European Sustainability Reporting Standards (ESRS)

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What is the ESRS?

The Corporate Sustainability Reporting Directive (CSRD) marks a landmark shift in requirements for companies to report sustainability-related information about their operations, alongside financial information and aims to promote sustainable development through transparency by advancing the scope and quality of corporate sustainability reporting. The CSRD is implemented in practice through the EU European Sustainability Reporting Standards (ESRS); enabling stakeholders to gain improved and comparable insights into the business practices of obligated companies.

In essence, the ESRS is a set of reporting standards that are used to meet the requirements of the EU CSRD. So, whilst the CSRD sets out reporting requirements and obligations, the ESRS provide the framework and methodology for reporting.

The adoption of the CSRD in 2022, and subsequently, the European Sustainability Reporting Standards ESRS in 2023 has continued to show the EU’s ambition to put sustainability reporting at the same level as financial reporting.

What are the key features of the final ESRS?

Two cross-cutting ESRSs and ten topic-specific ESRSs (5 environmental, 4 social and 1 on governance) will require disclosure on governance, strategy, and impact, risk and opportunity management. The cross-cutting ESRS, ESRS 1 and 2 are mandatory to report on for all obligated companies, whereas the topical standards are only mandatory to report on where material. This is determined through a Double Materiality Assessment, which will support stakeholders in understanding the organisation’s impacts on people and the environment as well as the material financial impacts of sustainability matters on the organisation.

Guide | Double Materiality Reporting: The Next Frontier in ESG

Anthesis’ double materiality guide provides a comprehensive overview of the emerging regulatory landscape surrounding double materiality, as well as it’s value and how to conduct a materiality assessment.

Cross-cuttingESRS 1General Requirements
Cross-cuttingESRS 2General Disclosures
EnvironmentESRS E1Climate
EnvironmentESRS E2Pollution
EnvironmentESRS E3Water and marine resources
EnvironmentESRS E4Biodiversity and ecosystems
EnvironmentESRS E5Resource use and circular economy
SocialESRS S1Own workforce
SocialESRS S2Workers in the value chain
SocialESRS S3Affected communities
SocialESRS S4Consumers and end users
GovernanceESRS G1Business conduct

Additional sector-specific requirements will be developed for adoption in 2026.

There are four reporting areas and three reporting layers that are part of the disclosures.

Four reporting areas:

  1. Governance: aims to provide stakeholders with insights into a company’s commitment to sustainable practices.
  2. Strategy: aims to provide a clear understanding of the governance mechanisms, controls, and procedures established for monitoring and managing sustainability aspects.
  3. Impact: aims to report on the procedures used to identify critical sustainability impacts, risks, and opportunities.
  4. Metrics and targets: aims to provide insight into performance indicators used by the company to assess critical sustainability issues.

Three reporting layers:

  1. Sector-agnostic disclosures
  2. Sector-specific disclosures
  3. Entity-specific disclosures

Changes compared to previous iterations on ESRS

After the standards were first released, they went through a 15-month public consultation process. The basic principles (e.g., double materiality) were retained however, the structure was changed to align more closely with the Task Force on Climate-related Financial Disclosures (TCFD).

Key changes include:

  • Providing more flexibility in deciding what information to disclose in reports. All disclosures except ESRS 2 are now subject to the materiality assessment. However, companies will need to provide a detailed explanation to support stakeholders to understand why the company has not disclosed the information.
  • Relief measures introduced to support companies in implementing data collection and reporting systems. Companies are now not required to disclose the expected financial impacts of environmental risks in their first year of reporting. For the following two years, companies may provide qualitative disclosures of these impacts but are not required to provide specific numbers.
  • An increase in the number of voluntary data points due to the difficulty and cost for companies to provide them.

What is the reporting timeline?

csrd timeline

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