[Draft] European Sustainability Reporting Standard SEC1 Sector

[Draft] ESRS SEC1 Sector classification standard

[Draft] European Sustainability Reporting Standard SEC1

Sector classification standard

DISCLAIMER

This document is a technical working paper intended solely for the internal use of PTF- ESRS

members, supporting debates in Plenary meetings. It is not open to public consultation but

serves as work-in progress document leading to the exposure drafts to be submitted to a future

public consultation. Significant changes to this working paper may arise from the subsequent

steps of the due process (for more information on subsequent steps of the due process, see

here).

This working paper should therefore not be interpreted in any way whatsoever as representing

the views of the PTF-ESRS as a whole at this stage, nor the position of relevant co-construction

partners. Also, the content of this working paper is the sole responsibility of the PTF-ESRS

and can under no circumstances be regarded as reflecting the position of the European Union

or European Commission DG Financial Stability, Financial Services and Capital Markets Union

(DG FISMA).

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Working paper, February 2022

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Table of contents

[Draft] European Sustainability Reporting Standard SEC1 ....................................... 1

Sector classification standard ..................................................................................... 1

[Draft] ESRS SEC1 - Sector classification standard .................................................. 3

Objective ....................................................................................................................... 3

Interactions with other [draft] ESRS ........................................................................... 3

Sector classification..................................................................................................... 3

Sustainability matters .................................................................................................. 5

Appendix A: Defined terms .......................................................................................... 6

Appendix B: Sector classification ............................................................................... 7

Appendix C: Sustainability matters .......................................................................... 48

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[Draft] European Sustainability Reporting Standard SEC1

Sector classification standard

Objective

1 [Draft] ESRS SEC1 is the sector classification standard which the undertaking shall apply to

identify the sector(s) it operates in and the related sector specific disclosure requirements. The

additional sector specific information to be disclosed by the undertaking for each sector is

determined in the sector specific [draft] ESRS (i.e. from [draft] ESRS SEC 2 to ESRS SEC 41).

2 The objective of this standard is also to provide the information relating to its business activities

as required by [draft] ESRS 1 and assessing the material impact in accordance to [draft] ESRS

4, taking into consideration its sector specific impacts, risks and opportunities.

3 The sector classification is based on the following considerations:

i.The business activities determine the sector group the undertaking is operating in and

determine business relationships and value chains.

ii.The business relationships and value chains determine the specific impacts, risks and

opportunities of the sector the undertaking is operating in.

iii.The impacts, risks and opportunities determine the undertaking’s sustainability matters.

iv.The undertaking’s sustainability matters determine the undertaking’s disclosure requirements.

Interactions with other [draft] ESRS

4 The undertaking’s reporting in accordance to the [draft] ESRS needs to comply with the

requirements related to strategy, governance, impacts, risks and opportunities as described in

the [draft] ESRS 1 to 4 and the sector agnostic topical [draft] ESRS.

5 Whereas the sector specific standards outline the additional sector specific disclosure

requirements considered to be relevant for the information of the different stakeholders, this [draft]

standard of sector classification defines the sector(s) the undertaking operates in.

6 This [draft] standard particularly interacts with [draft] ESRS 1 regarding the determination of

sectors of activities and [draft] ESRS 4 regarding the determination of impacts, risks and

opportunities related to sustainability matters.

Sector classification

7 The classification of sectors adopted in this [draft] standard is based on the NACE classification

system together with reference to additional economic activities as described in the EU-

Taxonomy.

8 Although undertakings have similar business models and characteristics which allow to classify

them under 14 sector groups, the different sectors within a sector group may determine different

impacts, risks and opportunities.

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9 The undertaking shall therefore determine in which of the following 40 sector(s) and 14 sector

group(s) they operate:

[draft] ESRS sector

group

[draft] ESRS sector

Code

Agriculture

Agriculture & Farming

AAF

Forestry

AFO

Construction

Construction & Engineering

CCE

Energy

Energy Production & Utilities

EEU

Water & Waste Services

EWW

Entertainment

Casinos & Gaming

ECG

Leisure Facilities

ELF

Financial Institutions

Capital Markets

FCM

Banking

FBM

Insurance

FIN

Health Care &

Services

Health Care

HHC

Hospitality

Food & Beverage Services

HFS

Hotels & Lodging

HHL

Manufacturing

Aerospace & Defence

MAD

Automobiles & Other Transport Vehicles

MAO

Biotechnology & Pharmaceuticals

MBP

Building Products & Furnishings

MBF

Chemicals & Biofuels

MCB

Construction Materials

MCM

Electronics

MEL

Food & Beverages

MFB

Machinery & Equipment

MME

Medical Equipment & Services

MMS

Metal Processing

MMP

Oil & Gas - Midstream & Downstream

MOM

Pulp, Paper & Wood products

MPW

Textiles, Apparels, Footwear & Accessories

MTA

Tobacco

MTO

Toys, Sporting Goods & Musical instruments

MTM

Mining

Coal Operations

MCO

Mining

MMI

Oil & Gas - Upstream & Services

MOU

Real Estate

Real Estate & Services

RRS

Services

Advertising & Marketing

SAM

Education

SED

Professional & Commercial Services

SPC

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Technology

Media & Communication

TMC

Software & IT Services

TSI

Transportation

TTR

Wholesale & Retail

Wholesale & Retail trade

WWR

10 Appendix B provides the details of the classification of business activities to sectors and sector

groups to be followed as well as the related NACE codes, sector profiles that contain information

in relation to production activities and services provided, a description of the value and supply

chains, relevant business relationships, customer groups and distribution channels.

11 The undertaking may operate in several sector groups and sectors. Depending on the scope of

its business activities, the undertaking shall consider the disclosure requirements of several sector

specific standards.

Sustainability matters

12 To facilitate the undertaking’s assessment of its sector specific impacts, risks and opportunities

in relation with the disclosure requirements set under [draft] ESRS 4, Appendix C provides

descriptions of likely sustainability matters for each sector.

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Appendix A: Defined terms

This appendix is integral part of the [draft] ESRS SEC1 Sector classification standard.

Economic activity

As defined in the supplementing Regulation (EU) 2020/852 of the European

Parliament and of the Council by establishing the technical screening criteria for

determining the conditions under which an economic activity qualifies as

contributing substantially to climate change mitigation or climate change

adaptation and for determining whether that economic activity causes no

significant harm to any of the other environmental objectives as of 4 June 2021,

referred to as “EU-Taxonomy”.

Impact

Effect the undertaking has or could have on the economy, environment, and

people, including on their human rights, which in turn can indicate its contribution

(negative or positive) to sustainable development. Impacts can be actual or

potential, negative or positive, short-term or long-term, intended or unintended,

and reversible or irreversible.

Supply chain

Range of activities carried out by entities upstream from the undertaking, which

provide products or services that are used in the development of the undertaking’s

own products or services

Undertaking’s

activity

Activities depicting the undertaking’s operating and/ or economic activity/(ies)

Value chain

Entire sequence of activities or parties that create or receive value through the

provision of a product or service.

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Appendix B: Sector classification

Agriculture sector group

The Agriculture sector group includes the exploitation of vegetal and animal natural resources, comprising the

activities of growing of crops, raising and breeding of animals, harvesting of timber and other plants, animals or animal

products from a farm or their natural habitats.

Agriculture & Farming sector

The Agriculture & Farming sector includes the production of crop products and production of animal products,

covering also the forms of organic agriculture, the growing of genetically modified crops and the raising of genetically

modified animals. The sector includes growing of crops in open fields as well in greenhouses. It also includes service

activities incidental to agriculture, as well as hunting, trapping and related activities. The sector also includes capture

fishery and aquaculture, covering the use of fishery resources from marine, brackish or freshwater environments, with

the goal of capturing or gathering fish, crustaceans, molluscs and other marine organisms and products (e.g. aquatic

plants, pearls, sponges etc). Also included are activities that are normally integrated in the process of production for

own account (e.g. seeding oysters for pearl production). Service activities incidental to marine or freshwater fishery

or aquaculture are included in the related fishing or aquaculture activities.

Agricultural and farming products are sold directly to consumers, retail and wholesale distributors and to businesses

for use in consumer and industrial products. Undertakings in the sector may source a substantial portion of

commodities from third-party growers in various countries. Therefore, managing sustainability risks within the supply

chain is critical to securing a reliable supply of raw materials and reducing the risk of price increases and volatility

over the long term. In addition, undertakings in the sector produce raw and processed animal products, including

meats, eggs, and dairy products, for human and animal consumption. Key activities include animal raising,

slaughtering, processing, and packaging.The sector’s largest undertakings have international operations, and

undertakings are vertically integrated to varying degrees. Large operators typically rely on contract or independent

farmers and may have varying degrees of control over their operations.

Included are these activities in accordance to the following NACE code classification:

A.01.11 Growing of cereals (except rice), leguminous crops and oil seeds

A.01.12 Growing of rice

A.01.13 Growing of vegetables and melons, roots and tubers

A.01.14 Growing of sugar cane

A.01.16 Growing of fibre crops

A.01.19 Growing of other non-perennial crops

A.01.21 Growing of grapes

A.01.22 Growing of tropical and subtropical fruits

A.01.23 Growing of citrus fruits

A.01.24 Growing of pome fruits and stone fruits

A.01.25 Growing of other tree and bush fruits and nuts

A.01.26 Growing of oleaginous fruits

A.01.27 Growing of beverage crops

A.01.28 Growing of spices, aromatic, drug and pharmaceutical crops

A.01.29 Growing of other perennial crops

A.01.30 Plant propagation

A.01.41 Raising of dairy cattle

A.01.42 Raising of other cattle and buffaloes

A.01.43 Raising of horses and other equines

A.01.44 Raising of camels and camelids

A.01.45 Raising of sheep and goats

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A.01.46 Raising of swine/pigs

A.01.47 Raising of poultry

A.01.49 Raising of other animals

A.01.50 Mixed farming

A.01.61 Support activities for crop production

A.01.62 Support activities for animal production

A.01.63 Post-harvest crop activities

A.01.64 Seed processing for propagation

A.01.70 Hunting, trapping and related service activities

A.03.11 Marine fishing

A.03.12 Freshwater fishing

A.03.21 Marine aquaculture

A.03.22 Freshwater aquaculture

Forestry sector

The Forestry sector includes the production of roundwood as well as the extraction and gathering of wild growing

non-wood forest products. Besides the production of timber, forestry activities result in products that undergo little

processing, such as firewood, charcoal and roundwood used in an unprocessed form (e.g. pit-props, pulpwood etc.).

These activities can be carried out in natural or planted forests. Excluded is further processing of wood beginning

with sawmilling and planing of wood.

The Forestry sector consists of undertakings that own and/ or manage natural and planted forestry lands and timber

tracts, or operate non-retail tree nurseries and rubber plantations. The sector conducts its operations on lands that

can be company-owned or leased from public or private landowners. Undertakings typically sell timber to wood

products manufacturers, pulp and paper producers, energy producers, and a variety of other customers. Undertakings

might operate globally or locally. While some integrated undertakings may also operate sawmills, wood products

facilities, or pulp and paper facilities, sustainability issues arising from these activities are addressed in ESRS Building

Products & Furnishings and ESRS Pulp, Paper and Wood products standards.

Included are these activities in accordance to the following NACE code classification:

A.02 Afforestation*

A.02 Conservation forest*

A.02 Existing forest management*

A.02 Reforestation*

A.02 Rehabilitation, Reforestation*

A.02.10 Silviculture and other forestry activities

A.02.20 Logging

A.02.30 Gathering of wild growing non-wood products

A.02.40 Support services to forestry

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Construction sector group

Construction & Engineering sector

The Construction & Engineering sector group includes general construction and specialised construction activities for

buildings and civil engineering works. It includes new work, repair, additions and alterations, the erection of

prefabricated buildings or structures on the site and also construction of a temporary nature. General construction is

the construction of entire dwellings, office buildings, stores and other public and utility buildings, farm buildings etc.,

or the construction of civil engineering works such as motorways, streets, bridges, tunnels, railways, airfields,

harbours and other water projects, irrigation systems, sewerage systems, industrial facilities, pipelines and electric

lines, sports facilities etc. This work can be carried out on own account or on a fee or contract basis. Portions of the

work and sometimes even the whole practical work can be subcontracted out. A unit that carries the overall

responsibility for a construction project is classified here. Also included is the repair of buildings and engineering

works. This sector includes the complete construction of buildings, the complete construction of civil engineering

works, as well as specialised construction activities, if carried out only as a part of the construction process. This

sector group also includes the development of building projects for buildings or civil engineering works by bringing

together financial, technical and physical means to realise the construction projects for later sale. The Construction

& Engineering sector group also includes activities related to the management (including collection, treatment and

disposal) of various forms of waste, such as solid or non-solid industrial or household waste, as well as contaminated

sites. The output of the waste or sewage treatment process can either be disposed of or become an input into other

production processes. Activities of water supply are also grouped in this sector, since they are often carried out in

connection with, or by units also engaged in, the treatment of sewage.

The Construction & Engineering sector includes general construction of buildings of all kinds. The sector includes

new work, repair, additions and alterations, the erection of pre-fabricated buildings or structures on the site and also

construction of temporary nature. Included is the construction of entire dwellings, office buildings, stores and other

public and utility buildings, farm buildings, etc.. The sector also includes specialised construction activities (special

trades), i.e. the construction of parts of buildings and civil engineering works or preparation therefore. These activities

are usually specialised in one aspect common to different structures, requiring specialised skills or equipment, such

as pile-driving, foundation work, carcass work, concrete work, brick laying, stone setting, scaffolding, roof covering,

etc. The erection of steel structures is included, provided that the parts are not produced by the same unit. Specialised

construction activities are mostly carried out under subcontract, but especially in repair construction it is done directly

for the owner of the property. Included is the installation of all kind of utilities that make the construction function as

such. These activities are usually performed at the site of the construction, although parts of the job may be carried

out in a special shop. Included are activities such as plumbing, installation of heating and air-conditioning systems,

antennas, alarm systems and other electrical work, sprinkler systems, elevators and escalators, etc. Also included

are insulation work (water, heat, sound), sheet metal work, commercial refrigerating work, the installation of

illumination and signalling systems for roads, railways, airports, harbours, etc. Also repair of the same type as the

above mentioned activities is included. Building completion activities encompass activities that contribute to the

completion or finishing of a construction such as glazing, plastering, painting, floor and wall tiling or covering with

other materials like parquet, carpets, wallpaper, etc., floor sanding, finish carpentry, acoustical work, cleaning of the

exterior, etc. Also repair of the same type as the above mentioned activities is included.

The rental of equipment with operator is classified with the associated construction activity. Also included are building

finishing and building completion activities. The sector also includes the collection, treatment, and disposal of waste

materials. This also includes local hauling of waste materials and the operation of materials recovery facilities (i.e.

those that sort recoverable materials from a waste stream).

The Construction & Engineering sector is comprised of undertakings that provides construction, design, contracting,

and other related services that support various building and infrastructure projects. The segment is primarily made

up of four major segments: Development, residential building construction and non-residential building

construction, infrastructure construction, and building sub-contractors and construction-related professional services.

The development segment includes the acquisition of land, site preparation, demolition, test drilling and boring and

home sales. The residential building construction and non-residential building construction segment includes

undertakings that develop, design and/ or build residential, industrial and commercial facilities. The infrastructure

construction segment includes undertakings that design and/ or build infrastructure projects such as power plants,

dams, oil and gas pipelines, refineries, highways, bridges, tunnels, railways, ports, airports, waste treatment plants,

water networks, and stadiums. Finally, the building sub-contractors and other construction-related professional

services segment includes smaller undertakings that provide ancillary services such as carpentry, electrical,

plumbing, painting, waterproofing, landscaping, interior design, and building inspection. The segment’s customers

include infrastructure owners and developers in the public and private sectors. Large undertakings in this segment

operate and generate revenue globally and typically specialize in multiple segments.

Included are these activities in accordance to the following NACE code classification:

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E.38.31 Dismantling of wrecks

F.41.10 Development of building projects

F.41.20 Construction of residential and non-residential buildings

F.42.11 Construction of roads and motorways

F.42.12 Construction of railways and underground railways

F.42.13 Construction of bridges and tunnels

F.42.21 Construction of utility projects for fluids

F.42.22 Construction of utility projects for electricity and telecommunications

F.42.91 Construction of water projects

F.42.99 Construction of other civil engineering projects n.e.c.

F.43.11 Demolition

F.43.12 Site preparation

F.43.13 Test drilling and boring

F.43.21 Electrical installation

F.43.22 Plumbing, heat and air-conditioning installation

F.43.29 Other construction installation

F.43.31 Plastering

F.43.32 Joinery installation

F.43.33 Floor and wall covering

F.43.34 Painting and glazing

F.43.39 Other building completion and finishing

F.43.91 Roofing activities

F.43.99 Other specialised construction activities n.e.c.

