CSRD ESRS E4: What Biodiversity Disclosure Means for Fashion Companies

What is CSRD ESRS E4?

ESRS E4 is the biodiversity and ecosystems standard under the European Sustainability Reporting Standards (ESRS), which form the disclosure framework for the Corporate Sustainability Reporting Directive (CSRD). It requires companies to report on their impacts, risks, and opportunities related to biodiversity, ecosystems, and ecosystem services across their full value chain.

Scope changed materially in 2026, and the old thresholds are still widely quoted. Following the Omnibus I Directive — adopted by Council on 24 February 2026 — CSRD now applies to companies with more than 1,000 employees and more than €450m net turnover. The earlier 250-employee / €40m turnover / €20m assets thresholds no longer determine scope, and listed SMEs (originally “Wave 3”) have been removed altogether. Companies newly in scope report on FY2027 data, in 2028, so data collection needs to be in place by the end of 2026.

If you sit below the threshold, you are not obliged to report — but you should still expect ESRS-shaped data requests from in-scope customers, which is how most of the pressure reaches mid-market fashion brands in practice.

For fashion brands that assumed biodiversity was a "nice to have" sustainability topic, ESRS E4 changes the calculus significantly. It is a mandatory disclosure standard with audit requirements, not a voluntary framework you can opt out of.

The double materiality assessment

Before you can report under ESRS E4, you must complete a double materiality assessment — an analysis of whether biodiversity is material to your company from two perspectives:

• Impact materiality: Does your business cause significant positive or negative impacts on biodiversity and ecosystems? For most fashion brands, the answer is yes — cotton farming, leather production, and viscose manufacturing all have documented, quantifiable impacts on land, water, and species.
• Financial materiality: Do biodiversity-related risks and opportunities create financial exposure for your business? Again, for fashion brands the answer is typically yes: water scarcity threatens cotton yields, deforestation regulations create supply chain risk, and growing consumer and investor expectations create transition risk for laggards.

If your double materiality assessment concludes that biodiversity is material (on either dimension), you must report in full against ESRS E4. Given the fashion sector's nature footprint, it is difficult to construct a credible argument that it is not material. Regulators and auditors are likely to scrutinise claims of non-materiality carefully.

The six mandatory disclosure areas

ESRS E4 requires disclosure across six areas. Each has specific datapoints, some mandatory and some voluntary:

1. Policies. Do you have a biodiversity policy? Does it cover your supply chain (Scope 3)? Is it aligned with the Kunming-Montreal Global Biodiversity Framework and the mitigation hierarchy (Avoid > Reduce > Restore & Regenerate > Transform)? Many brands have a sustainability policy that touches on biodiversity in general terms — ESRS E4 requires something more specific.

2. Targets. Have you set biodiversity targets? Are they time-bound and measurable? ESRS E4 does not require science-based targets, but it requires that you disclose how your targets relate to scientific guidance. The Science Based Targets for Nature (SBTN) provides the most widely recognised methodology for land and freshwater targets, aligned with Target 3 of the Kunming-Montreal Global Biodiversity Framework (the “30x30” protected-area goal) and Target 15, which covers business assessment and disclosure of biodiversity risks, dependencies and impacts. Note that “nature positive” is not a goal of the adopted GBF text — it was proposed during negotiation and excised — which is why careful companies avoid it as a formal claim.

3. Actions. What programmes are you running to address your biodiversity impacts? This includes supplier engagement programmes, certification adoption (FSC, LWG, Better Cotton), landscape partnerships, and restoration initiatives. Actions must be linked to the targets they contribute to.

4. Site footprint near biodiversity-sensitive areas. A mandatory metric: the area (in hectares) of your own operations and upstream value chain in or adjacent to biodiversity-sensitive areas, including IUCN Protected Areas, Key Biodiversity Areas (KBAs), and RAMSAR wetlands. For fashion brands, this primarily applies to supplier manufacturing sites and agricultural production locations.

5. Impact on species. Disclosure on whether your operations and value chain negatively affect species listed on the IUCN Red List. Cotton farming in India's Vidarbha region affects the Bengal florican; leather production in the Cerrado affects the giant armadillo and maned wolf; viscose pulping in Indonesian forests affects orangutans and Sumatran tigers. These are real, documented linkages that belong in your disclosure.

6. Land use and ecosystem conversion. Disclosure on land use change and ecosystem conversion in your value chain. This is closely related to the EUDR requirements for deforestation-free sourcing, but extends beyond the EUDR's commodity list to include any ecosystem conversion associated with your operations.

The data infrastructure you need to build

ESRS E4 disclosure requires systematic data collection across your value chain. The core data requirements are:

• Supplier site coordinates — GPS coordinates or polygons for every significant production location, enabling proximity-to-sensitive-area analysis
• Production country and region — at a minimum, to enable country-level risk benchmarking via Aqueduct, GBIF, and ENCORE
• Commodity volumes — by material, origin, and supplier, to weight risk assessments and measure target progress
• Certification coverage — which volumes are certified to credible standards (FSC, LWG, Better Cotton, GOTS, OEKO-TEX) and which are not

Many fashion brands have some of this data, scattered across procurement systems, supplier portals, and spreadsheets. ESRS E4 requires it to be consolidated, auditable, and linked to the specific datapoints in the standard.

What to have ready by end of 2026

For Wave 2 companies reporting on FY2027, the preparation clock is already running. The minimum viable state at end of 2026 should be:

• A completed double materiality assessment with biodiversity documented as material (or a well-evidenced argument for non-materiality, if genuinely applicable)
• A biodiversity policy covering supply chain impacts, approved at board level
• At least two to three targets with measurable KPIs and base-year data — for example, percentage of leather volume with LWG certification, percentage of viscose from certified sources, percentage of cotton from Better Cotton or equivalent
• A data collection process for the six mandatory metrics, with at least one year of baseline data
• An action plan linking each target to specific supplier engagement or sourcing programmes

The companies that will struggle with FY2027 ESRS E4 disclosure are the ones starting from scratch in 2027. The companies that will disclose credibly are the ones building their data infrastructure and governance now.

How ESRS E4 relates to TNFD and EUDR

The three frameworks are complementary rather than competing. The EUDR is a legal compliance requirement focused specifically on deforestation-free sourcing. ESRS E4 is a broader disclosure standard covering all biodiversity impacts, including but not limited to deforestation. TNFD is a voluntary disclosure framework with four pillars (Governance, Strategy, Risk Management, Metrics and Targets) that maps closely to ESRS E4's requirements.

A well-constructed nature strategy addresses all three simultaneously. The underlying data — supplier geolocation, commodity risk assessment, certification coverage, pressure heatmap — serves all three purposes. Brands that approach these as three separate compliance workstreams will spend three times the effort for roughly the same output.