CSRD and Paris Agreement
The Paris Agreement is the scientific foundation for CSRD climate disclosure — ESRS E1 requires companies to disclose how their strategy and targets are compatible with limiting global warming to 1.5°C. Understanding what Paris alignment means, how to demonstrate it, and what the 1.5°C pathway implies for your business is essential.
The Paris Agreement is the scientific foundation for CSRD climate disclosure — ESRS E1 requires companies to disclose how their strategy and targets are compatible with limiting global warming to 1. The Paris Agreement (2015) commits signatory nations to limiting global warming to well below 2°C, pursuing efforts to limit to 1.
What Paris alignment means for ESRS E1
The Paris Agreement (2015) commits signatory nations to limiting global warming to well below 2°C, pursuing efforts to limit to 1.5°C. For companies, Paris alignment means setting targets and implementing strategies consistent with the global emission reductions required to achieve this goal.
ESRS E1-1 (transition plan): Companies must disclose how their transition plan is compatible with the 1.5°C pathway — specifically what targets and actions will deliver the emissions reductions consistent with a Paris-aligned trajectory.
ESRS E1-4 (targets): Climate targets must be disclosed with information on whether they are consistent with limiting warming to 1.5°C. Companies must either provide SBTi validation (the most widely recognised validation pathway) or document the scientific basis for their alignment claim.
The IPCC reference: The IPCC Special Report on 1.5°C (SR15, 2018) defines what global emission reductions are required. Global net CO2 emissions must reach zero by approximately 2050. Total GHG emissions must reach net zero by approximately 2070. Corporate targets must be consistent with this global pathway — meaning approximately 4.2% annual absolute emission reduction for Scope 1 and 2 under the SBTi Absolute Contraction Approach.
Demonstrating 1.5°C alignment — the evidence options
Three approaches provide credible evidence for 1.5°C alignment claims in ESRS E1-4 disclosure:
SBTi validation: The Science Based Targets initiative validates company GHG reduction targets against 1.5°C-consistent methodologies. SBTi near-term targets require at least 4.2% annual absolute Scope 1 and 2 reduction. SBTi net zero targets require near-complete elimination of Scope 1, 2, and 3 by 2050 with permanent removals for residuals. SBTi validation is the strongest evidence and satisfies ESRS E1-4 alignment requirements without further documentation.
IEA NZE alignment: Compare your decarbonisation trajectory against the IEA Net Zero Emissions by 2050 sector pathway for your industry. If your targets achieve or exceed the IEA NZE sector trajectory, the 1.5°C alignment claim is defensible with documented methodology.
IPCC carbon budget approach: Calculate your company's proportionate share of the remaining global carbon budget consistent with 1.5°C — typically using the IPCC SR15 remaining budget estimates — and demonstrate that your targets do not exceed this share. Technically rigorous but resource-intensive.
Common mistake: claiming 1.5°C alignment based only on Scope 1 and 2 targets while Scope 3 represents 80%+ of total emissions. A target covering only Scope 1 and 2 is not a credible 1.5°C alignment claim where Scope 3 is material. The alignment claim must cover all material emission scopes.
1.5°C pathway implications for business strategy
Understanding the 1.5°C pathway has strategic implications beyond CSRD compliance — it reveals which business models are viable in a net zero economy and which face fundamental disruption.
Fossil fuel dependency: The IEA NZE scenario projects no new oil and gas fields beyond those already approved as of 2021 being needed. Companies with significant fossil fuel revenue — either direct production or downstream dependence — face strategic disruption under Paris-aligned scenarios. ESRS E1-9 financial effects disclosure must quantify this exposure.
Energy transition opportunities: The 1.5°C pathway requires massive deployment of renewable energy, electric vehicles, heat pumps, green hydrogen, and energy storage. Companies positioned in these sectors have significant growth opportunities under Paris-aligned scenarios — ESRS E1 also requires disclosure of climate-related opportunities, not just risks.
Supply chain transformation: Decarbonising Scope 3 Category 1 (purchased goods) requires your suppliers to be on Paris-aligned trajectories. Companies whose suppliers are not on 1.5°C pathways face Scope 3 reduction challenges regardless of their own operational decarbonisation. This creates supply chain engagement as a strategic imperative — not just a reporting exercise.
Capital allocation: Paris-aligned companies align capital investment with the energy transition — investing in low-carbon technology, divesting high-carbon assets, and pricing carbon risk into all major investment decisions. ESRS E1-3 CapEx disclosure demonstrates this capital alignment — showing investors that transition plan commitments are backed by funded actions.
Frequently asked questions
Does CSRD require a net zero target?
No — ESRS E1-4 requires disclosure of any targets set, not that you must have a net zero target. However, the IPCC 1.5°C pathway implies global net zero CO2 by 2050. Companies claiming 1.5°C alignment without a long-term (2050) net zero target face credibility challenges — the alignment claim is inconsistent with the trajectory unless a net zero endpoint is committed.
What if our industry has no sector-specific 1.5°C pathway?
Use the cross-sector Absolute Contraction Approach (ACA) from SBTi — applicable to all sectors regardless of sector-specific guidance availability. The ACA requires the same percentage annual reduction for all sectors. For sectors with specific SBTi methodologies, the sector approach may allow different trajectories reflecting technological constraints.
How does 1.5°C alignment interact with carbon offsets?
ESRS E1-7 requires separate disclosure of GHG removals and carbon offset purchases — they cannot be deducted from gross emissions. A 1.5°C alignment claim must be based on genuine emission reduction trajectories, not primarily on offset purchases. The SBTi Corporate Net-Zero Standard limits the use of offsets to neutralising residual emissions after achieving near-complete emission reduction — not as a substitute for operational decarbonisation.