Sustainability Reporting Boundary

What is Sustainability Reporting Boundary?

ESRS 1.62 requires the sustainability statement to cover the same reporting undertaking as the financial statements. For a group, that means every subsidiary consolidated line by line falls within "own operations." The parent's assets, liabilities, revenue, and expenses (and those of its subsidiaries, whether inside or outside the EU) form the core perimeter. ESRS 1.63 then extends the boundary: the undertaking must report on material impacts, risks, and opportunities connected through direct and indirect business relationships in its upstream and downstream value chain. This extension does not demand information on every actor. It requires coverage only where a sustainability matter is material in relation to a specific part of the chain.

ESRS 1.67 addresses a frequent grey area. Associates and joint ventures accounted for under the equity method sit outside the consolidation perimeter. When those entities are also suppliers or customers, the undertaking treats them as value chain counterparts and reports on them under ESRS 1.63 rather than as own operations. Impact metrics for those relationships reflect the full impact connected to the undertaking's products and services, not the proportionate equity share. ESRS 2 BP-1 requires the undertaking to disclose where the sustainability reporting boundary differs from the financial reporting boundary, together with the reasons for any divergence.

Worked example: Groupe Lefevre S.A.

Client: Belgian holding company, FY 2026, revenue EUR 185M, IFRS reporter, four wholly owned subsidiaries (two in Belgium, one in France, one in Poland) and a 35% stake in a German logistics operator accounted for under the equity method. Groupe Lefevre is a first-time CSRD reporter under the Omnibus I thresholds (1,200 employees, EUR 185M turnover).

Step 1 — Define own operations

The sustainability team maps the consolidation perimeter from the FY 2026 IFRS consolidated financial statements. All four wholly owned subsidiaries are included as own operations. The German logistics associate (35% equity stake) is excluded from own operations because it is equity-accounted, not fully consolidated.

Documentation note: record the list of entities forming own operations, cross-referenced to the consolidation schedule in the financial statements. Note the exclusion of the German associate from own operations per ESRS 1.62.

Step 2 — Map the value chain and identify material relationships

The team identifies upstream suppliers (raw material providers, contract manufacturers) and downstream customers across the group. The German associate also acts as the primary logistics provider for two of the four subsidiaries, handling inbound and outbound freight. The double materiality assessment flags climate change (ESRS E1) and own workforce (ESRS S1) as material. For climate, the logistics associate's transport emissions are a significant part of the group's Scope 3 footprint.

Documentation note: record the value chain map distinguishing own operations from upstream and downstream actors. Document why the German associate is treated as a value chain counterpart per ESRS 1.67. Cross-reference the double materiality assessment working paper.

Step 3 — Determine data requirements for the associate

Because the German associate is a value chain actor (not own operations), Groupe Lefevre reports the full transport-related emissions connected to its freight volumes, not 35% of the associate's total emissions. The associate provides primary emissions data for routes serving Groupe Lefevre, totalling 2,800 tonnes CO2e. The team discloses this figure under ESRS E1-6 as part of the group's Scope 3 category 4 (upstream transportation).

Documentation note: record the basis for reporting 100% of connected emissions rather than the equity share. Retain the associate's data certificate and document the allocation methodology per ESRS 1.67. Flag the distinction between the equity-method share used in the financial statements and the impact-based share used in the sustainability statement.

Step 4 — Disclose the boundary under ESRS 2 BP-1

The sustainability statement includes a boundary disclosure table listing own operations (four subsidiaries), the value chain extension (the German associate as logistics provider, upstream raw material suppliers), and any data gaps. Because this is Groupe Lefevre's first CSRD report, the team applies the value chain phase-in relief for two upstream suppliers that could not provide primary emissions data and discloses spend-based estimates instead.

Documentation note: record the ESRS 2 BP-1 disclosure, including a reconciliation of entities in the sustainability boundary to entities in the financial consolidation. Document the phase-in relief applied and the plan to obtain primary data from the two remaining suppliers by FY 2028.

Conclusion: Groupe Lefevre's sustainability reporting boundary is defensible because it anchors to the IFRS consolidation perimeter, treats the equity-accounted associate as a value chain actor with impact-based (not equity-share-based) metrics, and discloses all data gaps transparently under ESRS 2 BP-1.

Why it matters in practice

Teams frequently include associates and joint ventures within "own operations" because they appear in the consolidated financial statements under the equity method. ESRS 1.67 is explicit: equity-accounted investees sit outside own operations and enter the sustainability boundary as value chain actors. Treating them as own operations inflates Scope 1 and Scope 2 figures and distorts the boundary disclosure under ESRS 2 BP-1.

The boundary disclosure under ESRS 2 BP-1 is often omitted or reduced to a single sentence confirming alignment with the financial consolidation. EFRAG's Implementation Guidance IG 2 (published May 2024) stresses that entities must explain where and why the sustainability boundary differs from the financial reporting boundary. Without that explanation, the assurance provider cannot evaluate whether the scope of the sustainability statement is complete.

Sustainability reporting boundary vs. financial reporting boundary

The distinction matters on engagements because the assurance provider evaluating a sustainability statement must trace the boundary back to the financial consolidation, verify the value chain extensions, and confirm that equity-accounted investees have been correctly classified as value chain actors rather than own operations.

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