ESRS Standard
ESRS Standard
The company shall disclose the elements of its strategy that relate to or impact sustainability aspects, its business model and its Value chain.
Objective: This disclosure requirement aims to describe the key elements of the company's overall strategy that relate to or have an impact on sustainability aspects, as well as the key elements of the company's Business model and Value chain, in order to provide an understanding of its exposure to Impacts, Risks and Opportunities and where they originate.
The company provides the following information on the key elements of its overall strategy that relate to or have an impact on sustainability aspects:
(a) A description:
i. The significant groups of products and/or services offered, including changes during the reporting period (new/removed products and/or services).
ii. The significant markets and/or customer groups served, including changes during the reporting period (new/defunct markets and/or customer groups).
iii. The number of employees by geographical area.
iv. Materiality of products and services banned in certain markets, if applicable.
b) A breakdown of total revenue, as reported in the financial statements, by the relevant ESRS sectors. If the company's financial statements include segment reporting in accordance with IFRS 8 Operating Segments, this information on the sector's revenue is reconciled as far as possible with the disclosures in accordance with IFRS 8.
c) A list of additional relevant ESRS sectors beyond those identified in paragraph 40(b), for example, activities that give rise to intragroup revenue, in which the entity has significant operations or in which it is or may be exposed to Impact materiality. The identification of these additional ESRS sectors must be consistent with the way in which they were considered by the company in the Materiality Analysis and the way in which it discloses material sector-specific information.
d) Where applicable, a statement indicating, in addition to the related revenues, that the company is active in the following sectors:
i. In the fossil fuel sector (coal, oil and gas).
ii. In the manufacture of chemicals.
iii. In the controversial weapons sector (anti-personnel mines, cluster munitions, chemical and biological weapons).
iv. In the cultivation and production of tobacco.
e) Its sustainability goals in relation to the most important groups of products and services, customer categories, geographical areas and relationships with stakeholders.
f) An assessment of its current most important products and/or services and significant markets and customer groups in relation to its sustainability goals.
g) The elements of the company's strategy that relate to or have an impact on sustainability aspects, including key challenges for the future and planned significant solutions or projects relevant to sustainability reporting.
If the company is based in an EU Member State that allows an exemption from providing the information required by Article 18(1)(a) of Directive 2013/34/EU and the company has made use of this exemption, it may omit the breakdown of revenue by main ESRS sectors required by paragraph 40(b). In this case, the entity shall nevertheless disclose the list of ESRS sectors that are material to the entity.
The company provides a description of its Business model and Value chain, including:
(a) Its inputs and its approach to gathering, developing and securing those inputs.
b) Its outputs and outcomes in terms of current and expected value to customers, investors and other stakeholders.
c) The key characteristics of its upstream and downstream value chain and the company's position in its value chain, including a description of key economic actors (such as key suppliers, distribution channels and End-users) and their relationship with the company. If the company has multiple Value chains, the disclosure requirement extends to the most important Value chains.
Application Requirements (AR)
Application Requirements (AR)
AR 12 To provide the sector information required by paragraph 40, the entity shall provide an overview of its material activities in accordance with the ESRS sectors. If no code exists for a sub-sector, the heading "Other" shall be used.
AR 13 For the purposes of the disclosures required by paragraph 40, a group of products and/or services offered, a group of markets and/or customer groups served or an ESRS sector is material to the entity if it meets one or both of the following criteria:
(a) They account for more than 10% of the entity's revenue.
b) They are associated with actual material impacts or potential material negative impacts of the company.
AR 14 When preparing the disclosures on its Business model and Value chain, the company shall consider the following:
(a) Its principal activities, resources, distribution channels and customer segments.
b) Its principal business relationships and their key characteristics, including relationships with customers and suppliers.
c) Where applicable, the cost structure and revenue of its operating segments in accordance with the disclosure requirements in the financial statements under IFRS 8.
d) The potential Impacts, Risks and Opportunities in its significant sector(s) and their possible relationship to its Business model or Value chain.