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Energy sector group

The Energy Production & Utilities sector group includes the activity of providing electric power, natural gas, steam,

hot water and the like through a permanent infrastructure (network) of lines, mains and pipes. The dimension of the

network is not decisive; also included are the distribution of electricity, gas, steam, hot water and the like in industrial

parks or residential buildings. This sector therefore includes the operation of electric and gas utilities, which generate,

control and distribute electric power or gas. Also included is the provision of steam and air-conditioning supply as well

as water and waste services activities.

Energy Production & Utilities sector

The Energy Production & Utilities sector is comprised of undertakings that provides production, transmission,

distribution, storage of electricity, water and gaseous fuels services. The sector includes the electric, water and gas

utilities & power generators segment which is made up of undertakings that generate electricity, water or gas; build,

own, and operate transmission and distribution lines, and sell electricity, water or gas. Utilities generate from a number

of different sources. The sector comprises undertakings operating in both regulated and unregulated business

structures. Regulated utilities maintain a business model in which they accept comprehensive oversight from

regulators on their pricing mechanisms and their allowed return on equity, among other types of regulation, in

exchange for their license to operate as a monopoly. Unregulated undertakings, or merchant power undertakings,

are often independent power producers (IPPs) that generate electricity, water or gas to sell to the wholesale market,

which includes regulated utility buyers and other end-users. Furthermore, the sector is divided across regulated and

deregulated power markets - referring to how far up the value chain regulated utility operations span. Regulated

markets typically contain vertically integrated utilities that own and operate everything from the generation of power

to its retail distribution. Deregulated markets commonly split generation from distribution, designed to encourage

competition at the wholesale power level. Overall, undertakings in the sector are challenged with the complex mission

of providing reliable, accessible, low-cost power while balancing the protection of human life and the environment. It

also includes the biofuels segment which comprises undertakings that produce biofuels and process raw materials

for production. Biofuels are manufactured using organic feedstocks and are used primarily as transportation fuels.

Undertakings typically source feedstocks, which include food, oil crops, and animal products, from agricultural product

distributors. Ethanol and biodiesel are the most widely produced biofuels, while other types include biogas,

biohydrogen, and synthetic biofuels, produced from a variety of organic feedstocks. Biofuels undertakings’ customers

are chiefly fuel-blending and fuel-supply undertakings, including major integrated oil undertakings. Finally it consists

of the Solar and Wind Technology & Project Developers segment which is comprised of undertakings that

manufacture solar energy equipment, including solar photovoltaic (PV) modules, polysilicon feedstock, solar thermal

electricity-generation systems, solar inverters, and other related components or wind turbines, blades, towers, and

other components of wind power systems. Undertakings may also develop, build, and manage solar energy projects

and offer financing or maintenance services to customers. Two primary technologies are utilised in the segment: PV

and concentrated solar power (CSP). Within solar PV, there are two main technologies: crystalline silicon-based solar

and thin-film solar, which includes panels made using copper indium gallium selenide and cadmium telluride. The

primary markets for solar panels are residential, non-residential (commercial and industrial) , and utility-scale projects.

Undertakings in the segment operate globally. They can also develop, build, and manage wind energy projects are

also included within the scope of this segment. Manufacturers may also offer post-sale maintenance and support

services. Turbines can be installed onshore or offshore, which can cause differences in wind-generating capacity and

create challenges in project development for each type of installation. Most major wind technology undertakings

operate globally.

Included are these activities in accordance to the following NACE code classification:

D.35 Storage of Electricity*

D.35 Storage of Hydrogen*

D.35 Storage of Thermal Energy*

D.35.11 Production of electricity

D.35.12 Transmission of electricity

D.35.13 Distribution of electricity

D.35.14 Trade of electricity

D.35.21 Manufacture of gas

Economic activity as defined in the supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by

establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as

contributing substantially to climate change mitigation or climate change adaptation and for determining whether that economic

activity causes no significant harm to any of the other environmental objectives, 4 June 2021

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D.35.22 Distribution of gaseous fuels through mains

D.35.23 Trade of gas through mains

Water & Waste Services sector

The Water & Waste Services sector group includes activities related to the management (including collection,

treatment and disposal) of various forms of waste, such as solid or non-solid industrial or household waste, as well

as contaminated sites. The output of the waste or sewage treatment process can either be disposed of or become

an input into other production processes. Activities of water supply are also grouped in this sector, since they are

often carried out in connection with, or by units also engaged in, the treatment of sewage.

The Water & Waste Services sector includes undertakings that collect, store, dispose of, recycle, or treat various

forms of waste from residential, commercial, and industrial clients and the collection, treatment, supply and waste of

water from residential, commercial and industrial clients. Types of waste services include municipal solid waste,

hazardous waste, recyclable materials, and compostable or organic materials. Major undertakings are commonly

vertically integrated, providing a range of services from waste collection to landfilling and recycling, while others

provide specialized services such as treating medical and industrial wastes. Waste-to-energy operations are a distinct

segment segment. Certain sector players also provide environmental engineering and consulting services, mostly to

large industrial clients. Types of water supply services include the sourcing, treatment, and distribution of water to

residences, businesses, and other undertakings such as governments. Wastewater systems collect and treat

wastewater, including sewage, graywater, industrial waste fluids, and stormwater runoff, before discharging the

resulting effluent back into the environment.

Included are these activities in accordance to the following NACE code classification:

D.35.30 Steam and air conditioning supply

E.36.00 Water collection, treatment and supply

E.37.00 Sewerage

E.38.11 Collection of non-hazardous waste

E.38.12 Collection of hazardous waste

E.38.21 Treatment and disposal of non-hazardous waste

E.38.22 Treatment and disposal of hazardous waste

E.38.32 Recovery of sorted materials

E.39.00 Remediation activities and other waste management services

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Entertainment sector group

The Entertainment sector group includes a wide range of activities to meet varied cultural, entertainment and

recreational interests of the general public, including live performances, operation of museum sites, gambling, sports

and recreation activities.

Casinos & Gaming sector

The Casinos & Gaming sector is comprised of undertakings which operate gambling facilities and/or platforms,

including brick-and-mortar casinos, riverboat casinos, online gambling websites, and racetracks. Select undertakings

in the Casinos & Gaming sector are also engaged in activities of the Hotels & Lodging and/or Restaurants segments.

For such activities are outlined in the Hotels & Lodging and Food & Beverage Services standards. For the purposes

of this sector, it is assumed that casinos and gaming undertakings are engaged solely in operating gambling facilities

and providing online gaming services, and therefore issues such as water management and food safety, which may

be material for undertakings that have significant hotel and restaurant operations, are not covered by this sector.

Included are these activities in accordance to the following NACE code classification:

R.92.00 Gambling and betting activities

Leisure Facilities sector

The Leisure Facilities sector is comprised of undertakings that perform arts and operate entertainment, travel,

botanical and zoological gardens, historical sites as well as recreation facilities and services. Undertakings in this

sector operate museums, libraries, nature reserve activities, amusement parks, movie theaters, ski resorts, sports

stadiums, and fitness facilities and other venues. Leisure facilities undertakings mainly generate revenue by providing

live, digital, and/ or interactive entertainment to millions of guests and customers annually across various locations.

Included are these activities in accordance to the following NACE code classification:

R.90.01 Performing arts

R.90.02 Support activities to performing arts

R.90.03 Artistic creation

R.90.04 Operation of arts facilities

R.91.01 Library and archives activities

R.91.02 Museums activities

R.91.03 Operation of historical sites and buildings and similar visitor attractions

R.91.04 Botanical and zoological gardens and nature reserves activities

R.93.11 Operation of sports facilities

R.93.12 Activities of sports clubs

R.93.13 Fitness facilities

R.93.19 Other sports activities

R.93.21 Activities of amusement parks and theme parks

R.93.29 Other amusement and recreation activities

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Financial Institutions sector group

The Banking sector group includes financial service activities, including insurance, reinsurance and pension funding

activities and activities to support financial services. This sector also includes the activities of holding assets, such as

activities of holding undertakings and the activities of trusts, funds and similar financial entities.

Banking sector

Commercial banks accept deposits and make loans to individuals and corporations as well as engage in lending for

infrastructure, mortgages, real estate, and other projects. By providing these services, the sector serves an essential

role in the functioning of global economies and in facilitating the transfer of financial resources to their most productive

capacity. The Banking sector is driven by the volume of deposits, quality of loans made, the economic environment,

and interest rates. It is further characterised by risk from mismatched assets and liabilities. The regulatory

environment that governs the commercial banking sector saw significant changes in the wake of the financial crisis

of 2008 and continues to evolve today. These and other regulatory trends have the potential to impact shareholder

value and sustainability performance. Commercial banks with global operations must manage new regulations in

multiple jurisdictions that are creating regulatory uncertainty, particularly around consistent application of new rules.

Included are these activities in accordance to the following NACE code classification:

K.64.11 Central banking

K.64.19 Other monetary intermediation

K.64.91 Financial leasing

K.64.92 Other credit granting

Capital Markets sector

Capital Markets activities comprise three main groups of activities as well as their respective related supporting

activities:

a. Investment and custody activities related to asset management and asset ownership. These activities include

managing investment portfolios on a commission or fee basis for institutional, retail, and high net-worth investors. In

addition, undertakings in this segment provide wealth management, private banking, financial planning, and

investment advisory services. Investment portfolios and strategies may be diversified across multiple asset classes,

which include, but are not limited to, equities, fixed income, and hedge fund investments. Some undertakings are

engaged in venture capital and private equity investments. These activities provide an essential service in assisting

a range of customers from individual retail investors to large, institutional asset owners to meet specified investment

goals. Undertakings range from large multinational asset managers with a wide range of investable products,

strategies, and asset classes to small boutique undertakings providing services to a very specific market niche. While

large undertakings generally compete on the basis of management fees charged for their services as well as their

potential to generate superior investment performance, the smaller undertakings generally compete on their ability to

provide products and services geared towards individual clients to satisfy their diversification needs. The undertakings

have an important social impact in the society in terms of providing fair advice to customers and managing risks at

the undertaking, portfolio, and economy-wide levels. In addition, the collective impact of these undertakings on the

allocation of capital creates a responsibility to integrate sustainability factors in investment decisions and

management.

b. Investment banking and brokerage. These undertakings perform a wide range of functions in the capital markets,

including assisting with the capital-raising and allocation process, and providing market-making and advisory services

for undertakings, financial institutions, governments, and high net-worth individuals. Specific activities include

financial advisory and securities underwriting services conducted on a fee basis; securities and commodities

brokerage activities, which involves buying and selling securities or commodities contracts and options on a

commission or fee basis for investors; and trading and principal investment activities, which involves the buying and

selling of equities, fixed income, currencies, commodities, and other securities for client-driven and proprietary

trading. Investment banks also originate and securitize loans for infrastructure and other projects. Undertakings

generate their revenues from global markets and are exposed to systemic risks. The undertakings have an important

social impact in the society in terms of integrating sustainability considerations in providing advice to customers and

managing risks.

c. Security and commodity exchanges. These undertakings operate marketplaces in the form of physical trading floors

or electronic platforms for trading financial securities, commodities, or other financial instruments. Security and

commodity exchanges primarily generate revenue from fees on trades and for clearing transactions as well as listing

fees. Competition for fees continues to increase with the advent of alternative trading platforms that offer less

expensive trades and provide listing services. Important issues these undertakings need to focus on are transparency,

risk management, and market stability.

Included are these activities in accordance to the following NACE code classification:

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K.64.20 Activities of holding undertakings

K.64.30 Trusts, funds and similar financial entities

K.64.99 Other financial service activities, except insurance and pension funding n.e.c.

K.66.11 Administration of financial markets

K.66.12 Security and commodity contracts brokerage

K.66.19 Other activities auxiliary to financial services, except insurance and pension funding

K.66.30 Fund management activities

Insurance sector

The Insurance sector provides both traditional and nontraditional insurance-related products. Traditional policy lines

include property, life, casualty, and reinsurance. Nontraditional products include annuities, alternative risk transfers,

and financial guarantees. Undertakings in the insurance sector also engage in proprietary investments. Insurance

undertakings generally operate within a single segment in the segment, e.g., property and casualty, although there

are some large insurance undertakings with diversified operations. Similarly, undertakings may vary based on the

level of their geographic segmentation. While large undertakings may underwrite insurance premiums in multiple

countries, smaller undertakings generally operate at a national or even local level. Insurance premiums, underwriting

revenue, and investment income drive segment growth, while insurance claim payments present the most significant

cost and source of uncertainty for profits. Insurance undertakings provide products and services that enable the

transfer, pooling, and sharing of risk necessary for a well-functioning economy. Insurance undertakings, through their

products, can also create a form of moral hazard, lowering incentives to improve underlying behavior and

performance, and thus contributing to sustainability impacts. Similar to other financial institutions, insurance

undertakings face risks associated with credit and financial markets. Within the segment, undertakings that engage

in non-traditional or non-insurance activities, including credit default swaps (CDS) protection and debt securities

insurance, have been identified by regulators as being more vulnerable to financial market developments, and

subsequently, more likely to amplify or contribute to systemic risk. As a result, insurance undertakings face the

potential of being designated as Systemically Important Financial Institutions, thus exposing them to enhanced

regulation and oversight.

Included are these activities in accordance to the following NACE code classification:

K.65.11 Life insurance

K.65.12 Non-life insurance

K.65.20 Reinsurance

K.65.30 Pension funding

K.66.21 Risk and damage evaluation

K.66.22 Activities of insurance agents and brokers

K.66.29 Other activities auxiliary to insurance and pension funding

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Health Care sector group

Health Care & Services sector

The Health Care & Services sector includes the provision of health and social work activities. Activities include a wide

range of activities, starting from health care provided by trained medical professionals in hospitals and other facilities,

over residential care activities that still involve a degree of health care activities to social work activities without any

involvement of health care professionals. The sector also includes specialised professional, scientific and technical

activities. These activities require a high degree of training, and make specialised knowledge and skills available to

users. The Health Care & Services sector includes activities of short- or long-term hospitals, general or specialty

medical, surgical, psychiatric and substance abuse hospitals, sanatoria, preventoria, medical nursing homes,

asylums, mental hospital institutions, rehabilitation centres, leprosaria and other human health institutions which have

accommodation facilities and which engage in providing diagnostic and medical treatment to inpatients with any of a

wide variety of medical conditions. It also includes medical consultation and treatment in the field of general and

specialised medicine by general practitioners and medical specialists and surgeons. The sector includes dental

practice activities of a general or specialised nature and orthodontic activities. Additionally, this division includes

activities for human health not performed by hospitals or by practicing medical doctors but by paramedical

practitioners legally recognised to treat patients. The sector also includes the provision of residential care combined

with either nursing, supervisory or other types of care as required by the residents. Facilities are a significant part of

the production process and the care provided is a mix of health and social services with the health services being

largely some level of nursing services. Furthermore, the sector includes the provision of a variety of social assistance

services directly to clients. The activities in this division do not include accommodation services, except on a

temporary basis. In addition, the sector includes the provision of animal health care and control activities for farm

animals or pet animals. These activities are carried out by qualified veterinarians in veterinary hospitals as well as

when visiting farms, kennels or homes, in own consulting and surgery rooms or elsewhere. It also includes animal

ambulance activities.

Undertakings in the sector own and/or manage hospitals, clinics, and other health care-related facilities. Demand for

health care delivery services is driven largely by rates of insurance coverage, demographics, illness, and injury rates.

The sector is characterised by high fixed labor and facilities costs, and an increased regulatory emphasis on reduced

costs of care and improved outcomes. Health care delivery undertakings also face significant competition for patients

and resources from private, nonprofit, and religious health care systems.

Included are these activities in accordance to the following NACE code classification:

M.75.00 Veterinary activities

Q.86.10 Hospital activities

Q.86.21 General medical practice activities

Q.86.22 Specialist medical practice activities

Q.86.23 Dental practice activities

Q.86.90 Other human health activities

Q.87.10 Residential nursing care activities

Q.87.20 Residential care activities for mental retardation, mental health and substance abuse

Q.87.30 Residential care activities for the elderly and disabled

Q.87.90 Other residential care activities

Q.88.10 Social work activities without accommodation for the elderly and disabled

Q.88.91 Child day-care activities

Q.88.99 Other social work activities without accommodation n.e.c.

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Hospitality sector group

The Food & Beverage Services sector group includes the provision of short-stay accommodation for visitors and other

travellers and the provision of complete meals and drinks fit for immediate consumption. The amount and type of

supplementary services provided within this sector group can vary widely. This sector group excludes the provision

of long-term accommodation as primary residences, which is classified in real estate activities. Also excluded is the

preparation of food or drinks that are either not fit for immediate consumption or that are sold through independent

distribution channels, i.e. through wholesale or retail trade activities. The preparation of these foods is classified in

manufacturing.

