investors and consumers are increasingly demanding transparent and sustainable practices, forcing companies to strategically address their responsibility for nature and the environment.
Key messages of the ESRS E4 Practical Guide
The (European Sustainability Reporting Standard) ESRS E4 Practical Guide from the Michael Otto Environmental Foundation sets clear priorities for companies on how they can integrate ecosystems and biodiversity as strategic values in their sustainability reporting. These key messages help companies not only to meet the requirements of CSRD, but also to derive long-term benefits from them:
- Reporting as a strategic opportunity: The guide emphasizes that reporting on biodiversity and ecosystems is more than just a compliance exercise. It can help companies to strengthen their resilience and identify new opportunities. By transparently disclosing nature-related risks and dependencies, companies can increase the trust of their stakeholders and position themselves as pioneers in sustainable business.
- Early involvement of relevant stakeholders: The effective implementation of nature-based reporting and double materiality assessment requires the involvement of stakeholders, both within the company and externally. The guidelines recommend involving environmental and sustainability teams, risk management and external experts in the process at an early stage to ensure a holistic perspective and a comprehensive understanding of nature-related dependencies.
- Materiality assessment as a basis for well-founded decisions: The guideline places great emphasis on a precise materiality assessment. This is applied not only to the company's own sites, but also to the entire value chain. Such an analysis helps companies to identify the most significant nature-related risks and opportunities and to take targeted measures where they have the greatest impact. The ESRS E4 Practical Guide emphasizes that this analysis should be objective and based on scientifically sound data.
- Use of digital tools for site assessment: To meet the complex requirements of materiality assessment, the guidelines recommend the use of specialized tools. Tools such as the WWF Risk Filter or ENCORE offer data-based insights into the local conditions of sites and can help to assess nature-related risks more efficiently. The use of such tools enables companies to carry out a well-founded and resource-saving site analysis and facilitates continuous adaptation to future requirements. Information on these and other helpful tools for site assessment can also be found in our materiality assessment Excel template.
These key messages are intended to encourage companies to view nature-based reporting not just as compliance with legal requirements, but as a strategic opportunity to secure the long-term value creation of their business and drive forward their sustainable development.
Pragmatic steps for materiality assessment according to the ESRS E4 practical guide
The Michael Otto Environmental Foundation's guide provides clear instructions for implementing materiality assessment as part of the ESRS E4. These pragmatic steps enable companies to carry out a structured and well-founded analysis of their dependencies and impacts on nature.
We have also written a dedicated blog article with details on how to perform the double materiality assessment.
1) Preparation and definition of the scope
Before companies start with materiality assessment, they should define the scope of the key nature-related topics that are relevant to their business, for example by conducting a comparison with peers. This includes relevant value chains of the company to identify the most significant nature factors.
With the help of screening tools and desk research, companies can identify industry- and region-specific natural features, such as mean species abundance (MSA), water scarcity or deforestation risks that are potentially relevant to their business.
2) Implementation of materiality assessment at site level
Companies should not only analyze their own sites, but also critical sites in the value chain. The ESRS E4 practical guide recommends using standardized metrics such as the ecological status of local biodiversity, the availability of ecosystem services and the number of protected species.
Tools for site evaluation with regard to the ESRS E4
The use of digital tools enables an efficient and data-based assessment of impacts, risks and opportunities (IROs) without the need for extensive on-site investigations. Tool examples:
| Tool | Description |
|---|---|
| ENCORE | Exploring Natural Capital Opportunities, Risks, and Exposure. Helps companies analyze nature-related risks and dependencies, showing how economic activities depend on and impact nature. |
| Kuyua | Integrated AI solution for recording and evaluating environmental status and dependencies at own sites and in the supply chain. Identifies nature-related risks and proposes measures to promote a nature-positive corporate profile. |
| IBAT | Integrated Biodiversity Assessment Tool. Provides access to key biodiversity information and identifies areas of high biodiversity using global databases such as the IUCN Red List. |
| WWF Risk Filter | Online tool that helps companies understand the risks associated with the destruction of nature at relevant locations. Identifies risk hotspots and prioritizes them for targeted nature reporting. |
| Copernicus | EU earth observation program providing comprehensive data for environmental monitoring and risk assessment using satellite data, including deforestation rates and soil erosion. |
| IUCN | International Union for Conservation of Nature. Provides information on biodiversity and lists endangered species in the Red List. |
| Flood check | Tool from German insurers enabling risk assessment of locations in Germany with regard to flood hazards. |
| Water Risk Atlas | World Resources Institute (WRI) tool providing comprehensive data on global water scarcity and risks for water-intensive production processes. |
Some of the tools mentioned can be used free of charge. Such ESG software solutions provide a basis for making informed decisions and managing nature-related risks on a site-specific basis.
Before you carry out the location analysis yourself, approach your insurance or reinsurance company. They usually have complex models for assessing physical risks in order to calculate the policy. Ask your contacts whether you can obtain this analysis. Some insurers make this data available to their customers.
Source: Practical guide from the Michael Otto Environmental Foundation for the ESRS E4 of the CSRD
3) Stakeholder engagement and validation of results
An essential step is to consult internal and external stakeholders to verify and complement the findings of materiality assessment. Stakeholders such as environmental and sustainability teams, local communities and scientific experts can provide valuable insights that contribute to a deeper and more objective assessment to determine whether the IROs and therefore the topics are material.
The consultation enables companies to identify potential risks and opportunities at an early stage and to develop a sustainable strategy based on comprehensive transparency and cooperation.
4) Integration of the analysis into reporting and risk management
The results of the materiality assessment can be compared with other benchmarks and should be actively integrated into the company's risk management. This can include adapting supply chains, production processes and locations in order to minimize nature-related risks and make better use of opportunities.