AR 15 Background information may be particularly relevant for Users of the company's Sustainability statement to understand the extent to which the disclosures provided include information on the upstream and/or downstream Value chain. The description of the main characteristics of the upstream and/or downstream value chain and, where applicable, the identification of key value chains should contribute to a better understanding of how the company implements the requirements of ESRS 1 Chapter 5 and the materiality analysis conducted by the company in accordance with ESRS 1 Chapter 3. The description can provide a comprehensive overview of the key characteristics of the upstream and/or downstream value chain, showing their relative contribution to the entity's performance and position and how they contribute to the entity's value creation.
Examples from previous practice
Examples from previous practice
Examples serve only as an indication of how a disclosure requirement has been stated by other companies to date. Audited ESRS reports are not yet available. There is no guarantee of accuracy and completeness.
SMB-1 - Strategy, Business model and Value chain
Strategy
The corporate strategy is based on three central pillars: core strengthening, growth areas and digitalization of processes. The aim is to strengthen competitiveness in mechanical engineering, exploit growth opportunities in the automotive supply industry and increase the efficiency of production processes through technological innovation.
In the 2023 financial year, the company generated sales of 71.9 million euros. The average number of employees was 410, while a total of 420 people were employed as at December 31, 2023. Geographically, these are spread across 180 in Germany, 90 in Poland, 60 in the Czech Republic, 50 in Hungary, 30 in Slovakia and 10 in Romania.
The company believes it is well positioned to benefit from developments in the automotive industry in the long term. This will be achieved by
Optimizing production capacities through automation and process innovations,
tapping into new customer groups in the field of electromobility,
expanding the product portfolio to include complex parts and system components,
strengthening supply chains through strategic cooperation with suppliers and
the targeted development of international growth markets.
Thanks to its strong market presence in Europe, long-standing partnerships with leading automotive manufacturers and an experienced development team, the company is able to offer innovative solutions and scale production sustainably.
Business model
The company is a leading supplier of precision parts and system components for the automotive industry in Europe. With five production sites in Germany, Poland, Hungary, the Czech Republic and Slovakia, the company supplies well-known automotive manufacturers and suppliers worldwide.
The core business comprises the development, production and supply of:
Metal components: e.g. engine mounts, axle components, structural parts
Precision components: e.g. transmission components and steering parts
System components: e.g. assemblies for electric motors
No specific sustainability targets were set for product groups or customer segments in the reporting period.
Value chain
The company's Value chain includes the procurement of materials, the production of components and systems and delivery to customers in the automotive industry.
Upstream area: The focus is on the procurement of steel, aluminum and other metals required for the production of components. The most important Raw materials are:
Steel production: iron and alloys, with gas and electricity serving as energy sources.
Aluminum production: bauxite as the main raw material, which is processed in an energy-intensive process.
The company also purchases components such as castings, screws and fasteners from suppliers in Europe. Transportation is carried out by freight forwarders who deliver the materials to the production sites.
The company works with 120 strategic suppliers and relies on a second sourcing strategy to avoid supply bottlenecks. The quality of suppliers is regularly checked through internal audits.
Core processes and production: Production takes place at five sites and includes
Forming and machining: precise machining of metal parts using state-of-the-art CNC machines.
Welding technology: Production of assemblies using robot welding.
Surface finishing: Galvanizing, powder coating or anodizing for corrosion resistance.
Quality control: Testing of products in accordance with international automotive standards.
Just-in-time delivery of components directly to the customer's production lines.
Use phase and end of life: The manufactured components are installed in vehicles and contribute to the performance and safety of the end products. At the end of their life cycle, the materials used, such as steel and aluminum, can be recycled.
The company is continuously working to improve its processes in order to use resources more efficiently and reduce the carbon footprint of production. This includes the use of energy from renewable sources and the reduction of material waste through optimized production techniques.
Templates
Templates
Value chain analysis (download):
Questions for the Value chain (image):
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