Food & Beverage Services sector

The Food & Beverage Services sector includes food and beverage serving activities providing complete meals or

drinks fit for immediate consumption, whether in traditional restaurants, self-service or take-away restaurants, whether

as permanent or temporary stands with or without seating. Decisive is the fact that meals fit for immediate

consumption are offered, not the kind of facility providing them. Excluded is the production of meals not fit for

immediate consumption or not planned to be consumed immediately or of prepared food which is not considered to

be a meal. Also excluded is the sale of not self-manufactured food that is not considered to be a meal or of meals

that are not fit for immediate consumption.

Undertakings in the Food & Beverage Services sector are engaged in restaurants, mobile food service activities,

event catering and beverage serving activities. Undertakings in the Restaurants segment prepare meals, snacks, and

beverages to customers’ orders for immediate on-and off-premises consumption. Broadly divided into three sub-

categories, the restaurant segment includes limited-service eating places, casual full-service eating places, and

upscale full-service eating places. Limited-service restaurants provide services to customers who order and pay

before eating. Fast-food restaurants represent the largest share of the limited-service restaurants segment. Full-

service restaurants offer more service, food for consumption primarily on-premise, and typically reflect higher quality

food and prices.

Included are these activities in accordance to the following NACE code classification:

I.56.10 Restaurants and mobile food service activities

I.56.21 Event catering activities

I.56.29 Other food service activities

I.56.30 Beverage serving activities

Hotels & Lodging sector

The Hotels & Lodging sector is composed of undertakings that provide overnight accommodation, including hotels,

motels, inns, and camping grounds, recreational parks and trailer parks. The amount and type of supplementary

services provided within this sector group can vary widely. This sector excludes the provision of long-term

accommodation as primary residences, which isclassified in real estate activities. Also excluded is the preparation of

food or drinks that are either not fit for immediate consumption or that are sold through independent distribution

channels, i.e. through wholesale or retail trade activities. The preparation of these foods is classified in manufacturing.

The Hotels & Lodging sector includes the provision of short-stay accommodation for visitors and other travellers. Also

included is the provision of longer term accommodation for students, workers and similar individuals. Some units may

provide only accommodation while others provide a combination of accommodation, meals and/or recreational

facilities. The Hotels & Lodging sector includes the provision of short-stay accommodation for visitors and other

travellers. Also included is the provision of longer term accommodation for students, workers and similar individuals.

Some units may provide only accommodation while others provide a combination of accommodation, meals and/or

recreational facilities.

It is a competitive sector that is primarily comprised of large hotel chains and in which customers base purchase

decisions on a wide range of factors including quality and consistency of services, availability of locations, price, and

loyalty program offers. Businesses are often structured in one or more of the following ways: direct revenue from

hotel services, including room rental and food and beverage sales; management and franchise services with fee

revenue from property management; and vacation residential ownership with revenue from sales of residential units.

Select undertakings in the Hotels & Lodging sector are also engaged in activities of the Restaurants sector. The

disclosure requirements for such activities are outlined in the ESRS Food & Beverage Services standard. Hotels and

lodging undertakings do not provide food and beverage services, and therefore issues such as food safety, waste,

and sourcing, which may be material for undertakings that offer food and beverages, are not covered by this sector

standard.

Included are these activities in accordance to the following NACE code classification:

I.55.10 Hotels and similar accommodation

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I.55.20 Holiday and other short-stay accommodation

I.55.30 Camping grounds, recreational vehicle parks and trailer parks

I.55.90 Other accommodation

J.59.14 Motion picture projection activities

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Manufacturing sector group

The Manufacturing sector group includes the physical or chemical transformation of materials, substances, or

components into new products, although this cannot be used as the single universal criterion for defining

manufacturing (see remark on processing of waste below). The materials, substances, or components transformed

are raw materials that are products of agriculture, forestry, fishing, mining or quarrying as well as products of other

manufacturing activities. Substantial alteration, renovation or reconstruction of goods is generally considered to be

manufacturing. The output of a manufacturing process may be finished in the sense that it is ready for utilisation or

consumption, or it may be semi-finished in the sense that it is to become an input for further manufacturing.

Aerospace & Defence sector

The Aerospace & Defence sector includes the provision of passenger or freight transport, whether scheduled or not,

by rail, pipeline, road, water or air and associated activities such as terminal and parking facilities, cargo handling,

storage etc. Included in this sector is the rental of transport equipment with driver or operator. Also included are postal

and courier activities. Undertakings in the Aerospace & Defence sector include manufacturers of commercial aircraft,

aircraft parts, aerospace and defence products, as well as defence prime contractors. Commercial aircraft

manufacturers sell mainly to commercial airlines and governments. Aerospace and defence parts manufacturers sell

primarily to governments. Both aerospace and defence manufacturers operate globally and serve a global customer

base.

Defence primes manufacture products including military aircraft, space vehicles, missile systems, ammunition, small

arms, naval ships, and other commercial and military vehicles. Their customers consist of various government

agencies and related businesses with global operations. The defence prime category also includes firearms

manufacturers that sell to law enforcement agencies, businesses, distributors, retailers, and consumers.

Key sustainability topics within the segment include the energy efficiency and emissions profile of products and

management of manufacturing energy and waste.

Included are these activities in accordance to the following NACE code classification:

C.20.51 Manufacture of explosives

C.25.40 Manufacture of weapons and ammunition

C.30.30 Manufacture of air and spacecraft and related machinery

C.30.40 Manufacture of military fighting vehicles

C.33.16 Repair and maintenance of aircraft and spacecraft

H.51.22 Space transport

Automobiles & Other Transport Vehicles sector

The Automobiles & Other Transport Vehicles sector includes the manufacture of motor vehicles for transporting

passengers or freight. The manufacture of various parts and accessories, as well as the manufacture of trailers and

semi-trailers, is included here. Undertakings in the Automobiles & Other Transport Vehicles sector are typically active

in the automobiles, auto parts and industrial machinery & goods segments. Transport Vehicles sector are typically

active in the automobiles, auto parts and industrial machinery & goods segments. The sector also includes the

manufacture of transportation equipment such as ship building and boat manufacturing, the manufacture of railroad

rolling stock and locomotives, air and spacecraft and the manufacture of parts thereof. In addition, the sector covers

related repair and maintenance activities.

The automobiles segment includes undertakings that manufacture passenger vehicles, light trucks, and motorcycles.

Industry players design, build, and sell vehicles that run using a range of traditional and alternative fuels and

powertrains. They sell these vehicles to dealers for consumer retail sales as well as sell directly to fleet customers,

including car rental and leasing undertakings, commercial fleets, and governments. Due to the global nature of this

segment, nearly all undertakings have manufacturing facilities, assembly plants, and service locations in several

countries around the world. The automobiles segment is highly concentrated, with a few large manufacturers and a

diversified supply chain. Given the segment’s reliance on natural resources and sensitivity to the business cycle,

revenues are typically cyclical. Undertakings in the auto parts segment supply motor vehicle parts and accessories

to original equipment manufacturers (OEM). These undertakings typically specialise in the manufacturing and

assembly of certain parts or accessories, such as engine exhaust systems, alternative drivetrains, hybrid systems,

catalytic converters, aluminium wheels (rims), tires, rear-view mirrors, and onboard electrical and electronic

equipment. Although the larger automotive segment includes several tiers of suppliers that provide parts and raw

materials used to assemble motor vehicles, the scope includes only Tier 1 suppliers that supply parts directly to

OEMs. The scope of the segment excludes captive suppliers, such as engine and stamping facilities, that are owned

and operated by OEMs. Similarity, it excludes Tier 2 suppliers, which provide inputs for the auto parts segment.

Included are these activities in accordance to the following NACE code classification:

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C.22.11 Manufacture of rubber tyres and tubes

C.29.10 Manufacture of motor vehicles

C.29.20 Manufacture of bodies (coachwork) for motor vehicles

C.29.32 Manufacture of other parts and accessories for motor vehicles

C.30.11 Building of ships and floating structures

C.30.12 Building of pleasure and sporting boats

C.30.20 Manufacture of railway locomotives and rolling stock

C.30.91 Manufacture of motorcycles

C.33.15 Repair and maintenance of ships and boats

C.33.17 Repair and maintenance of other transport equipment

G.45.20 Maintenance and repair of motor vehicles

Biotechnology & Pharmaceuticals sector

The Biotechnology & Pharmaceuticals sector includes the manufacture of basic pharmaceutical products and

pharmaceutical preparations. This also includes the manufacture of medicinal chemical and botanical products. The

sector also covers the research and development of biotechnology.

Undertakings in the Biotechnology & Pharmaceuticals sector develop, manufacture, and market a range of brand-

name and generic medications. A significant portion of the sector is driven by research and development, a high risk

of product failure during clinical trials, and the need to obtain regulatory approval. Concerns over pricing practices

and consolidation within the sector have created downward pricing pressures. Demand for the sector’s products is

largely driving by population demographics, rates of insurance coverage, disease profiles, and economic conditions.

The Biotechnology & Pharmaceuticals sector group includes specialised professional, scientific and technical

activities. These activities require a high degree of training, and make specialised knowledge and skills available to

users. Undertakings in the Biotechnology & Pharmaceuticals sector develop, manufacture, and market a range of

brand-name and generic medications. A significant portion of the sector is driven by research and development, a

high risk of product failure during clinical trials, and the need to obtain regulatory approval. Concerns over pricing

practices and consolidation within the sector have created downward pricing pressures. Demand for the sector’s

products is largely driving by population demographics, rates of insurance coverage, disease profiles, and economic

conditions.

Included are these activities in accordance to the following NACE code classification:

C.21.10 Manufacture of basic pharmaceutical products

C.21.20 Manufacture of pharmaceutical preparations

G.46.46 Wholesale of pharmaceutical goods

M.72.11 Research and experimental development on biotechnology

Building Products & Furnishings sector

The Building Products & Furnishings sector includes the manufacture of wood products, such as lumber, plywood,

veneers, wood containers, wood flooring, wood trusses, and prefabricated wood buildings. The production processes

include sawing, planing, shaping, laminating, and assembling of wood products starting from logs that are cut into

bolts, or lumber that may then be cut further, or shaped by lathes or other shaping tools. The lumber or other

transformed wood shapes may also be subsequently planed or smoothed, and assembled into finished products,

such as wood containers.

The sector also includes the manufacture of furniture and related products of any material except stone, concrete and

ceramic. The processes used in the manufacture of furniture are standard methods of forming materials and

assembling components, including cutting, moulding and laminating. The design of the article, for both aesthetic and

functional qualities, is an important aspect of the production process. Some of the processes used in furniture

manufacturing are similar to processes that are used in other segments of manufacturing. However, the multiple

processes distinguish wood furniture manufacturing from wood product manufacturing.

The Building Products & Furnishings sector comprises undertakings involved in the design and manufacturing of

home improvement products, home and office furnishings, and structural wood building materials. The sector’s

products include flooring, ceiling tiles, home and office furniture and fixtures, wood trusses, plywood, paneling, and

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lumber. Undertakings typically sell their products through distribution channels to retail stores or through independent

or undertaking-owned dealerships.

Included are these activities in accordance to the following NACE code classification:

C.22.23 Manufacture of builders' ware of plastic

C.23.41 Manufacture of ceramic household and ornamental articles

C.23.42 Manufacture of ceramic sanitary fixtures

C.23.43 Manufacture of ceramic insulators and insulating fittings

C.23.44 Manufacture of other technical ceramic products

C.23.49 Manufacture of other ceramic products

C.31.01 Manufacture of office and shop furniture

C.31.02 Manufacture of kitchen furniture

C.31.03 Manufacture of mattresses

C.31.09 Manufacture of other furniture

Chemicals & Biofuels sector

The sector includes the transformation of organic and inorganic raw materials by a chemical process and the

formation of products. It distinguishes the production of basic chemicals that constitute the first industry group from

the production of intermediate and end products produced by further processing of basic chemicals that make up the

remaining industry activities.

Undertakings in the Chemicals & Biofuels sector are typically active in the chemicals, containers & packaging and

household & personal products segments. Undertakings transform organic and inorganic feedstocks into diverse

products with a range of industrial, pharmaceutical, agricultural, housing, automotive, and consumer applications.

The sector is commonly segmented into basic (commodity) chemicals, agricultural chemicals, and specialty

chemicals. Basic chemicals, the largest segment by volume produced, include bulk polymers, petrochemicals,

inorganic chemicals, and other industrial chemicals. Agricultural chemicals include fertilizers, crop chemicals, and

agricultural biotechnology. Specialty chemicals include paints and coatings, agrochemicals, sealants, adhesives,

dyes, industrial gases, resins, and catalysts. Larger undertakings may produce basic, agricultural, and specialty

chemicals, while most undertakings are specialised. Chemicals undertakings typically manufacture and sell products

globally.

Included are these activities in accordance to the following NACE code classification:

C.18.20 Reproduction of recorded media

C.20.11 Manufacture of industrial gases

C.20.12 Manufacture of dyes and pigments

C.20.13 Manufacture of other inorganic basic chemicals

C.20.14 Manufacture of other organic basic chemicals

C.20.15 Manufacture of fertilisers and nitrogen compounds

C.20.16 Manufacture of plastics in primary forms

C.20.17 Manufacture of synthetic rubber in primary forms

C.20.20 Manufacture of pesticides and other agrochemical products

C.20.30 Manufacture of paints, varnishes and similar coatings, printing ink and mastics

C.20.41 Manufacture of soap and detergents, cleaning and polishing preparations

C.20.42 Manufacture of perfumes and toilet preparations

C.20.52 Manufacture of glues

C.20.53 Manufacture of essential oils

C.20.59 Manufacture of other chemical products n.e.c.

C.20.60 Manufacture of man-made fibres

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C.22.19 Manufacture of other rubber products

C.22.21 Manufacture of plastic plates, sheets, tubes and profiles

C.22.22 Manufacture of plastic packing goods

C.22.29 Manufacture of other plastic products

C.32.91 Manufacture of brooms and brushes

Construction Materials sector

The Construction Materials sector includes manufacturing activities related to a single substance of mineral origin.

The sector comprises of undertakings which manufacture, produce and cut materials for construction purposes. The

manufacturing segment include non-metallic, (ready-mixed) concrete, plaster, mortars, (fibre) cement, lime, bricks

and tiles, flat glass, hollow glass, glass fibres and refractory products undertakings. Undertakings in the production

segment include abrasive products production. Undertakings in the cutting segment include stone cutting

undertakings. Undertakings typically sell their products through distribution channels to retail stores, construction

firms or wholesale distributors or through independent or company-owned dealerships. Demand in the sector is

closely tied to industrial production, while government emissions standards and customer demand are driving

innovations to improve energy efficiency and limit air emissions during product manufacture and use.

Included are these activities in accordance to the following NACE code classification:

C.23.11 Manufacture of flat glass

C.23.12 Shaping and processing of flat glass

C.23.13 Manufacture of hollow glass

C.23.14 Manufacture of glass fibres

C.23.19 Manufacture and processing of other glass, including technical glassware

C.23.20 Manufacture of refractory products

C.23.31 Manufacture of ceramic tiles and flags

C.23.32 Manufacture of bricks, tiles and construction products, in baked clay

C.23.51 Manufacture of cement

C.23.52 Manufacture of lime and plaster

C.23.61 Manufacture of concrete products for construction purposes

C.23.62 Manufacture of plaster products for construction purposes

C.23.63 Manufacture of ready-mixed concrete

C.23.64 Manufacture of mortars

C.23.65 Manufacture of fibre cement

C.23.69 Manufacture of other articles of concrete, plaster and cement

C.23.70 Cutting, shaping and finishing of stone

C.23.91 Production of abrasive products

C.23.99 Manufacture of other non-metallic mineral products n.e.c.

Electronics sector

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The sector includes the manufacture of computers, computer peripherals, communications equipment, and similar

electronic products, as well as the manufacture of components for such products. Production processes of this sector

are characterised by the design and use of integrated circuits and the application of highly specialised miniaturisation

technologies. The sector also contains the manufacture of consumer electronics, measuring, testing and navigating

equipment, irradiation, electromedical and electrotherapeutic equipment, optical instruments and equipment, and the

manufacture of magnetic and optical media. In addition, the sector includes the manufacture of products that

generate, distribute and use electrical power. Also included is the manufacture of electrical lighting, signalling

equipment and electric household appliances as well as repair activities.

