The ESRS explains: ESRS E4 - Biodiversity and Ecosystems

ESRS E4 Explained: Biodiversity and Ecosystems

The importance of biodiversity and ecosystem services for businesses has long been underestimated. Only in recent years has it become clear that the loss of biodiversity is not merely an ecological problem, but also poses significant economic risks. According to an analysis by the World Economic Forum, 55% of global GDP depends directly or indirectly on functioning ecosystems. At the same time, according to IPBES, the loss of biological diversity is considered one of the greatest global risks of the coming decades. With ESRS E4 – Biological Diversity and Ecosystems, biodiversity is being integrated into European sustainability reporting for the first time in a binding manner.

In our ongoing blog series on the European Sustainability Reporting Standards (ESRS), today we focus on ESRS E4, which governs reporting on biodiversity and ecosystems. This standard will become increasingly important as the conservation of biodiversity and healthy ecosystems is critical to global sustainability.

The Significance of ESRS E4

Biodiversity and healthy ecosystems are a cornerstone of our planet’s stability. According to international analyses, nearly half of global gross domestic product (GDP) depends directly on functioning ecosystems—whether through agricultural yields, the availability of raw materials, or ecosystem services such as pollination, clean water, and climate regulation. The loss of these natural resources due to climate change, environmental pollution, and land-use changes has massive implications for the economy, society, and the financial sector.

This is exactly where ESRS E4 comes in: The standard aims to promote transparency and encourage companies to systematically integrate biodiversity into their strategies, governance, and processes. The goal is to halt the loss of biodiversity and highlight our dependence on ecosystem services.

Biodiversity and healthy ecosystems are essential for the stability of the global climate and the preservation of habitats. Nearly half of the world's gross domestic product (GDP) depends on biodiversity and intact ecosystems. The loss of these natural resources due to human activities such as climate change, pollution and land use change has far-reaching consequences for the environment and society. ESRS E4 aims to create transparency and encourage companies to adopt sustainable practices to halt biodiversity loss and protect ecosystems.

Content and Objectives of ESRS E4

The primary goal of ESRS E4 is to promote transparency regarding the interactions between businesses and nature. While climate reporting is already well established, the biodiversity standard serves as a necessary complement to provide a holistic view of ecological relationships.

Companies should not only report on strategies and measures, but also explain the dependencies and financial risks involved. This includes, for example, the loss of pollination services in agriculture, the decline of fish stocks in the food industry, or the scarcity of wood and biomass for construction and chemical companies.

The goal is to capture two aspects of materiality: on the one hand, the company’s impact on nature and ecosystems; on the other hand, the financial implications that biodiversity loss can have for the business model. This ensures that environmental issues are more closely integrated into the corporate governance process —from strategy development and investment decisions to risk management and compliance.

ESRS E4 focuses on companies' disclosure obligations in relation to their impacts on biodiversity and ecosystems. Companies must describe how their activities affect these natural resources, what measures they take to minimize or prevent negative impacts, and how they adapt their strategies to maximize positive effects. The requirements cover reporting on actual and potential positive and negative impacts, measures to prevent and mitigate them, targets and financial impacts.

ESRS Benchmarking: ESRS S4 in CSRD Reporting Practice

The study “Practices in Sustainability Reporting 2024” (DRSC/Deloitte, May 2025) provides a clear picture of the current state of implementation in DAX 40 reporting. While climate change (E1) is almost universally considered material, biodiversity and ecosystems (E4) have so far remained a niche topic. Only a minority of companies have classified this standard as material. In practice, this means:

• Biodiversity is often seen as a "future issue," much like Scope 3 emissions were years ago.
• Companies that are directly dependent on nature—such as those in the chemical, agricultural, construction, or energy sectors—cannot afford to delay, as investors, banks, and stakeholders are increasingly demanding proof of their sustainability efforts.
• The study (p. 24) shows that, by industry, companies in the raw materials and agriculture sectors in particular are more likely to consider biodiversity relevant, while financial and IT companies are significantly more cautious.

However, the DRSC/Deloitte study (p. 24) also emphasizes that the industry sector plays a decisive role in determining how relevant ESRS E4 is considered to be. For instance, reporting companies in the agriculture, forestry, fisheries, chemicals, materials, energy, and construction sectors report high materiality, while companies in the consumer goods, automotive, and transport & logistics sectors report moderate materiality. This results in a call to action for companies in nature-intensive sectors: biodiversity must no longer be treated as a secondary issue. At the same time, companies in less exposed industries should examine how indirect dependencies may already be influencing their risk profiles and business models today.

In other words: Those who ignore biodiversity today run the risk of having to react with ad hoc measures in two to three years—and in complex supply chains, that is usually more expensive and risky than integrating it early on.