As part of the CSRD reporting obligations, it is important to regularly update the findings and make them transparent in the reporting. An important step after implementing the double materiality check is the mapping of topics to the ESRS data points. The disclosure of nature-related data and measures strengthens the trust of stakeholders and positions the company as a responsible market player.
By taking these steps, companies can not only meet the regulatory requirements of ESRS E4, but also strengthen their resilience to nature-related risks. The guide shows how a well-founded materiality assessment becomes the basis for a long-term sustainable and nature-conscious corporate strategy.
Pilot projects: Experiences from the ESRS E4 Practical Guide
To facilitate the practical implementation of a nature-related materiality assessment in accordance with ESRS E4, the Environmental Foundation Michael Otto's guidelines describe various pilot projects and their results. These projects show how companies can use digital tools to systematically assess nature-related risks and dependencies and integrate them into their corporate strategy. Here are some key findings from the pilot projects:
- Piloting tools for site assessments: In the pilot projects, tools such as the WWF Risk Filter and ENCORE were used to identify and assess the nature-related risks at the respective company sites. These tools helped companies to locate potential risk hotspots, such as water-scarce regions or areas with high biodiversity, and prioritize their risks accordingly. Companies recognized that these digital tools provide a valuable basis for nature-based reporting by providing comprehensive data on specific site conditions.
- Use of the IBAT to record biodiversity risks: Several companies used the Integrated Biodiversity Assessment Tool (IBAT) to identify protected areas and areas with threatened biodiversity in their surroundings. The tool enabled the project participants to specifically integrate biodiversity risks into their site assessments and develop appropriate measures to minimize risks. The IBAT was found to be particularly indispensable at production sites located near ecologically sensitive areas.
- Efficient water risk assessment with the Aqueduct Water Risk Atlas: Companies operating in water-intensive industries used the World Resources Institute's Aqueduct Water Risk Atlas to analyze water-related risks such as water scarcity or flooding risks. This enabled them to identify regions with an increased water risk at an early stage and develop preventive measures to avoid interruptions to production.
- Findings on practical applicability: The pilot projects showed that the combination of different CSR tools enables a more comprehensive and precise materiality assessment. Companies found that the tools help them to capture complex location data and evaluate it more efficiently, significantly reducing the resources required for analysis. At the same time, challenges also became clear: using the tools requires a certain level of data and methodological expertise, particularly for interpreting the results. Some companies therefore decided to work closely with external experts.
Advantages and challenges of using tools to assess the ESRS E4 standard
Advantages of digital assessment tools:
- The combination of different CSR tools enables a more comprehensive and precise materiality assessment.
- Tools help companies capture complex location data and evaluate it more efficiently, significantly reducing the resources required for analysis.
Challenges to keep in mind:
- Using the tools requires a certain level of data and methodological expertise, particularly for interpreting the results. Some companies therefore decided to work closely with external CSRD experts.
- Many of the tools mentioned can be used free of charge, at least to a certain extent. However, some software solutions are also subject to a charge.
- No single tool fully supports companies in identifying and assessing all impacts, risks and opportunities under the ESRS E4 standard. Each tool has its strengths and weaknesses.
Our materiality assessment template includes guidance on nature-related topics and supports you in conducting a structured ESRS E4 analysis, including references to the key digital tools mentioned in this guide.
Summary of the ESRS E4 Practical Guide
The Environmental Foundation Michael Otto's guidelines offer companies practical support for implementing nature-related reporting as part of the ESRS E4 standard. It shows that a comprehensive materiality assessment on nature and biodiversity is not only a regulatory requirement, but also brings strategic advantages. By specifically analyzing their dependencies and risks, companies can both strengthen their sustainability strategy and gain the trust of their stakeholders.
Frequently asked questions about ESRS E4 and biodiversity reporting
What does ESRS E4 cover and which companies need to report on it?
ESRS E4 covers biodiversity and ecosystems. It requires companies subject to the CSRD to disclose their dependencies on and impacts on nature, including risks and opportunities related to habitat loss, species extinction and ecosystem degradation. Under the updated rules in force since March 2026, mandatory CSRD reporting now applies to companies with more than 1,000 employees and more than 450 million euros in net turnover. Companies outside this scope may still benefit from voluntary standards such as the VS (Voluntary Standard), which builds on the VSME framework.
How do I start a nature-related materiality assessment under ESRS E4?
Start by defining the scope of relevant nature topics for your sector and value chain, using peer comparisons and desk research. Then use digital tools such as ENCORE, the WWF Risk Filter or IBAT to screen your sites for nature-related risks. Involve internal and external stakeholders to validate the findings, and integrate the results into your risk management and reporting processes.
Which free tools are most useful for ESRS E4 site assessments?
Several tools are available free of charge, including ENCORE (dependencies and impacts on natural capital), the WWF Risk Filter (biodiversity and water risk), IBAT (protected areas and threatened species) and the Aqueduct Water Risk Atlas (water scarcity). The EU's Copernicus program also provides free satellite data for environmental monitoring. Before running your own analysis, it is worth asking your insurer whether they can share their physical risk models.
Is the ESRS E4 materiality assessment the same as the general double materiality assessment?
The underlying principle is the same: you assess both how your company impacts nature (impact materiality) and how nature-related changes affect your financial performance (financial materiality). ESRS E4 applies this double materiality lens specifically to biodiversity and ecosystems, and requires site-level analysis covering your own operations and critical value chain sites. The Michael Otto Environmental Foundation's guide provides additional sector-specific detail and tool recommendations for this topic area.