Undertakings in the Electronics sector are typically active in the appliance manufacturing, electrical and electronic

equipment, electronic manufacturing services and original design manufacturing, hardware and semiconductor

segments. The appliance manufacturing segment includes undertakings involved in the design and manufacturing of

household appliances and hand tools. The sector sells and manufactures products around the world, primarily selling

products to consumers through retail locations. The electrical & electronic equipment segment consists of

undertakings that develop and manufacture a broad range of electric components, including power generation

equipment, energy transformers, electric motors, switchboards, automation equipment, heating and cooling

equipment, lighting, and transmission cables. Undertakings in this mature and competitive sector operate globally

and typically generate a significant portion of their revenue from outside the country of their domicile. The electronic

manufacturing services (EMS) & original design manufacturing (ODM) segment consists of two main segments. EMS

undertakings provide assembly, logistics, and after-market services for original equipment manufacturers. The ODM

segment of the sector provides engineering and design services for original equipment manufacturers and may own

significant intellectual property. Although EMS & ODM undertakings produce equipment for a variety of sectors, the

sector is closely associated with the Hardware sector, which consists of undertakings that design technology

hardware products such as personal computers, consumer electronics, and storage devices for both personal

consumers and businesses. The Hardware sector consists of undertakings that design and sell technology hardware

products, including computers, consumer electronics, communications equipment, storage devices, components, and

peripherals. Many undertakings in the sector rely heavily on the EMS &ODM sector for manufacturing services. The

sector is expected to continue to grow as the use of technology rapidly grows, especially from consumers in emerging

markets. The Semiconductors segment includes undertakings that design or manufacture semiconductor devices,

integrated circuits, their raw materials and components, or capital equipment. Some undertakings in the sector

provide outsourced manufacturing, assembly, or other services for designers of semiconductor devices.

Included are these activities in accordance to the following NACE code classification:

C.26.11 Manufacture of electronic components

C.26.12 Manufacture of loaded electronic boards

C.26.20 Manufacture of computers and peripheral equipment

C.26.30 Manufacture of communication equipment

C.26.40 Manufacture of consumer electronics

C.26.51 Manufacture of instruments and appliances for measuring, testing and navigation

C.26.52 Manufacture of watches and clocks

C.26.70 Manufacture of optical instruments and photographic equipment

C.26.80 Manufacture of magnetic and optical media

C.27.11 Manufacture of electric motors, generators and transformers

C.27.12 Manufacture of electricity distribution and control apparatus

C.27.20 Manufacture of batteries and accumulators

C.27.31 Manufacture of fibre optic cables

C.27.32 Manufacture of other electronic and electric wires and cables

C.27.33 Manufacture of wiring devices

C.27.40 Manufacture of electric lighting equipment

C.27.51 Manufacture of electric domestic appliances

C.27.52 Manufacture of non-electric domestic appliances

C.27.90 Manufacture of other electrical equipment

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C.29.31 Manufacture of electrical and electronic equipment for motor vehicles

C.33.13 Repair of electronic and optical equipment

C.33.14 Repair of electrical equipment

S.95.11 Repair of computers and peripheral equipment

S.95.12 Repair of communication equipment

S.95.21 Repair of consumer electronics

S.95.22 Repair of household appliances and home and garden equipment

Food & Beverages sector

The Food & Beverage sector includes the processing of the products of agriculture, forestry and fishing into food for

humans or animals, and includes the production of various intermediate products that are not directly food products.

Undertakings often generate associated products of greater or lesser value (for example, hides from slaughtering, or

oilcake from oil production). The sector is organised by activities dealing with different kinds of products: meat, fish,

fruit and vegetables, fats and oils, milk products, grain mill products, animal feeds and other food products. Production

can be carried out for own account, as well as for third parties, as in custom slaughtering. It does not include the

preparation of meals for immediate consumption, such as in restaurants. The sector also includes the manufacture

of beverages.

Undertakings in the Food & Beverages sector operate in the manufacturing, processing and distributing of agriculture

products, meat and beverages. The sector includes undertakings that process and package foods such as bread,

frozen foods, snack foods, pet foods, and condiments for retail consumer consumption. Typically, these products are

made ready to consume, are marketed for retail consumers, and can be found on food retailers’ shelves. The sector

is characterised by large and complex ingredient supply chains, as many undertakings source ingredients from

around the world. Large undertakings operate globally, and international opportunities are driving growth.

Undertakings may also produce non-alcoholic beverages, including various carbonated soft drinks, syrup

concentrates, juices, energy and sport drinks, teas, coffee, and water products, dominated by large, international

undertakings. Undertakings partake in syrup manufacturing, marketing, bottling operations, and distribution, with

larger undertakings typically being more vertically integrated into operations that bottle, sell, and distribute the finished

products. In addition, undertakings may also produce alcoholic beverages and brew, distill, manufacture and distribute

various alcoholic beverages, including beer, wine, and liquor. Undertakings in this sector transform agricultural

products, including sugar, barley, and corn, into finished alcoholic beverages. The largest undertakings have global

operations, with portfolios of numerous branded products. Levels of vertical integration vary due to regulation in

different markets. Breweries generally have multiple manufacturing facilities to provide access to different markets,

while vintners and distillers are typically located where they have a history of production. Undertakings in this sector

are engaged in wholesale and retail sales. Store formats include retail supermarkets, convenience stores, warehouse

supermarkets, liquor stores, bakeries, natural food stores, specialty food stores, seafood stores, and distribution

centers. Undertakings may specialise in one type of store format or have facilities that contain multiple formats.

Included are these activities in accordance to the following NACE code classification:

C.10.11 Processing and preserving of meat

C.10.12 Processing and preserving of poultry meat

C.10.13 Production of meat and poultry meat products

C.10.20 Processing and preserving of fish, crustaceans and molluscs

C.10.31 Processing and preserving of potatoes

C.10.32 Manufacture of fruit and vegetable juice

C.10.39 Other processing and preserving of fruit and vegetables

C.10.41 Manufacture of oils and fats

C.10.42 Manufacture of margarine and similar edible fats

C.10.51 Operation of dairies and cheese making

C.10.52 Manufacture of ice cream

C.10.61 Manufacture of grain mill products

C.10.62 Manufacture of starches and starch products

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C.10.71 Manufacture of bread

C.10.72 Manufacture of rusks and biscuits

C.10.73 Manufacture of macaroni, noodles, couscous and similar farinaceous products

C.10.81 Manufacture of sugar

C.10.82 Manufacture of cocoa, chocolate and sugar confectionery

C.10.83 Processing of tea and coffee

C.10.84 Manufacture of condiments and seasonings

C.10.85 Manufacture of prepared meals and dishes

C.10.86 Manufacture of homogenised food preparations and dietetic food

C.10.89 Manufacture of other food products n.e.c.

C.10.91 Manufacture of prepared feeds for farm animals

C.10.92 Manufacture of prepared pet foods

C.11.01 Distilling, rectifying and blending of spirits

C.11.02 Manufacture of wine from grape

C.11.03 Manufacture of cider and other fruit wines

C.11.04 Manufacture of other non-distilled fermented beverages

C.11.05 Manufacture of beer

C.11.06 Manufacture of malt

C.11.07 Manufacture of soft drinks

Machinery & Equipment sector

The Machinery & Equipment sector includes the manufacture of machinery and equipment that act independently on

materials either mechanically or thermally or perform operations on materials (such as handling, spraying, weighing

or packing), including their mechanical components that produce and apply force, and any specially manufactured

primary parts as well as repair activities. This includes the manufacture of fixed and mobile or hand-held devices,

regardless of whether they are designed for industrial, building and civil engineering, agricultural or home use. The

manufacture of special equipment for passenger or freight transport within demarcated premises also belongs within

this sector. It distinguishes between the manufacture of special-purpose machinery and general-purpose. It also

includes the manufacture of other special-purpose machinery, not covered elsewhere, whether or not used in a

manufacturing process, such as fairground amusement equipment, automatic bowling alley equipment, etc..

Undertakings in the Machinery & Equipment sector are typically active in the industrial machinery & goods segment

as well as fuel cells & industrial batteries segment. The industrial machinery & goods segment manufactures

equipment for a variety of segments including construction, agriculture, energy, utility, mining, manufacturing,

automotive, and transportation. Products to be considered include engines, earth-moving equipment, industrial

pumps, and turbines. Machinery manufacturers utilise large amounts of raw materials for production, including steel,

plastics, rubber, paints, and glass. Manufacturers may also perform the machining and casting of parts before final

assembly. Demand in the sector is closely tied to industrial production, while government emissions standards and

customer demand are driving innovations to improve energy efficiency and limit air emissions during product use.

The fuel cells & industrial batteries segment consists of undertakings that manufacture fuel cells for energy production

and energy storage equipment such as batteries. Manufacturers mainly sell products to undertakings for varied

energy-generation and energy-storage applications and intensities, from commercial business applications to large-

scale energy projects for utilities. Undertakings in the sector typically have global operations and sell products to a

global marketplace.

Included are these activities in accordance to the following NACE code classification:

C.28 Manufacture of low carbon technologies

C.28.11 Manufacture of engines and turbines, except aircraft, vehicle and cycle engines

C.28.12 Manufacture of fluid power equipment

C.28.13 Manufacture of other pumps and compressors

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C.28.14 Manufacture of other taps and valves

C.28.15 Manufacture of bearings, gears, gearing and driving elements

C.28.21 Manufacture of ovens, furnaces and furnace burners

C.28.22 Manufacture of lifting and handling equipment

C.28.23 Manufacture of office machinery and equipment (except computers and peripheral equipment)

C.28.24 Manufacture of power-driven hand tools

C.28.29 Manufacture of other general-purpose machinery n.e.c.

C.28.30 Manufacture of agricultural and forestry machinery

C.28.41 Manufacture of metal forming machinery

C.28.49 Manufacture of other machine tools

C.28.91 Manufacture of machinery for metallurgy

C.28.92 Manufacture of machinery for mining, quarrying and construction

C.28.93 Manufacture of machinery for food, beverage and tobacco processing

C.28.94 Manufacture of machinery for textile, apparel and leather production

C.28.95 Manufacture of machinery for paper and paperboard production

C.28.96 Manufacture of plastics and rubber machinery

C.28.99 Manufacture of other special-purpose machinery n.e.c.

C.33.12 Repair of machinery

C.33.19 Repair of other equipment

C.33.20 Installation of industrial machinery and equipment

Medical Equipment & Services sector

Undertakings in the Medical Equipment & Services sector are engaged in the manufacture of irradiation,

electromedical and electrotherapeutic equipment and the manufacture of medical and dental instruments and

supplies. Undertakings are typically active in the drug retailing and medical equipment & supplies segments. The

Drug Retailers sector comprises undertakings that operate retail pharmacies and distribution centers that supply retail

stores. Stores may be company-owned or franchised. The majority of the sector’s revenues are derived from

consumer sales of prescription and over-the-counter pharmaceutical products; other goods sold include household

goods, personal care products, and a limited selection of groceries. Additionally, the pharmacy retailer segment is

expanding its health-focused services by offering clinics at various retail locations, which adds to the sector’s shifting

sustainability landscape. The Medical Equipment & Supplies sector researches, develops, and produces medical,

surgical, dental, ophthalmic, and veterinary instruments and devices. Products are used in settings, including

hospitals, clinics, and laboratories, and range from disposable items to highly specialised equipment. The increased

prevalence of diseases associated with unhealthy lifestyles and an aging population are important factors that may

impact growth in this sector. Emerging markets and the expansion of health insurance will contribute to further growth.

However, the extension of government insurance programs, provider and payer consolidation, and regulatory

emphasis on reduced costs in all markets may result in downward pricing pressure.

Included are these activities in accordance to the following NACE code classification:

C.26.60 Manufacture of irradiation, electromedical and electrotherapeutic equipment

C.32.50 Manufacture of medical and dental instruments and supplies

G.47.74 Retail sale of medical and orthopaedic goods in specialised stores

Metal Processing sector

The Metal Processing sector includes the activities of smelting and/or refining ferrous and non-ferrous metals from

ore, pig or scrap, using electrometallurgic and other process metallurgic techniques. It also includes the manufacture

of metal alloys and super-alloys by introducing other chemical elements to pure metals. The output of smelting and

refining, usually in ingot form, is used in rolling, drawing and extruding operations to make products such as plate,

sheet, strip, bars, rods, wire or tubes, pipes and hollow profiles, and in molten form to make castings and other basic

metal products.

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Undertakings in the Metal Processing sector are typically active in the iron & steel production and metals & mining

segments.

The iron & steel production segment consists of steel producers with iron and steel mills and undertakings with iron

and steel foundries. The steel producers segment consists of undertakings that produce iron and steel products from

their own mills. These products include flat-rolled sheets, tin plates, pipes, tubes, and products made of stainless

steel, titanium, and high alloy steels. Iron and steel foundries, which cast various products, typically purchase iron

and steel from other firms. The sector also includes metal service centers and other metal merchant wholesalers,

which distribute, import, or export ferrous products. Steel production occurs via two primary methods: the Basic

Oxygen Furnace (BOF) , which uses iron ore as an input, and the Electric Arc Furnace (EAF) , which uses scrap

steel. Many undertakings in the sector operate on an international scale. The metals & mining segment produces iron

ores, rare earth metals, and precious metals and stones. Larger undertakings in this sector are vertically integrated.

Included are these activities in accordance to the following NACE code classification:

C.24.10 Manufacture of basic iron and steel and of ferro-alloys

C.24.20 Manufacture of tubes, pipes, hollow profiles and related fittings, of steel

C.24.31 Cold drawing of bars

C.24.32 Cold rolling of narrow strip

C.24.33 Cold forming or folding

C.24.34 Cold drawing of wire

C.24.41 Precious metals production

C.24.42 Aluminium production

C.24.43 Lead, zinc and tin production

C.24.44 Copper production

C.24.45 Other non-ferrous metal production

C.24.46 Processing of nuclear fuel

C.24.51 Casting of iron

C.24.52 Casting of steel

C.24.53 Casting of light metals

C.24.54 Casting of other non-ferrous metals

C.25.11 Manufacture of metal structures and parts of structures

C.25.12 Manufacture of doors and windows of metal

C.25.21 Manufacture of central heating radiators and boilers

C.25.29 Manufacture of other tanks, reservoirs and containers of metal

C.25.30 Manufacture of steam generators, except central heating hot water boilers

C.25.50 Forging, pressing, stamping and roll-forming of metal

C.25.61 Treatment and coating of metals

C.25.62 Machining

C.25.71 Manufacture of cutlery

C.25.73 Manufacture of tools

C.25.91 Manufacture of steel drums and similar containers

C.25.92 Manufacture of light metal packaging

C.25.93 Manufacture of wire products, chain and springs

C.25.94 Manufacture of fasteners and screw machine products

C.25.99 Manufacture of other fabricated metal products n.e.c.

C.32.11 Striking of coins

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C.33.11 Repair of fabricated metal products

Oil & Gas - Midstream & Downstream sector

Undertakings in the Oil & Gas - Midstream & Downstream sector refine petroleum products, market oil and gas

products, and/or operate gas stations and convenience stores, all of which comprise the downstream operations of

the oil and gas value chain. The types of refinery products and crude oil inputs influence the complexity of the refining

process used, with different expenditure needs and intensity of environmental and social impacts. Note: The

standards discussed below are for “pure-play ”Oil & Gas - Midstream & Downstream activities, or independent Oil &

Gas - Midstream & Downstream undertakings. Integrated oil and gas undertakings conduct upstream operations and

are also involved in the distribution and/or refining or marketing of products. Those activities are covered by the ESRS

Oil & Gas - Upstream & Services. As such, integrated undertakings should also consider the disclosure topics and

metrics from these standards.

Included are these activities in accordance to the following NACE code classification:

C.19.20 Manufacture of refined petroleum products

G.46.71 Wholesale of solid, liquid and gaseous fuels and related products

G.47.30 Retail sale of automotive fuel in specialised stores

H.49.50 Transport via pipeline

Pulp, Paper & Wood products sector

The Pulp, Paper and Wood Products sector includes the manufacture of wood products, such as lumber, plywood,

veneers, wood containers, wood flooring, wood trusses, and prefabricated wood buildings. The production processes

include sawing, planing, shaping, laminating, and assembling of wood products starting from logs that are cut into

bolts, or lumber that may then be cut further, or shaped by lathes or other shaping tools. The lumber or other

transformed wood shapes may also be subsequently planed or smoothed, and assembled into finished products,

such as wood containers. The sector also includes the manufacture of pulp, paper and converted paper products.

The manufacture of these products is grouped together because they constitute a series of vertically connected

processes. More than one activity is often carried out in a single unit. There are essentially three activities: The

manufacture of pulp involves separating the cellulose fibres from other matter in wood, or dissolving and de-inking of

used paper, and mixing in small amounts of reagents to reinforce the binding of the fibres. The manufacture of paper

involves releasing pulp onto a moving wire mesh so as to form a continuous sheet. Converted paper products are

made from paper and other materials by various techniques. The paper articles may be printed (e.g. wallpaper, gift

wrap etc.), as long as the printing of information is not the main purpose.

