CSRD Water Reporting (ESRS E3)
ESRS E3 covers water withdrawal, consumption, recycling, and impacts on marine resources. As water scarcity intensifies globally, water risk is moving from a niche environmental concern to a mainstream financial and operational risk — particularly for food, beverage, semiconductor, textile, and agriculture companies.
ESRS E3 covers water withdrawal, consumption, recycling, and impacts on marine resources. E3-1 Policies related to water and marine resources: Water stewardship policy — water efficiency commitments, discharge quality standards, marine protection approach.
What ESRS E3 requires
E3-1 Policies related to water and marine resources: Water stewardship policy — water efficiency commitments, discharge quality standards, marine protection approach. For companies in water-stressed geographies, the policy must address local water availability constraints.
E3-2 Actions and resources: Specific water efficiency actions with allocated CapEx and OpEx — water recycling systems, closed-loop cooling, wastewater treatment upgrades, rainwater harvesting. Disclose the investment made and expected water saving.
E3-3 Targets: Water reduction targets — absolute withdrawal reduction, recycled water percentage, zero liquid discharge commitments. Targets must cover water-stressed locations specifically where material.
E3-4 Water and marine resources metrics: Total water withdrawal by source (surface water, groundwater, seawater, rainwater, third-party/municipal); total water consumption (withdrawal minus discharge); water recycled and reused; water discharge by quality category and destination; and whether operations are in water-stressed areas with breakdown.
E3-5 Anticipated financial effects: Financial impacts from water-related risks — operational disruption from water scarcity, regulatory tightening on discharge permits, stranded assets in water-stressed locations, and increased water costs.
Water-stressed area identification and disclosure
ESRS E3-4 requires water metrics broken down by whether operations are in water-stressed areas. This is the most operationally demanding element of E3 — it requires site-level geographic assessment.
Tool: Use the WRI Aqueduct Water Risk Atlas (free at wri.org/aqueduct) to screen all operational locations. Enter site coordinates and the tool returns baseline water stress, drought risk, groundwater depletion, and other water risk indicators for each location. Sites in 'High' (40–80% of available water withdrawn annually) or 'Extremely High' (>80%) baseline water stress are the primary disclosure focus.
For E3-4 breakdown: Report total withdrawal separately for operations in water-stressed areas vs non-stressed areas. This dual disclosure shows investors where your water use creates the most significant water competition risk.
For companies with many sites: screen all sites through Aqueduct and categorise as stressed or non-stressed. For large portfolios, this can be done in bulk using coordinates and the Aqueduct API. Prioritise detailed data collection for stressed-area sites — non-stressed sites can use estimated data where actual metering is unavailable.
For companies with no stressed-area operations: this is itself a material disclosure — confirm no operations in water-stressed areas with the screening methodology. This demonstrates due diligence even where the outcome is low risk.
Water consumption vs withdrawal — why both matter
ESRS E3-4 requires both water withdrawal AND water consumption — and the distinction matters for investors assessing water risk.
Withdrawal: Total water taken from any source — surface water, groundwater, seawater, rainwater, or municipal/third-party supply. This is the gross intake before any return to source.
Consumption: Water that is not returned to the same source catchment — evaporated in cooling towers, incorporated into products, or discharged to a different basin. Net consumption is the actual depletion of local water resources.
Why consumption matters more for risk: Water stress assessments focus on consumption — regulatory restrictions on water use, insurance costs, and operational disruption risk are driven by how much water is permanently removed from the catchment, not total intake. A company with high withdrawal but low consumption (cooling water returned to river at similar quality) poses less water stress risk than a high-consumption user.
Calculation: Consumption = Withdrawal − Discharge (to same catchment). For companies without separate discharge metering, estimate discharge as a percentage of withdrawal based on process knowledge. For manufacturing processes that incorporate significant water into products (food, beverage, chemicals), consumption can be close to 100% of withdrawal.
Frequently asked questions
We only use municipal water — do we need to report ESRS E3?
Yes if water is material. Municipal water is a third-party water source — report the volume under E3-4. Additionally, your municipal supplier may draw from water-stressed catchments, creating indirect water stress exposure. Check whether your municipal suppliers' sources are in stressed areas using WRI Aqueduct — this is increasingly expected in E3 disclosures.
What qualifies as water recycled and reused for E3-4?
Water that is treated and used again within the same facility or transferred to another user without being discharged to the environment. Examples: treated process water recirculated in cooling systems; wastewater treated to sufficient quality for irrigation or industrial reuse on site; condensate recovery from steam systems. Water that is discharged to sewer and subsequently treated at a municipal plant is not recirculated — it is discharged.
Does ESRS E3 cover marine impacts beyond discharge?
Yes — E3 covers broader marine resource impacts including: activities in or adjacent to marine protected areas; impacts on marine ecosystems from operations near coastlines; and dependencies on marine resources. For coastal operations, port activities, aquaculture, and offshore energy, marine impact assessment beyond discharge quality is required.