The following is a standardized overview of all ESRS standards based on page 11 of the DRSC/Deloitte study (2025):

Disclosure requirements in accordance with ESRS E4

ESRS E4 is divided into various disclosure requirements and application requirements:

Strategy

• E4-1: Transition plan and consideration of biodiversity and ecosystems in strategy and business model
  Companies must disclose the impacts, dependencies, risks and opportunities related to biodiversity and ecosystems arising from their strategy. This includes assessing the resilience of the business model to biodiversity risks and disclosing a transition plan that aligns the company's strategy with international and EU strategies and targets.
• E4-2: Policies related to biodiversity and ecosystems
  Companies must disclose their corporate policies and strategies related to biodiversity and ecosystems. This includes linking biodiversity policies to the key drivers of biodiversity loss, ecosystem management and the traceability of products and raw materials in the value chain.

Management of impacts, risks and opportunities

• E4-3: Measures and resources related to biodiversity and ecosystems
  Companies shall describe measures to achieve biodiversity and ecosystem targets, including biodiversity offsetting measures, financial allocation of investments and application of the mitigation hierarchy.

Parameters and targets

• E4-4: Targets related to biodiversity and ecosystems
  Companies must disclose their targets related to biodiversity and ecosystems, including the application of ecological thresholds and the relationship to impacts and risks.
• E4-5: Impact parameters related to biodiversity and ecosystem change
  Companies must disclose metrics on their material impacts on biodiversity and ecosystems. This includes the number and area of sites in biodiversity-sensitive areas and the use of established data sources to measure these metrics.
• E4-6: Expected financial implications of material risks and opportunities related to biodiversity and ecosystems
  Companies must quantify and present the financial implications of biodiversity and ecosystem-related risks and opportunities.

Synergies with other ESRS standards

ESRS E4 does not stand alone; rather, it is closely linked to other ESRS.

A key link is ESRS E1 (Climate Change): Climate risks such as extreme weather or rising temperatures are fundamentally altering ecosystems. Biodiversity and climate must therefore be considered together. ESRS E3 (Water) is also closely linked—water quality and availability are critical factors for the functioning of ecosystems.

Furthermore, ESRS E4 plays a key role in conjunction with the social standards (S1–S4). The protection of biodiversity is often directly linked to the rights of indigenous peoples or the health of local communities. Finally, there are points of intersection with ESRS E5 (resource use and circular economy): conserving resources reduces pressure on ecosystems.

Companies that leverage these synergies avoid redundancies and can develop an integrated sustainability strategy that consistently combines environmental and social considerations.

Challenges & Recommendations for Implementation

The implementation of ESRS E4 is significantly more complex than that of other environmental standards. While CO₂ emissions are relatively easy to quantify, biodiversity management requires a multidimensional understanding of species diversity, habitats, and ecological functions.

Typical challenges arise in four areas:

1. Data collection: Many companies currently lack reliable data on land use, impacts on ecosystems, or dependence on ecosystem services. Transparency and monitoring systems are particularly lacking in global supply chains.
2. Geographical Context: Biodiversity is a local issue. While a production site in Europe may have little impact on protected habitats, the same process in South America or Asia can result in serious disruption to ecosystems. Companies must learn to geolocate their data with precision.
3. Integration into governance and strategy: A standalone sustainability report is not enough. ESRS E4 requires that biodiversity risks also be taken into account in risk management, procurement policies, and investment decisions.
4. Legal and societal expectations: In addition to the ESRS, there are links to international frameworks such as the Kunming-Montreal Global Biodiversity Framework, which must be taken into account as well.
   

Recommendations for businesses:

• Start early with a biodiversity materiality analysis to identify the relevant hotspots.
• Use external databases such as IBAT (Integrated Biodiversity Assessment Tool) or national nature conservation registries to identify site-specific risks.
• Develop pilot projects for biodiversity KPIs that can be integrated into the overall reporting process in the medium term.
• Engage in stakeholder dialogues, particularly with local communities and NGOs, to prevent social conflicts.

Changes in the Revised ESRS E4 (Draft July 2025)

The July 2025 draft also introduces important changes for E4 that will enable more practical application. Particularly notable is the reduction in mandatory data points by approximately 41%, which reduces the administrative burden on companies. At the same time, there is a greater emphasis on principles-based disclosure, which allows more flexibility for industry-specific approaches.

Conclusion: The significance of ESRS E4

ESRS E4 requires companies to address an issue that has often been underestimated in the past. For industries that are highly dependent on nature—such as agriculture, chemicals, construction, and consumer goods—biodiversity is becoming a key risk factor. However, companies in other sectors are also affected if they indirectly impact biodiversity through land-use changes, supply chains, or emissions.

The standard offers companies the opportunity to integrate natural capital into their strategic management processes, mitigate reputational risks, and meet the growing expectations of investors and society.

Learn more about the ESRS standards

To provide a comprehensive understanding of the European Sustainability Reporting Standards (ESRS), we at Five Glaciers Consulting have authored a series of articles that systematically cover all topic-specific standards—from the environmental standards (E1–E5) to the social standards (S1–S4) and governance (G1). These are complemented by the two cross-cutting standards (ESRS 1 & 2), which form the basis for consistent and comparable reporting. Continue reading below to explore our in-depth articles on the topic-specific standards of the ESRS:

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Article last updated on:September 30, 2025