The Pulp, Paper and Wood Products sector consists of undertakings that manufacture a range of wood pulp and

paper products, including pulp fiber, paper packaging and sanitary paper, office paper, newsprint, and paper for

industrial applications. Undertakings in the sector typically function as business-to-business entities and may have

operations in multiple countries. While some integrated undertakings own or manage timber tracts and are engaged

in forest management, sustainability issues arising from these activities are addressed in ESRS Forestry standard.

Included are these activities in accordance to the following NACE code classification:

C.16.10 Sawmilling and planing of wood

C.16.21 Manufacture of veneer sheets and wood-based panels

C.16.22 Manufacture of assembled parquet floors

C.16.23 Manufacture of other builders' carpentry and joinery

C.16.24 Manufacture of wooden containers

C.16.29 Manufacture of other products of wood

C.17.11 Manufacture of pulp

C.17.12 Manufacture of paper and paperboard

C.17.21 Manufacture of corrugated paper and paperboard and of containers of paper and paperboard

C.17.22 Manufacture of household and sanitary goods and of toilet requisites

C.17.23 Manufacture of paper stationery

C.17.24 Manufacture of wallpaper

C.17.29 Manufacture of other articles of paper and paperboard

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Textiles, Apparels, Footwear & Accessories sector

The Apparel, Accessories & Footwear includes preparation and spinning of textile fibres as well as textile weaving,

finishing of textiles and wearing apparel, manufacture of made-up textile articles, except apparel (e.g. household

linen, blankets, rugs, cordage etc.). The sector alos includes all tailoring (ready-to-wear or made-to-measure), in all

materials (e.g. leather, fabric, knitted and crocheted fabrics etc.), of all items of clothing (e.g. outerwear, underwear

for men, women or children as well as the fur industry (fur skins and wearing apparel). In addition, the sector includes

dressing and dyeing of fur and the transformation of hides into leather by tanning or curing and fabricating the leather

into products for final consumption. It also includes the manufacture of similar products from other materials (imitation

leathers or leather substitutes), such as rubber footwear, textile luggage etc. The products made from leather

substitutes are included here, since they are made in ways similar to those in which leather products are made (e.g.

luggage) and are often produced in the same unit.

The sector includes undertakings involved in the design, manufacturing, wholesaling, and retailing of various

products, including men’s, women’s, and children’s clothing, handbags, jewelry, watches, and footwear. Products are

largely manufactured by vendors in emerging markets, thereby allowing undertakings in the sector to primarily focus

on design, wholesaling, marketing, supply chain management, and retail activities.

Included are these activities in accordance to the following NACE code classification:

C.13.10 Preparation and spinning of textile fibres

C.13.20 Weaving of textiles

C.13.30 Finishing of textiles

C.13.91 Manufacture of knitted and crocheted fabrics

C.13.92 Manufacture of made-up textile articles, except apparel

C.13.93 Manufacture of carpets and rugs

C.13.94 Manufacture of cordage, rope, twine and netting

C.13.95 Manufacture of non-wovens and articles made from non-wovens, except apparel

C.13.96 Manufacture of other technical and industrial textiles

C.13.99 Manufacture of other textiles n.e.c.

C.14.11 Manufacture of leather clothes

C.14.12 Manufacture of workwear

C.14.13 Manufacture of other outerwear

C.14.14 Manufacture of underwear

C.14.19 Manufacture of other wearing apparel and accessories

C.14.20 Manufacture of articles of fur

C.14.31 Manufacture of knitted and crocheted hosiery

C.14.39 Manufacture of other knitted and crocheted apparel

C.15.10 Tanning and dressing of leather

C.15.12 Manufacture of luggage, handbags and the like, saddlery and harness

C.15.20 Manufacture of footwear

C.32.12 Manufacture of jewellery and related articles

C.32.13 Manufacture of imitation jewellery and related articles

C.32.99 Other manufacturing n.e.c.

Tobacco sector

The Tobacco sector is comprised of undertakings that grow and manufacture tobacco products including cigarettes,

electronical cigarettes, cigars, waterpipes and smokeless tobacco products. Many large tobacco undertakings

operate globally. Undertakings may obtain or sell exclusive rights to sell certain brands of cigarettes in diverse

markets. Most tobacco is grown by independent tobacco farmers, who typically sell their crops to tobacco merchants

or to manufacturers under contract.

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Included are these activities in accordance to the following NACE code classification:

A.01.15 Growing of tobacco

C.12.00 Manufacture of tobacco products

Toys, Sporting Goods & Musical instruments sector

The Toys, Sporting goods & Musical instrument sector comprises undertakings that manufacture toys and games,

sporting and athletic goods, such as bicycles, golf clubs, fitness equipment, musical instruments and other similar

products. Undertakings in this sector primarily sell their products to consumers through retail stores. The level of

manufacturing integration varies among and within segments of the sector; manufacturing is based primarily in Asia,

with China accounting for a majority of production.

Included are these activities in accordance to the following NACE code classification:

C.30.92 Manufacture of bicycles and invalid carriages

C.30.99 Manufacture of other transport equipment n.e.c.

C.32.20 Manufacture of musical instruments

C.32.30 Manufacture of sports goods

C.32.40 Manufacture of games and toys

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Mining sector group

The Mining sector group includes the extraction of minerals occurring naturally as solids (coal and ores), liquids

(petroleum) or gases (natural gas). Extraction can be achieved by different methods such as underground or surface

mining, well operation, seabed mining etc. This sector group also includes supplementary activities aimed at

preparing the crude materials for marketing, for example, crushing, grinding, cleaning, drying, sorting, concentrating

ores, liquefaction of natural gas and agglomeration of solid fuels. These operations are often accomplished by the

units that extracted the resource and/or others located nearby.

Coal Operations sector

The Coal Operations sector includes the extraction of solid mineral fuels through underground or open-cast mining

and includes operations (e.g. grading, cleaning, compressing and other steps necessary for transportation etc.)

leading to a marketable product.

The Coal Operations sector includes undertakings that mine coal and other similar materials and those that

manufacture coal products. Mining activity covers both underground and surface mining, and thermal and

metallurgical coal.

Included are these activities in accordance to the following NACE code classification:

B.05.10 Mining of hard coal

B.05.20 Mining of lignite

C.19.10 Manufacture of coke oven products

Mining sector

The Mining sector includes mining for metallic minerals (ores), performed through underground or open-cast

extraction, seabed mining etc. It also includes ore dressing and beneficiating operations, such as crushing, grinding,

washing, drying, sintering, calcining or leaching ore, gravity separation or flotation operations. The sector also

includes extraction from a mine or quarry, but also dredging of alluvial deposits, rock crushing and the use of salt

marshes. The products are used most notably in construction (e.g. sands, stones etc.), manufacture of materials (e.g.

clay, gypsum, calcium etc.), manufacture of chemicals etc. It does not include processing (except crushing, grinding,

cutting, cleaning, drying, sorting and mixing) of the minerals extracted. In addition, support activities are included.

The sector is involved in extracting metals, peats and minerals, producing ores, quarrying stones and clay, smelting

and manufacturing metals, refining metals, and providing mining support activities. It also produces iron ores, rare

earth metals, precious metals and stones. Larger undertakings in this sector are vertically integrated – from mining

across global operations to wholesaling metals to customers.

Included are these activities in accordance to the following NACE code classification:

B.07.10 Mining of iron ores

B.07.21 Mining of uranium and thorium ores

B.07.29 Mining of other non-ferrous metal ores

B.08.11 Quarrying of ornamental and building stone, limestone, gypsum, chalk and slate

B.08.12 Operation of gravel and sand pits

B.08.91 Mining of chemical and fertiliser minerals

B.08.92 Extraction of peat

B.08.93 Extraction of salt

B.08.99 Other mining and quarrying n.e.c.

B.09.90 Support activities for other mining and quarrying

Oil & Gas - Upstream & Services sector

The Oil & Gas - Upstream & Services sector includes the production of crude petroleum, the mining and extraction of

oil from oil shale and oil sands and the production of natural gas and recovery of hydrocarbon liquids. The sector

includes the activities of operating and/or developing oil and gas field properties. Such activities may include drilling,

completing and equipping wells. The sector includes the extraction of minerals occurring naturally as solids (coal and

ores), liquids (petroleum) or gases (natural gas). Extraction can be achieved by different methods such as

underground or surface mining, well operation, seabed mining etc. This sector includes supplementary activities

aimed at preparing the crude materials for marketing, for example, crushing, grinding, cleaning, drying, sorting,

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concentrating ores, liquefaction of natural gas and agglomeration of solid fuels. These operations are often

accomplished by the units that extracted the resource and/or others located nearby.

Undertakings in the Oil & Gas - Upstream & Services sector explore for, extract, or produce energy products such as

crude oil and natural gas, which comprise the upstream operations of the oil and gas value chain. Undertakings in

the sector develop conventional and unconventional oil and gas reserves; these include, but are not limited to, shale

oil and/or gas reserves, oil sands, and gas hydrates. Activities covered by this standard include the development of

both on-shore and off-shore reserves. The sector creates contracts with the Oil & Gas - Midstream & Downstream

sector to conduct several activities and to obtain equipment and oilfield services. Undertakings in the sector provide

support services, manufacture equipment, or are contract drillers for oil and natural gas exploration and production

undertakings. The drilling and drilling-support segment comprises undertakings that drill for oil and natural gas on-

shore and off-shore on a contract basis. Undertakings in this segment may also manufacture jack-up rigs,

semisubmersible rigs, and drill ships. Undertakings in the oilfield services segment manufacture equipment that is

used in the extraction, storage, and transportation of oil and natural gas. They also provide support services such as

seismic surveying, equipment rental, well cementing, and well monitoring. These services are commonly provided on

a contractual basis, and the customer will purchase or lease the materials and equipment from the service provider.

Service undertakings may also provide personnel or subject matter expertise as part of their scope of service. The

contractual relationship between oil and gas services undertakings and their customers plays a significant role in

determining the material impacts of their sustainability performance. Besides the rates charged, undertakings

compete on the basis of their operational and safety performance, technology and process offerings, and reputation.

Included are these activities in accordance to the following NACE code classification:

B.06.10 Extraction of crude petroleum

B.06.20 Extraction of natural gas

B.09.10 Support activities for petroleum and natural gas extraction

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Real Estate sector group

Real Estate & Services sector

The Real Estate & Services sector group includes acting as lessors, agents and/or brokers in one or more of the

following: selling or buying real estate, rental real estate, providing other real estate services such as appraising real

estate or acting as real estate escrow agents. Activities in this sector may be carried out on own or leased property

and may be done on a fee or contract basis. This sector group includes real estate property managers. Also included

is the building of structures, combined with maintaining ownership or leasing of such structures. In addition, the sector

includes the provision of a number of general support services, such as the provision of a combination of support

services within a client's facilities, the interior and exterior cleaning of buildings of all types, cleaning of industrial

machinery, cleaning of trains, buses, planes, etc., cleaning of the inside of road and sea tankers, disinfecting and

exterminating activities for buildings, ships, trains, etc., bottle cleaning, street sweeping, snow and ice removal,

provision of landscape care and maintenance services and provision of these services along with the design of

landscape plans and/or the construction (i.e. installation) of walkways, retaining walls, decks, fences, ponds, and

similar structures.

The Real Estate & Services is composed of undertakings that provide services including property management,

brokerage, appraisal and information services for Real Estate owners or own, develop, and generally operate income-

producing real estate assets. Undertakings in this sector are commonly structured as real estate investment trusts

(REITs) or play important roles in the Real Estate value chain and operate in a wide range of segments within the

real estate sector, including residential, retail, office, health care, industrial, and hotel properties. REITs typically focus

on the direct ownership of real estate assets, thereby providing investors with the opportunity to obtain real estate

exposure without direct asset ownership and management.

Included are these activities in accordance to the following NACE code classification:

L.68.10 Buying and selling of own real estate

L.68.20 Rental and operating of own or leased real estate

L.68.31 Real estate agencies

L.68.32 Management of real estate on a fee or contract basis

N.81.10 Combined facilities support activities

N.81.21 General cleaning of buildings

N.81.22 Other building and Industrial cleaning activities

N.81.29 Other cleaning activities

N.81.30 Landscape service activities

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Services sector group

The Services sector group includes specialised professional, scientific and technical activities. These activities require

a high degree of training, and make specialised knowledge and skills available to users. This includes a variety of

activities that support general business operations, with the primary purpose not the transfer of specialised

knowledge.

Advertising & Marketing sector

The Advertising & Marketing sector includes the creation of advertising campaigns and placement of such advertising

in periodicals, newspapers, radio and television, or other media as well as the design of display structures and sites.

The Advertising & Marketing sector is comprised of undertakings that create advertising campaigns for use in media,

display, or direct mail advertising and related services including market research and public opinion polling.

Advertising and marketing undertakings are engaged primarily by businesses selling consumer products,

entertainment, financial services, technology products, telecommunication services and sale and re-sale of time and

space for various media soliciting advertising. Larger advertising undertakings are structured as holding undertakings,

owning multiple agencies across the globe that provide a wide range of services such as custom publishing, brand

consultancy, mobile and online marketing, and public relations. For any advertising campaign, the same undertaking

may be engaged in all aspects, from graphic arts and content creation to data analytics, marketing research, and

media planning and buying, or the undertaking may only be in charge of certain aspects.

Included are these activities in accordance to the following NACE code classification:

M.73.11 Advertising agencies

M.73.12 Media representation

M.73.20 Market research and public opinion polling

Education sector

The Education sector includes the activities of three types of research and development: 1) basic research:

experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of

phenomena and observable facts, without particular application or use in view, 2) applied research: original

investigation undertaken in order to acquire new knowledge, directed primarily towards a specific practical aim or

objective and 3) experimental development: systematic work, drawing on existing knowledge gained from research

and/or practical experience, directed to producing new materials, products and devices, to installing new processes,

systems and services, and to improving substantially those already produced or installed. Research and

experimental development activities in this division are subdivided into two categories: natural sciences and

engineering. It excludes market research. The Education sector includes education at any level or for any

profession. The instructions may be oral or written and may be provided by radio, television, Internet or via

correspondence. It includes education by the different institutions in the regular school system at its different levels

as well as adult education, literacy programmes etc. Also included are military schools and academies, prison

schools etc. at their respective levels. The sector includes public as well as private education.

The Education sector includes education institutions that are profit-seeking and generate revenue from student

fees. At the primary and secondary levels this includes mostly alternative educational schools, specialty schools

within sports, the arts or similar occupations, as well as some businesses. At the tertiary (or higher) level, services

are delivered on a full-time, part-time, distance-learning, and occasional basis across establishments such as junior

colleges, business and secretarial schools, colleges, universities, and professional schools including medical,

pharmaceutical, and veterinary programs. An increasing number of students in for-profit universities take courses

online. The Education sector also includes other educational activities such as tutoring undertakings and specialty

schools that fall in between the secondary level and tertiary level. This includes, but is not limited to, folk high

schools.

Included are these activities in accordance to the following NACE code classification:

M.72.19 Other research and experimental development on natural sciences and engineering

M.72.20 Research and experimental development on social sciences and humanities

P.85.10 Pre-primary education

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P.85.20 Primary education

P.85.31 General secondary education

P.85.32 Technical and vocational secondary education

P.85.41 Post-secondary non-tertiary education

P.85.42 Tertiary education

P.85.51 Sports and recreation education

P.85.52 Cultural education

P.85.53 Driving school activities

P.85.59 Other education n.e.c.

P.85.60 Educational support activities

Professional & Commercial Services sector

The Professional & Commercial Services sector includes undertakings that rely on the unique skills and knowledge

of their employees to serve a range of clients. Services are often provided on an assignment basis, where an

individual or team is responsible for the delivery of services to clients. Offerings include, but are not limited to,

management and administration consulting services, such as staffing and executive search services; legal,

accounting, and tax preparation services; political, religious, and organisational services; travel, beauty and well-

being services; architectural services, engineering services, drafting services, building inspection services and

surveying and mapping services; and financial and non-financial information services. Non-financial information

service providers may specialise in an array of topics such as energy, healthcare, real estate, technology, and

science. Financial information service undertakings include credit and rating agencies as well as data and portfolio

analytics providers. Customers of professional and commercial service providers include private and public for-profit

institutions and non-profit organisations.

This can include activities of a governmental nature, normally carried out by the public administration. This includes

the enactment and judicial interpretation of laws and their pursuant regulation, as well as the administration of

programmes based on them, legislative activities, taxation, national defence, public order and safety, immigration

services, foreign affairs and the administration of government programmes. The legal or institutional status is not, in

itself, the determining factor for an activity to belong in this sector, rather than the activity being of a nature specified

in the previous paragraph. This means that activities classified elsewhere in NACE do not fall under this sector, even

if carried out by public entities. This sector also includes compulsory social security activities.

The Professional & Commercial Services sector group also includes the activities of membership organisations, the

repair of computers and personal and household goods and a variety of personal service activities not covered

elsewhere in the classification. It also includes activities of organisations representing interests of special groups or

promoting ideas to the general public. These organisations usually have a constituency of members, but their activities

may involve and benefit non-members as well. The primary breakdown of this division is determined by the purpose

that these organisations serve, namely interests of employers, self-employed individuals and the scientific community,

interests of employees or promotion of religious, political, cultural, educational or recreational ideas and activities.

The Professional and Commercial Services sector also includes the rental and leasing of tangible and non-financial

intangible assets, including a wide array of tangible goods, such as automobiles, computers, consumer goods, and

industrial machinery and equipment, to customers in return for a periodic rental or lease payment.

The Professional & Commercial Services sector includes all service activities not mentioned elsewhere in the activity

classification. Notably it includes types of services such as washing and (dry-)cleaning of textiles and fur products,

hairdressing and other beauty treatment, funeral and related activities. Also the activities of households as employers

of domestic personnel such as maids, cooks, waiters, valets, butlers, laundresses, gardeners, gatekeepers, stable-

lads, chauffeurs, caretakers, governesses, babysitters, tutors, secretaries etc. It allows the domestic personnel

employed to state the activity of their employer in censuses or studies, even though the employer is an individual.

Included are these activities in accordance to the following NACE code classification:

O.84.11 General public administration activities

O.84.12 Regulation of the activities of providing health care, education, cultural services and other social services,

excluding social security

O.84.13 Regulation of and contribution to more efficient operation of businesses

O.84.21 Foreign affairs

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O.84.22 Defence activities

O.84.23 Justice and judicial activities

O.84.24 Public order and safety activities

O.84.25 Fire service activities

O.84.30 Compulsory social security activities

T.97.00 Activities of households as employers of domestic personnel

M.69.10 Legal activities

M.69.20 Accounting, bookkeeping and auditing activities

M.70.10 Activities of head offices

M.70.21 Public relations and communication activities

M.70.22 Business and other management consultancy activities

M.71.11 Architectural activities

M.71.12 Engineering activities and related technical consultancy

M.71.20 Technical testing and analysis

M.74.10 Specialised design activities

M.74.20 Photographic activities

M.74.30 Translation and interpretation activities

M.74.90 Other professional, scientific and technical activities n.e.c.

N.77.40 Leasing of intellectual property and similar products, except copyrighted works

N.78.10 Activities of employment placement agencies

N.78.20 Temporary employment agency activities

N.78.30 Other human resources provision

N.79.11 Travel agency activities

N.79.12 Tour operator activities

N.79.90 Other reservation service and related activities

N.80.10 Private security activities

N.80.20 Security systems service activities

N.80.30 Investigation activities

N.82.11 Combined office administrative service activities

N.82.19 Photocopying, document preparation and other specialised office support activities

N.82.20 Activities of call centres

N.82.30 Organisation of conventions and trade shows

N.82.91 Activities of collection agencies and credit bureaus

N.82.92 Packaging activities

N.82.99 Other business support service activities n.e.c.

S.94.11 Activities of business, employers and professional membership organisations

S.94.20 Activities of trade unions

S.94.92 Activities of political organisations

S.94.99 Activities of other membership organisations n.e.c.

S.96.01 Washing and (dry-)cleaning of textile and fur products

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S.96.02 Hairdressing and other beauty treatment

S.96.03 Funeral and related activities

S.96.04 Physical well-being activities

S.96.09 Other personal service activities n.e.c.

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Technology sector group

The Technology sector group includes the production and distribution of information and cultural products, the

provision of the means to transmit or distribute these products, as well as data or communications, information

technology activities and the processing of data and other information service activities.

Media & Communication sector

Undertakings in the Media & Communication sector are typically active in the media & entertainment, internet media

& services and telecommunications segments. The main components of the are publishing activities, including

software publishing, motion picture and sound recording activities, radio and TV broadcasting and programming

activities, telecommunications activities, information technology activities and other information service activities.

Publishing includes the acquisition of copyrights for content (information products) and making this content

available to the general public by engaging in (or arranging for) the reproduction and distribution of this content in

various forms. All the feasible forms of publishing (in print, electronic or audio form, on the Internet, as multimedia

products such as CD-ROM reference books etc.) are included in this sector as well as activities related to

production and distribution of TV programming at different stages in this process.

The Media and communications sector includes printing of products, such as newspapers, books, periodicals,

business forms, greeting cards, and other materials, and associated support activities, such as bookbinding, plate-

making services, and data imaging. The support activities included here are an integral part of the printing industry,

and a product (a printing plate, a bound book, or a computer disk or file) that is an integral part of the printing

industry is almost always provided by these operations. Processes used in printing include a variety of methods for

transferring an image from a plate, screen or computer file to a medium, such as paper, plastics, metal, textile

articles, or wood. The most prominent of these methods entails the transfer of the image from a plate or screen to

the medium through lithographic, gravure, screen or flexographic printing. Often a computer file is used to directly

''drive'' the printing mechanism to create the image or electrostatic and other types of equipment (digital or non-

impact printing). Though printing and publishing can be carried out by the same unit (a newspaper, for example), it

is less and less the case that these distinct activities are carried out in the same physical location. It also includes

the reproduction of recorded media, such as compact discs, video recordings, software on discs or tapes, records

etc.. This also includes the publishing of books, brochures, leaflets, dictionaries, encyclopaedias, atlases, maps and

charts.

Undertakings in the media & entertainment segment create content and/or acquire rights to distribute content over

cable or broadcast media, including entertainment programs, news, dataprograms of entertainment, music, and

children’s programming. Undertakings in this sector also publish books, newspapers, and periodicals, and

broadcast radio and local television programming. Note: Undertakings in the Media & Communication sector are

increasingly engaged in distributing content via the Internet. Issues such as data processing, hosting and related

activities are covered by ESRS Software & IT Services. This includes production of theatrical and non-theatrical

motion pictures whether on film, video tape or disc for direct projection in theatres or for broadcasting on television.

It also includes the sound recording activities, i.e. production of original sound master recordings, releasing,

promoting and distributing them, publishing of music as well as sound recording service activities in a studio or

elsewhere.

The internet media & services segment consists of two main segments. The internet media segment includes

undertakings providing search engines and internet advertising channels, online gaming, and online communities

such as social networks, as well as content, usually easily searchable, such as educational, medical, health, sports,

or news content. The internet-based services segment includes undertakings selling services mainly through the

Internet. As well as activities of web search portals, data processing and hosting activities, as well as other activities

that primarily supply information. The segment generates revenues primarily from online advertising, on usually free

content, with other sources of revenue being subscription fees, content sales, or sale of user information to

interested third parties.

The telecommunication services segment consists of wireless and wireline telecommunications undertakings, as

well as undertakings that provide cable and satellite services. The broadcasting can be performed using different

technologies, over-the-air, via satellite, via a cable network or via Internet. It also includes the production of

programs that are typically narrowcast in nature a subscription or fee basis, to a third party, for subsequent

broadcasting to the public. The wireless services segment provides direct communication through radio-based

cellular networks and operates and maintains the associated switching and transmission facilities. The wireline

segment provides local and long distance voice communication via the Public Switched Telephone Network.

Wireline carriers also offer voice over internet protocol (VoIP) telephone, television, and broadband internet

services over an expanding network of fiber optic cables. Cable providers distribute television programming from

cable networks to subscribers. They typically also provide consumers with video services, high-speed internet

service, and VoIP. These services are traditionally bundled into packages that provide subscribers with easier

payment options than paying for each service separately. Satellite undertakings distribute TV programming through

broadcasting satellites orbiting the Earth or through ground stations. The commonality of activities classified in this

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division is the transmission of content, without being involved in its creation. The breakdown in this division is based

on the type of infrastructure operated. In the case of transmission of television signals this may include the bundling

of complete programming channels in to programme packages for distribution. The sector also includes the

activities of web search portals, data processing and hosting activities, as well as other activities that primarily

supply information. Undertakings serve customers primarily in their domestic markets, although some undertakings

operate in several countries.

Included are these activities in accordance to the following NACE code classification:

C.18.11 Printing of newspapers

C.18.12 Other printing

C.18.13 Pre-press and pre-media services

C.18.14 Binding and related services

J.58.11 Book publishing

J.58.12 Publishing of directories and mailing lists

J.58.13 Publishing of newspapers

J.58.14 Publishing of journals and periodicals

J.58.19 Other publishing activities

J.58.21 Publishing of computer games

J.59.11 Motion picture, video and television programme production activities

J.59.12 Motion picture, video and television programme post-production activities

J.59.13 Motion picture, video and television programme distribution activities

J.59.20 Sound recording and music publishing activities

J.60.10 Radio broadcasting

J.60.20 Television programming and broadcasting activities

J.61.10 Wired telecommunications activities

J.61.20 Wireless telecommunications activities

J.61.30 Satellite telecommunications activities

J.61.90 Other telecommunications activities

J.63.12 Web portals

J.63.91 News agency activities

J.63.99 Other information service activities n.e.c.

Software & IT Services sector

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The Software & IT Services sector includes the activities of web search portals, data processing and hosting activities,

as well as other activities that primarily supply information. As well as providing expertise in the field of information

technologies: writing, modifying, testing and supporting software.

Undertakings in the Software & IT Services sector offer products and services globally to retail, business, and

government customers, and includes undertakings involved in the development and sales of applications software,

infrastructure software, and middleware. The sector is generally competitive, but with dominant players in some

segments. While relatively immature, the sector is characterised by high-growth undertakings that place a heavy

emphasis on innovation and depend on human and intellectual capital. The sector also includes IT services

undertakings delivering specialised IT functions, such as consulting and outsourced services. New sector business

models include cloud computing, software as a service, virtualisation, machine-to-machine communication, big data

analysis, and machine learning. Additionally, brand value is key for undertakings in the sector to scale and achieve

network effects, whereby wide adoption of a particular software product leads to self-perpetuating growth in sales.

Included are these activities in accordance to the following NACE code classification:

J.58.29 Other software publishing

J.62.01 Computer programming activities

J.62.02 Computer consultancy activities

J.62.03 Computer facilities management activities

J.62.09 Other information technology and computer service activities

J.63.11 Data processing, hosting and related activities

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Transportation sector group

The Transportation sector group includes the provision of passenger or freight transport, whether scheduled or not,

by rail, pipeline, road, water or air and associated activities such as terminal and parking facilities, cargo handling,

storage etc. Included in this sector is the rental of transport equipment with driver or operator. Also included are postal

and courier activities.

Transportation sector

Undertakings in the Transportation sector are typically active in the air freight and logistics, airlines, cruise lines,

marine transportation, rail transportation and road transportation segments.

Air freight and logistics undertakings provide freight services and transportation logistics to both businesses and

individuals. There are three main sector segments: air freight transportation, post and courier services, and

transportation logistics services. Undertakings in the sector earn revenue from one or more of the segments and

range from non-asset-based to asset-heavy. Transportation logistics services include contracting with road, rail,

marine, and air freight undertakings to select and hire appropriate transportation. Services can also include customs

brokerage, distribution management, vendor consolidation, cargo insurance, purchase-order management, and

customized logistics information. The sector is key to global trade, granting it a degree of demand stability.

The sector includes postal and courier activities, such as pickup, transport and delivery of letters and parcels under

various arrangements. Local delivery and messenger services are also included.

The airlines segment is comprised of undertakings that provide air transportation globally to passengers for both

leisure and business purposes. This includes commercial full-service, low-cost, and regional airlines. Full-service

carriers typically use a hub-and-spoke model to design their routes within countries and internationally. Low-cost

carriers usually offer a smaller number of routes as well as no-frills service to their customers. Regional carriers

typically operate under contract to full-service carriers, expanding the network of the larger carriers. Many airline

undertakings also have a cargo segment in their operations from which they generate additional revenue. It is

common within the segment for undertakings undertaking to form partnerships or join alliances in order to increase

network size. Operating as an alliance allows airlines to offer customers access to international or otherwise

underserved itineraries on multiple airlines under one ticket. At the same time, airlines share some overhead costs

and increase their competitive position in the global market without having to operate outside their home country.

The sector includes the transport of passengers or freight by air or via space.

The cruise lines segment comprises undertakings that provide passenger transportation and leisure entertainment,

including deep sea cruises and river cruises. The segment is dominated by a few large undertakings. Cruises aim to

provide a luxury resort experience for thousands of passengers at a time. The cruise lines segment has often been

the fastest-growing segment of the travel sector, but is very cyclical.

The marine transportation segment consists of undertakings that provide deep-sea, coastal, and/or river-way freight

shipping services. It is of strategic importance to international trade and its revenues are tied to macroeconomic

cycles. Key activities include transportation of containerised and bulk freight, including consumer goods and a wide

range of commodities, and transportation of chemicals and petroleum products in tankers. Due to the global scope

of the segment, undertakings operate in many countries and under diverse legal and regulatory frameworks. This

also includes the transport of passengers or freight over water, whether scheduled or not. Also included are the

operation of towing or pushing boats, excursion, cruise or sightseeing boats, ferries, water taxis etc. Although the

location is an indicator for the separation between sea and inland water transport, the deciding factor is the type of

vessel used.

The rail transportation segment consists of undertakings that provide rail freight shipping and support services. Key

activities include shipping containerised and bulk freight, including consumer goods and commodities. Rail

undertakings typically own, maintain, and operate their rail networks, which may require significant capital

expenditures. The segment exhibits economies of density due to its network effects, lending itself to natural

monopoly conditions. Together with the large sunk costs of rail infrastructure, this provides a competitive advantage

to incumbent firms undertaking in the segment and creates barriers to entry for new undertakings.

The road transportation segment consists of undertakings that provide long-and short-haul freight trucking services.

Key activities include the shipment of containerised and bulk freight, including consumer goods and a wide variety

of commodities. The segment is commonly broken down into two categories: truckload (vehicles carrying the goods

of only one customer) and less-than-truckload (vehicles carrying the goods of multiple customers). Owner-operators

comprise the vast majority of the sector due to the relative ease of entry, while a few large operators maintain

market share through contracts with major shippers. Large undertakings often subcontract with owner-operators to

supplement their owned fleet.

The Transportation sector includes warehousing and support activities for transportation, such as operating of

transport infrastructure (e.g. airports, harbours, tunnels, bridges, etc.), the activities of transport agencies and cargo

handling.

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Included are these activities in accordance to the following NACE code classification:

H.49.10 Passenger rail transport, interurban

H.49.20 Freight rail transport

H.49.31 Urban and suburban passenger land transport

H.49.32 Taxi operation

H.49.39 Other passenger land transport n.e.c.

H.49.41 Freight transport by road

H.49.42 Removal services

H.50.10 Sea and coastal passenger water transport

H.50.20 Sea and coastal freight water transport

H.50.30 Inland passenger water transport

H.50.40 Inland freight water transport

H.51.10 Passenger air transport

H.51.21 Freight air transport

H.52.10 Warehousing and storage

H.52.21 Service activities incidental to land transportation

H.52.22 Service activities incidental to water transportation

H.52.23 Service activities incidental to air transportation

H.52.24 Cargo handling

H.52.29 Other transportation support activities

H.53.10 Postal activities under universal service obligation

H.53.20 Other postal and courier activities

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Wholesale & Retail sector group

The Wholesale & Retail trade sector group includes wholesale and retail sale (i.e. sale without transformation) of any

type of goods, and rendering services incidental to the sale of merchandise. As well as a variety of activities that

support general business operations, with the primary purpose not the transfer of specialised knowledge. It also

includes (as a residual category) the activities of membership organisations, the repair of computers and personal

and household goods and a variety of personal service activities not covered elsewhere in the classification.

Wholesale & Retail trade sector

Wholesaling and retailing are the final steps in the distribution of merchandise. Sale without transformation is

considered to include the usual operations (or manipulations) associated with trade, for example sorting, grading and

assembling of goods, mixing (blending) of goods (for example sand), bottling (with or without preceding bottle

cleaning), packing, breaking bulk and repacking for distribution in smaller lots, storage (whether or not frozen or

chilled). Wholesale is the resale (sale without transformation) of new and used goods to retailers, business-to-

business trade, such as to industrial, commercial, institutional or professional users, or resale to other wholesalers,

or involves acting as an agent or broker in buying merchandise for, or selling merchandise to, such persons or

undertakings. The principal types of businesses included are merchant wholesalers, i.e. wholesalers who take title to

the goods they sell, such as wholesale merchants or jobbers, industrial distributors, exporters, importers, and

cooperative buying associations, sales branches and sales offices (but not retail stores) that are maintained by

manufacturing or mining units apart from their plants or mines for the purpose of marketing their products and that do

not merely take orders to be filled by direct shipments from the plants or mines. Wholesalers frequently physically

assemble, sort and grade goods in large lots, break bulk, repack and redistribute in smaller lots. Retailing is the resale

of new and used goods mainly to the general public for personal or household consumption or utilisation, in shops,

department stores, stalls, mail-order houses, door-to-door sales persons, hawkers, consumer cooperatives, auction

houses etc. Most retailers take title to the goods they sell, but some act as agents for a principal and sell either on

consignment or on a commission basis.

The Wholesale & Retail trade sector encompasses a variety of retailing categories such as department stores, mass

merchants, home products stores, and warehouse clubs, as well as distributors like electronics wholesalers and

automotive wholesalers. Common to these undertakings is that they manage global supply chains to anticipate

consumer demands, keep costs low, and keep products stocked in their brick-and-mortar storefronts. This is a highly

competitive segment, in which each undertaking category generally has a small number of key players, characterised

by generally low margins. The relatively substitutable nature of retail makes undertakings in this segment especially

susceptible to reputational risks. Most undertakings operate an e-commerce platform for marketing, selling and

distributing of their products. In addition undertakings also provide online marketplaces for other firms or individuals

to sell their goods and services, as well as retailers and wholesalers that provide an exclusively web-based platform

for consumers to buy goods and services. Undertakings in this segment sell to consumers as well as to other

businesses. Because of the accessibility of e-commerce sites, the segment is a global marketplace for buyers and

sellers. This sector also covers undertakings that rent or lease passenger vehicles to customers. Car rentals are

typically for periods of less than a month, while leases are for a year or more. The segment includes car-sharing

business models where rentals are measured hourly and typically include subscription fees. Car rental undertakings

operate out of airport locations, which serve business and leisure travellers, and out of neighbourhood locations,

which mostly provide repair-shop and weekend rentals. The segment is concentrated, with several dominant market

players, who operate globally using a franchise model. The growth of public transit and ride-sharing services in major

metropolitan areas may represent a threat to the long-term profitability of the car rental & leasing segment if customers

chose to hail rides or take public transit rather than rent vehicles.

The Wholesale and Retail Trade sector includes the repair and maintenance of computers peripheral equipment such

as desktops, laptops, computer terminals, storage devices and printers. It also includes the repair of communications

equipment such as fax machines, two-way radios and consumer electronics such as radios and TVs, home and

garden equipment such as lawn-mowers and blowers, footwear and leather goods, furniture and home furnishings,

clothing and clothing accessories, sporting goods, musical instruments, hobby articles and other personal and

household goods.

The Wholesale and Retail Trade sector also includes the rental and leasing of tangible and non-financial intangible

assets, including a wide array of tangible goods, such as automobiles, computers, consumer goods, and industrial

machinery and equipment, to customers in return for a periodic rental or lease payment. It is subdivided into: (1) the

rental of motor vehicles, (2) the rental of recreational and sports equipment and personal and household equipment,

(3) the leasing of other machinery and equipment of the kind often used for business operations, including other

transport equipment and (4) the leasing of intellectual property products and similar products. Only the provision of

operating leases is included in this division. It excludes:

- financial leasing, see 64.91

- rental of real estate, see sector L

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- rental of equipment with operator, see corresponding activityes according to activities carried out with this

equipment, e.g. construction (sector F), transportation (sector H)

The wholesale and retail trade sector includes all activities (except manufacture and rental) related to motor vehicles

and motorcycles, including lorries and trucks, such as the wholesale and retail sale of new and second-hand vehicles,

the repair and maintenance of vehicles and the wholesale and retail sale of parts and accessories for motor vehicles

and motorcycles. Also included are activities of commission agents involved in wholesale or retail sale of vehicles. It

also includes activities such as washing, polishing of vehicles etc.

The sector also includes the resale (sale without transformation) of new and used goods mainly to the general public

for personal or household consumption or utilisation, by shops, department stores, stalls, mail-order houses, door-to-

door sales persons, hawkers, consumer cooperatives etc. Retail trade is classified first by type of sale outlet (retail

trade in stores: groups 47.1 to 47.7. It also includes units engaged primarily in selling to the general public, from

displayed merchandise, products such as personal computers, stationery, paint or timber, although these products

may not be for personal or household use. Handling that is customary in trade does not affect the basic character of

the merchandise and may include, for example, sorting, separating, mixing and packaging.It also includes the retail

sale by commission agents and activities of retail auctioning houses.

Finally, the wholesale and retail trade sector includes wholesale trade on own account or on a fee or contract basis

(commission trade) related to domestic wholesale trade as well as international wholesale trade (import/export). It

excludes:

- wholesale of motor vehicles, caravans and motorcycles, see 45.1, 45.4

- wholesale of motor vehicle accessories, see 45.31, 45.40

- rental and leasing of goods, see division 77

- packing of solid goods and bottling of liquid or gaseous goods, including blending and filtering for third parties, see

82.92

Included are these activities in accordance to the following NACE code classification:

G.45.11 Sale of cars and light motor vehicles

G.45.19 Sale of other motor vehicles

G.45.31 Wholesale trade of motor vehicle parts and accessories

G.45.32 Retail trade of motor vehicle parts and accessories

G.45.40 Sale, maintenance and repair of motorcycles and related parts and accessories

G.46.11 Agents involved in the sale of agricultural raw materials, live animals, textile raw materials and semi-finished

goods

G.46.12 Agents involved in the sale of fuels, ores, metals and industrial chemicals

G.46.13 Agents involved in the sale of timber and building materials

G.46.14 Agents involved in the sale of machinery, industrial equipment, ships and aircraft

G.46.15 Agents involved in the sale of furniture, household goods, hardware and ironmongery

G.46.16 Agents involved in the sale of textiles, clothing, fur, footwear and leather goods

G.46.17 Agents involved in the sale of food, beverages and tobacco

G.46.18 Agents specialised in the sale of other particular products

G.46.19 Agents involved in the sale of a variety of goods

G.46.21 Wholesale of grain, unmanufactured tobacco, seeds and animal feeds

G.46.22 Wholesale of flowers and plants

G.46.23 Wholesale of live animals

G.46.24 Wholesale of hides, skins and leather

G.46.31 Wholesale of fruit and vegetables

G.46.32 Wholesale of meat and meat products

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G.46.33 Wholesale of dairy products, eggs and edible oils and fats

G.46.34 Wholesale of beverages

G.46.35 Wholesale of tobacco products

G.46.36 Wholesale of sugar and chocolate and sugar confectionery

G.46.37 Wholesale of coffee, tea, cocoa and spices

G.46.38 Wholesale of other food, including fish, crustaceans and molluscs

G.46.39 Non-specialised wholesale of food, beverages and tobacco

G.46.41 Wholesale of textiles

G.46.42 Wholesale of clothing and footwear

G.46.43 Wholesale of electrical household appliances

G.46.44 Wholesale of china and glassware and cleaning materials

G.46.45 Wholesale of perfume and cosmetics

G.46.47 Wholesale of furniture, carpets and lighting equipment

G.46.48 Wholesale of watches and jewellery

G.46.49 Wholesale of other household goods

G.46.51 Wholesale of computers, computer peripheral equipment and software

G.46.52 Wholesale of electronic and telecommunications equipment and parts

G.46.61 Wholesale of agricultural machinery, equipment and supplies

G.46.62 Wholesale of machine tools

G.46.63 Wholesale of mining, construction and civil engineering machinery

G.46.64 Wholesale of machinery for the textile industry and of sewing and knitting machines

G.46.65 Wholesale of office furniture

G.46.66 Wholesale of other office machinery and equipment

G.46.69 Wholesale of other machinery and equipment

G.46.72 Wholesale of metals and metal ores

G.46.73 Wholesale of wood, construction materials and sanitary equipment

G.46.74 Wholesale of hardware, plumbing and heating equipment and supplies

G.46.75 Wholesale of chemical products

G.46.76 Wholesale of other intermediate products

G.46.77 Wholesale of waste and scrap

G.46.90 Non-specialised wholesale trade

G.47.11 Retail sale in non-specialised stores with food, beverages or tobacco predominating

G.47.19 Other retail sale in non-specialised stores

G.47.21 Retail sale of fruit and vegetables in specialised stores

G.47.22 Retail sale of meat and meat products in specialised stores

G.47.23 Retail sale of fish, crustaceans and molluscs in specialised stores

G.47.24 Retail sale of bread, cakes, flour confectionery and sugar confectionery in specialised stores

G.47.25 Retail sale of beverages in specialised stores

G.47.26 Retail sale of tobacco products in specialised stores

G.47.29 Other retail sale of food in specialised stores

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G.47.41 Retail sale of computers, peripheral units and software in specialised stores

G.47.42 Retail sale of telecommunications equipment in specialised stores

G.47.43 Retail sale of audio and video equipment in specialised stores

G.47.51 Retail sale of textiles in specialised stores

G.47.52 Retail sale of hardware, paints and glass in specialised stores

G.47.53 Retail sale of carpets, rugs, wall and floor coverings in specialised stores

G.47.54 Retail sale of electrical household appliances in specialised stores

G.47.59 Retail sale of furniture, lighting equipment and other household articles in specialised stores

G.47.61 Retail sale of books in specialised stores

G.47.62 Retail sale of newspapers and stationery in specialised stores

G.47.63 Retail sale of music and video recordings in specialised stores

G.47.64 Retail sale of sporting equipment in specialised stores

G.47.65 Retail sale of games and toys in specialised stores

G.47.71 Retail sale of clothing in specialised stores

G.47.72 Retail sale of footwear and leather goods in specialised stores

G.47.73 Dispensing chemist in specialised stores

G.47.75 Retail sale of cosmetic and toilet articles in specialised stores

G.47.76 Retail sale of flowers, plants, seeds, fertilisers, pet animals and pet food in specialised stores

G.47.77 Retail sale of watches and jewellery in specialised stores

G.47.78 Other retail sale of new goods in specialised stores

G.47.79 Retail sale of second-hand goods in stores

G.47.81 Retail sale via stalls and markets of food, beverages and tobacco products

G.47.82 Retail sale via stalls and markets of textiles, clothing and footwear

G.47.89 Retail sale via stalls and markets of other goods

G.47.91 Retail sale via mail order houses or via Internet

G.47.99 Other retail sale not in stores, stalls or markets

N.77.11 Rental and leasing of cars and light motor vehicles

N.77.12 Rental and leasing of trucks

N.77.21 Rental and leasing of recreational and sports goods

N.77.22 Rental of video tapes and disks

N.77.29 Rental and leasing of other personal and household goods

N.77.31 Rental and leasing of agricultural machinery and equipment

N.77.32 Rental and leasing of construction and civil engineering machinery and equipment

N.77.33 Rental and leasing of office machinery and equipment (including computers)

N.77.34 Rental and leasing of water transport equipment

N.77.35 Rental and leasing of air transport equipment

S.95.23 Repair of footwear and leather goods

S.95.24 Repair of furniture and home furnishings

S.95.25 Repair of watches, clocks and jewellery

S.95.29 Repair of other personal and household goods

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Appendix C: Sustainability matters

This Appendix provides a non-limitative indication of sustainability matters to be considered by the

undertaking when performing its assessment of material impacts, risks and opportunities.

Agriculture sector group

Agriculture & Farming sector

Energy consumption & mix

Processing and milling agricultural products requires substantial energy input. While some agricultural products

undertakings generate energy on-site through the direct combustion of fossil fuels and/ or biomass, most energy is

procured from the electrical grid. Energy consumption contributes to environmental impacts, including climate

change and pollution. Energy management affects current and future costs of operation. Climate regulation and

other sustainability factors could result in higher and/ or more volatile electricity and fuel prices, increasing operating

costs for agricultural products undertakings. Therefore, energy efficiency gained through process improvements can

lower operating costs. The tradeoff between on-site versus grid-sourced electricity as well as the use of alternative

energy can play important roles in influencing both the long-term cost and reliability of an undertaking’s energy

supply and the extent of regulatory impact from direct versus indirect emissions.

Scopes 1 & 2 GHG emissions

Undertakings in the Agriculture & Farming sector generate direct greenhouse gas (GHG) emissions from the

processing and transportation of goods via land and sea freight operations. Emissions regulations may increase the

cost of capital, operational costs, and affect the operational efficiency of undertakings that do not have strategies in

place to manage GHG emissions. Employing innovative technologies that use alternative fuels and energy inputs -

including biomass waste generated from internal processes -and improving fuel efficiency are ways undertakings

can limit exposure to volatile fuel pricing, supply disruptions, future regulatory costs, and other potential

consequences of GHG emissions.

Within farming activities, the majority of the sector’s emissions stem directly from the animals themselves through

the release of methane during enteric fermentation, and from manure storage and processing. The direct emissions

from raising and producing livestock represent a significant portion of total GHG emissions released among all

sources. These emissions sources are currently not widely regulated, which presents uncertainties as to the future

of GHG regulations for the sector. undertakings in this sector also use large quantities of fossil fuels to meet energy

needs, generating additional direct GHG emissions and increasing exposure to regulatory risks. Future emission

regulations could result in additional operating and/ or compliance costs. By implementing new technologies to

capture animal emissions and focusing on energy efficiency, undertakings can mitigate regulatory risk and volatile

energy costs while also limiting their GHG emissions.

Financial exposure to physical and transition risks, opportunities

Undertakings of agricultural products source a wide variety of commodities and ingredients from farmers and/ or

intermediary distributors. The sector’s ability to reliably source ingredients at desired price points fluctuates with

crop yield, which may be affected by climate change, water scarcity, land management, and other resource scarcity

considerations. undertakings that source more productive and less resource-intensive crops, or those that work

closely with suppliers to increase their adaptability to climate change and other resource scarcity risks, will be better

protected from volatility in crop prices and from disruptions in crop supplies. Additionally, undertakings may improve

their brand reputation and develop new market opportunities. Failure to effectively manage sourcing risks can lead

to higher costs of capital, reduced margins, and constrained revenue growth.

Water-related Performance Measurement

Agricultural products undertakings source a wide variety of commodities and ingredients from farmers and/ or

intermediary distributors. The sector’s ability to reliably source ingredients at desired price points fluctuates with

crop yield, which may be affected by climate change, water scarcity, land management, and other resource scarcity

considerations. undertakings that source more productive and less resource-intensive crops, or those that work

closely with suppliers to increase their adaptability to climate change and other resource scarcity risks, will be better

protected from volatility in crop prices and from disruptions in crop supplies. Additionally, undertakings may improve

their brand reputation and develop new market opportunities. Failure to effectively manage sourcing risks can lead

to higher costs of capital, reduced margins, and constrained revenue growth.

Farming undertakings source animal and animal feed from a range of suppliers depending on animal species. The

sector’s ability to reliably source animals and animal feed at desired price points may be affected by climate

change, water scarcity, land management, and other resource scarcity considerations. undertakings that select and

work with suppliers who are less resource-intensive and who actively manage adaptation to climate change and

other resource scarcity risks, will be better protected from potential price volatility and supply disruptions.

Additionally, such undertakings may improve their brand reputation and develop new market opportunities. Failure

to effectively manage sourcing risks can lead to higher costs of capital, reduced margins, and constrained revenue

growth.

Resources inflow

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Animal farming undertakings source animal and animal feed from a range of suppliers depending on animal

species. The undertaking sector’s ability to reliably source animals and animal feed at desired price points may be

affected by climate change, water scarcity, land management, and other resource scarcity considerations.

undertakings that select and work with suppliers who are less resource-intensive and who actively manage

adaptation to climate change and other resource scarcity risks, will be better protected from potential price volatility

and supply disruptions. Additionally, such undertakings may improve their brand reputation and develop new

market opportunities. Failure to effectively manage sourcing risks can lead to higher costs of capital, reduced

margins, and constrained revenue growth.

Pollution of water

The Agricultural & Farming sector is water-intensive both in growing agricultural products and raising livestock and

relies on water for processing activities. Additionally, undertakings in the -sector typically generate wastewater, or

effluent, from both animal production and processing activities. The availability of water, due to physical availability

and/ or regulatory access, directly impacts the sector’s ability to efficiently operate processing facilities. As water

scarcity becomes an issue of growing importance due to population growth, increasing consumption per capita,

poor water management, and climate change, undertakings in the sector may face higher operational costs,

remediation costs, and/ or potential fines or lost revenues due to water shortages and/ or regulations resulting in

production reduction. undertakings can manage water-related risks and opportunities and mitigate long-term costs

through capital investments and assessment of facility locations relative to water scarcity risks, improvements to

operational efficiency, and work with regulators and communities on issues related to water access and effluent.

Pollution of soil

Undertakings operating animal farming have diverse ecological impacts, primarily because of significant land-use

needs to raise livestock and the contamination of the air, land, and groundwater by animal waste. While the impacts

are different, most methods lead to significant ecological impacts. The primary concern animal-product processing

facilities is the generation of large and concentrated amounts of waste and pollutants into the environment. Treating

effluent and waste from facilities involves significant costs. Animal farming which requires large tracts of

pastureland, can lead to physical degradation of land resources. Land use and ecological impacts pose legal and

regulatory risks in the form of fines, litigation, and difficulties obtaining permits for facility expansions or waste

discharges.

Working conditions

Industrial processes used in the Agricultural & Farming sector present significant occupational hazards. The

Agriculture & Farming sector has relatively high injury rates compared with other sectors given the prevalence of

industrial machinery and chemicals. Common acute and chronic hazards include musculoskeletal disorders,

exposure to chemicals and pathogens, and traumatic injuries from machines and tools. Employees are engaged in

many labour-intensive activities. Common hazards include falls, transportation accidents, equipment-related

accidents, and heat-related illness or injury, among others. Worker injuries or fatalities can lead to reputational

risks, high turnover, low worker morale and productivity, injury liability risks, and associated health care and

workers’ compensation costs. Additionally, regulators may levy fines against undertakings for noncompliance with

worker health and safety standards or require employee training to address preventable accidents. High injury

rates, particularly fatality rates, may indicate a weak governance structure and a weak workplace safety culture, as

well as lead to significant reputational harm. Strong performance on managing workforce health and safety can help

build brand image while promoting worker morale, which may lead to increased productivity, reduced worker

turnover, and enhanced community relations. By developing a strong safety culture and reducing employees’

exposure to potentially harmful situations, an undertaking can proactively guard against accidents and improve

workforce health and safety.

Personal safety

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Agricultural and farming products are either sold directly to consumers in raw form or are further processed before

reaching consumers. Maintaining product quality and safety is critical, as contamination by pathogens, chemicals,

or spoilage presents serious human and animal health risks. Contamination may result from poor farming, transport,

storage, or handling practices. Food safety practices and procedures in the sector have recently been subject to

more intense scrutiny and oversight, and future outbreaks of diseases among livestock could lead to further

governmental regulation. Food quality and safety issues can lead to consumer-driven demand changes and

regulatory action. Product recalls can harm brand reputation, reduce revenues, and lead to costly fines. Obtaining

food safety certifications or ensuring suppliers meet food safety guidelines may help undertakings in the sector

safeguard against product safety risks and communicate the quality of their products to buyers.

The use of antibiotics in livestock production is of increasing concern due to the potential impacts on public health.

Prevalent use of antibiotics in livestock production that are also administered to humans may promote the

development of antibiotic-resistant strains of bacteria. While the use of antibiotics in animal feed or water supplies

can improve the output of animal production and enhance animal welfare in industrial farm settings, undertakings in

the sector must balance these benefits with the potential for negative public health risks. The use of antibiotics in

animal production presents reputational and regulatory risks, both of which can affect long-term profitability through

impacts on demand and market share for meat, poultry, and dairy producers. Depending on the animal species,

undertakings in the sector have differing levels of control over and management approaches to this issue, from

having direct control over the feed and medicine administered by contract suppliers to more broadly setting

requirements for suppliers.

Agricultural and farming products undertakings source agricultural inputs from a large number of suppliers. How

undertakings in the sector screen, monitor, and engage with suppliers on environmental and social topics may

impact consumer demand, reputational risks, and the ability of undertakings to effectively manage their crop supply

and respond to price fluctuations. Supply chain management issues related to labour, environmental practices,

ethics, or corruption may result in regulatory fines and/ or increased long-term operational costs for undertakings.

Similarly, agricultural products undertakings may face reputational damage if their suppliers perform poorly on

environmental or social issues. undertakings can mitigate these risks and potentially increase consumer demand or

capture new market opportunities by engaging with key suppliers to implement sustainable agricultural practices or

source from certified suppliers.

Farming undertakings rely on a variety of contract farmers and suppliers. Environmental and social impacts within

the supply chain include those related to deforestation, land use and waste management, water withdrawals, animal

welfare, antibiotic usage, and food safety. Management of environmental and social risks within an undertaking’s

animal supply chain is critical to maintain the cost of capital, secure a steady source of animals at desired price

points, and to prevent reputational damage, which may decrease revenue and market share.

Products and services

Agricultural products developed using genetically modified organism (GMO) technology have gained increasing

consumer interest. While GMO technology has, in many cases, enabled improvements in crop yield through

development of disease or drought resistant traits in plants, there is increasing consumer concern on the perceived

health, environmental, and/ or social impacts related to the cultivation and consumption of GMOs. Certain countries

and geographic regions have also enacted regulations that ban the usage or cultivation of GMOs. Food and

beverage undertakings along the food supply chain, including undertakings in this sector, are seeking effective

means to assess GMO-related risks and opportunities, and communicate with consumers on the topic. Agricultural

products undertakings that are able to meet changing consumer trends and regulatory changes through their

product mix or effective communications may reduce potential reputational risks and revenue loss as well as

capture new market share opportunities.

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Forestry sector

Financial exposure to physical and transition risks, opportunities

Global climate change may create long-term business uncertainty for some forestry management undertakings.

Variations in precipitation patterns and temperatures, more frequent extreme weather events and forest fires, and

an increased prevalence of tree diseases and pests could adversely impact timberlands through increased mortality

or diminished productivity. Conversely, climate change could also facilitate forest productivity through increased

atmospheric carbon dioxide, a longer growing season, moderating temperatures in high latitudes, greater

precipitation, and expanded geographic ranges for some species, positively impacting forest productivity. In light of

such variability, undertakings could benefit from identifying and understanding potential long-term impacts of

climate change on the productivity of forestlands, and adjusting forestry management strategies to optimize the

productivity of their forestland assets.

Pollution of soil

Along with their timber output, forests provide valuable ecosystem services including carbon sequestration, wildlife

habitat, water purification and storage, soil formation, and recreational opportunities. Meanwhile, in many regions,

regulations related to water quality and endangered species protection, as well as harvesting rights that are

contingent upon environmental preservation, can create operational risks for undertakings. As such, protecting or

enhancing ecosystem services within managed forestlands could mitigate reputational, demand, and operational

risks related to the potential adverse environmental impacts of forestry. Undertakings increasingly utilise third-party

certification to demonstrate sustainable forestry management practices that serve to enhance the value and

productivity of their forest assets, as well as to meet rising customer demand for sustainably produced forest

products.

Particular rights of indigenous peoples

Forests contribute directly to the livelihoods of millions of people worldwide. Effective relations and engagement

with local communities and indigenous populations can be important to forestry undertakings. Communities may be

affected by forestry management operations because of environmental degradation or competition for natural

resources such as land and water. Conflict with communities, including or indigenous populations, could affect a

undertaking’s ability to operate in some regions, result in regulatory action, and could cause brand impacts.

Conversely, undertakings can provide benefits to community stakeholders through employment opportunities,

revenue sharing, and increased commerce. Undertakings can adopt various community engagement strategies to

manage the risks and opportunities associated with community rights and interests, such as maintaining positive

relations with local stakeholders and accommodating communities’ needs.

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Construction sector group

Construction & Engineering sector

Energy consumption & mix

The production of construction materials requires a significant quantity of energy, sourced primarily from direct

combustion of fossil fuels as well as from purchased electricity. Energy-intense production has implications for

climate change, and electricity purchases from the grid can create indirect Scope 2 emissions. Construction &

Engineering undertakings also use alternative fuels for their kilns, such as scrap tires and waste oil-often waste

generated by other sectors. If properly managed, these can lower energy costs and greenhouse gas (GHG)

emissions. However, there could be potentially negative impacts, such as releases of harmful air pollutants that

undertakings need to minimize in order to obtain net benefits from using such fuels. Decisions about use of

alternative fuels, renewable energy, and on-site generation of electricity (versus purchases from the grid) can play

an important role in influencing both the costs and reliability of energy supply. Affordable, easily accessible, and

reliable energy is an important competitive factor in this sector, with purchased fuels and electricity accounting for a

significant proportion of total production costs. The way in which a Construction & Engineering undertaking

manages its overall energy efficiency, its reliance on different types of energy and associated sustainability risks,

and its ability to access alternative sources of energy can influence its profitability. Energy is a critical input in the

Construction & Engineering sector. Purchased electricity represents the largest share of energy expenditures in the

sector, followed by purchased fuels. The type of energy used, magnitude of consumption, and energy management

strategies depends on the type of products manufactured. A undertaking’s energy mix, including the use of

electricity generated on-site, grid-sourced electricity, and the use of alternative energy, can play an important role in

influencing the cost and reliability of energy supply, and ultimately affect the undertaking’s cost structure and

regulatory risk.

Scopes 1 & 2 GHG emissions

The production of construction materials, particularly cement, generates significant direct greenhouse gas (GHG)

emissions from on-site fuel combustion and chemical processes. The sector has achieved gains in efficiency for

reducing emissions per ton of materials produced. At the same time, increasing production is associated with an

increase in absolute emissions from cement production. The production of construction materials remains carbon-

intensive relative to other sectors, exposing the sector to higher operating and capital expenditures from emissions

regulations. Strategies to reduce GHG emissions include: energy efficiency, use of alternative and renewable fuels,

carbon sequestration, and clinker substitution. Operational efficiencies can be achieved through the cost-effective

reduction of GHG emissions. Such efficiencies can mitigate the potential financial impact of increased fuel costs as

well as direct emissions from regulations that seek to limit-or put a price on-GHG emissions. | Many of the

Industrial Machinery & Goods sector’s products are powered by fossil fuels and therefore release greenhouse

gases (GHGs) and other air emissions during use. Customer preferences for improved fuel economy combined with

regulations addressing emissions are increasing the demand for energy-efficient and lower-emission products in the

sector. As such, undertakings that develop products with these characteristics may be well-positioned to capture

expanding market share, reduce regulatory risk, and improve brand value. | Many of the Industrial Machinery &

Goods sector’s products are powered by fossil fuels and therefore release greenhouse gases (GHGs) and other air

emissions during use. Customer preferences for improved fuel economy combined with regulations addressing

emissions are increasing the demand for energy-efficient and lower-emission products in the sector. As such,

undertakings that develop products with these characteristics may be well-positioned to capture expanding market

share, reduce regulatory risk, and improve brand value.

Financial exposure to physical and transition risks, opportunities

The Construction & Engineering sector works with clients that are exposed to potentially disruptive climate

regulation as well as those that play a role in addressing climate change. Certain types of construction projects are

significant contributors toward climate change due to the greenhouse gases (GHGs) emitted during their use phase.

Projects that are likely to contribute to global GHG emissions include those in the oil and gas space and other

extractives sectors, as well as large buildings. While some infrastructure projects, such as renewable energy

projects, are designed to reduce GHG emissions, many types of projects present trade-offs. Mass transit systems,

for example, may be direct contributors of GHG emissions while lowering net emissions once the benefits offered

by the system are factored in. Several undertakings in the sector generate a substantial share of revenues and

profits from clients in carbon-intensive sectors and whose future capital expenditures may be at risk due to evolving

climate regulations. Downside risks may manifest through project delays, cancellations, and diminished long-term

revenue growth opportunities. On the other hand, undertakings that specialize in infrastructure projects that

contribute to GHG mitigation could develop competitive advantages as they continue to focus on these growing

markets. As the sector and its customers continue to operate within an uncertain business environment and face

increasing environmental and regulatory requirements, assessing and communicating the risks and opportunities

stemming from climate change that are embedded in a undertakings backlog and future business prospects can be

helpful for investors in assessing the overall impact of climate change on the business.

Water-related Performance Measurement

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Home builders face challenges directly related to the ecological impacts of development activities. Developments

often take place on previously undeveloped land, and undertakings must manage the ecosystem disruption of

construction activities as well as the regulations and permitting processes that accompany “greenfield” land

development. Regardless of the siting decisions undertakings make, sector development activities generally carry

risks related to land and water contamination, mismanagement of waste, and excessive strain on water resources

during the construction and use phases. Violation of environmental regulations can result in costly fines and delays

that decrease financial returns while potentially harming reputations. undertakings with repeated violations or track

records of prior activities with excessive ecological impacts may find it difficult to receive approval from local

communities for new developments, thereby decreasing future revenue and market share. undertakings that

concentrate development efforts in water-stressed regions may see further challenges to permitting approvals, and

also face risks related to land or home depreciation due to water shortage concerns. Environmental quality control

procedures, “smart growth” strategies (including a focus on redevelopment sites), and conservation strategies may

help ensure compliance with environmental laws, and therefore mitigate financial risks, while improving future

growth opportunities.

Resources inflow

Community and urban planning gives home builders the opportunity to thoughtfully design new residential

developments in a way that benefits their customers as well as the pre-existing surrounding community. New home

development can bring economic growth and workforce opportunities while moderating cost-of-living increases, and

can provide communities with safe and vibrant neighborhoods. undertakings may strive to improve communities’

environmental and social impacts by providing access to public transportation and/ or not overburdening existing

transportation or utilities infrastructure, providing access to green spaces, developing mixed-use spaces, and

creating more walkable communities. These strategies can help increase the overall demand for and selling prices

of homes as well as reduce the risks related to permitting and community or stakeholder opposition related to

current or future developments. When undertakings use development strategies that inadequately integrate their

new communities into the pre-existing surrounding communities, they risk insufficient sales prices, excessive costs

related to infrastructure needs and assessments, and risk being permitting approvals, delays, and/ or community

support for future developments. undertakings are exposed to supply chain risks when critical materials are used in

products. undertakings in the sector using critical materials with few or no available substitutes, many of which are

sourced from deposits concentrated in only a few countries, which are subject to geopolitical uncertainty.

undertakings in this sector also face competition due to increasing global demand for these materials from other

sectors, which can result in price increases and supply risks. undertakings that are able to limit the use of critical

materials through use of alternatives, as well as secure their supply, can mitigate the potential for financial impacts

stemming from supply disruptions and volatile input prices.

Waste and emissions

Recycling rates in the Construction & Engineering sector are high. However, wastes from production processes,

pollution control devices, and from hazardous waste management activities present a regulatory risk and can raise

operating costs. Cement kiln dust (CKD) - consisting of fine-grained, solid, highly alkaline waste removed from

cement kiln exhaust gas by air pollution control devices - is the most significant waste category in the sector.

Regulatory risk remains from evolving environmental laws, including those at local and national levels and for other

waste streams. undertakings that reduce waste streams - hazardous waste streams in particular - and recycle by-

products, can therefore lower regulatory and litigation risks and costs.

Pollution of air

On-site fuel combustion and production processes in the Construction & Engineering sector emit criteria air

pollutants and hazardous chemicals, including small quantities of organic compounds and heavy metals. Emissions

of particular concern include nitrogen oxides, sulfur dioxides, particulate matter, heavy metals (e. g., mercury),

dioxins, and volatile organic compounds, among others. These air emissions can have significant, localized human

health and environmental impacts. Financial impacts resulting from air emissions will vary depending on the specific

location of operations and the applicable air emissions regulations, but could include higher operating or capital

expenditures and regulatory or legal penalties. Active management of the issue-through technological and process

improvements - could allow undertakings to limit the impact of regulations and benefit from operational efficiencies

that could lead to a lower cost structure over time.

Pollution of water

The Construction & Engineering sector requires substantial volumes of water for the production process.

undertakings face operational, regulatory, and reputational risks due to water scarcity, costs of water acquisition,

regulations on effluents or amount of water used, and competition with local communities and other sectors for

limited water resources. Risks are likely to be higher in regions of water scarcity, due to potential water availability

constraints and price volatility. undertakings that are unable to secure a stable water supply could face production

disruptions, while rising water prices could directly increase production costs. Consequently, the adoption of

technologies and processes that reduce water consumption could lower operating risks and costs for undertakings

by minimizing the impact of regulations, water supply shortages, and community-related disruptions on undertaking

operations.

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Impact metrics

Within the Construction & Engineering sector undertakings often operate their own quarries close to processing

facilities. Quarrying requires the removal of vegetation and topsoil. It also requires the blasting and crushing of

underlying stone deposits. The process can lead to permanent alterations of the landscape, with associated

impacts on biodiversity. The environmental characteristics of the land where quarrying takes place could increase

extraction costs, due to increasing awareness and protection of ecosystems. undertakings could also face

regulatory or reputational barriers to accessing sites in ecologically sensitive areas. This may include new

protection status afforded to areas where reserves are located. Ongoing quarrying operations may also be subject

to laws protecting endangered species. undertakings that have an effective environmental management plan for

different stages of the project lifecycle-including restoration during site decommissioning-could minimize their

compliance costs and legal liabilities. These undertakings could face less community resistance in quarrying at new

sites and avoid difficulties in obtaining permits and delays in project completion.