European Sustainability Reporting Standards (ESRS)

• ESRS E1: Climate Change
• ESRS E2: Pollution
• ESRS E3: Water and Marine Resources
• ESRS E4: Biodiversity and Ecosystems
• ESRS E5: Resource Use and Circular Economy

• ESRS S1: Own Workforce
• ESRS S2: Workers in the Value Chain
• ESRS S3: Affected Communities
• ESRS S4: Consumers and End Users

• ESRS G1: Business Conduct

The ESRS are the sustainability reporting standards used to comply with the Corporate Sustainability Reporting Directive (CSRD). They define what sustainability information organisations must disclose and how that information should be reported.

No. ESRS 2 contains disclosures that apply broadly to reporting organisations, while topical disclosures are determined by the outcome of the Double Materiality Assessment. Once material impacts, risks, and opportunities have been identified, companies must determine which qualitative and quantitative disclosures are necessary to explain those matters, reflect their business and value chain, support investor and stakeholder decision-making, and provide a fair presentation of their sustainability performance.

In addition, the revised ESRS introduce phase-ins, relief provisions, and optional datapoints that may allow certain disclosures to be simplified, deferred, or omitted where permitted.

The CSRD requires sustainability information to be subject to limited assurance by an independent assurance provider. This involves reviewing whether there is evidence of material misstatements in the sustainability information. The CSRD also envisages a future transition to reasonable assurance.

To prepare, organisations should establish robust governance, controls, and documentation from the outset rather than treating assurance as a year-end exercise. Building audit-ready processes throughout the reporting journey helps ensure that materiality assessments, methodologies, disclosures, and underlying data can be independently verified and relied upon.

A Climate Transition Plan is not explicitly required as a standalone document within the CSRD sustainability statement. However, ESRS E1 requires companies to disclose policies, actions, targets, and metrics related to their climate transition, including how they plan to align their business model and strategy with the transition to a sustainable economy.

Interoperability refers to the alignment between the ESRS and the IFRS Sustainability Disclosure Standards (ISSB). The revised ESRS are designed to reduce duplication and allow organisations to leverage common sustainability information across multiple reporting requirements. However, the standards are not identical, particularly because ESRS is built on double materiality while ISSB focuses on financially material risks and opportunities.

Within each topical standard, Disclosure Requirements (DRs) specify what information must be disclosed. A DR focuses on a particular aspect of reporting, such as governance arrangements, policies, actions, targets, or performance metrics. For example, a standard may contain separate DRs covering climate transition plans, greenhouse gas emissions, or workforce-related policies.

Supporting each DR are Application Requirements (ARs), which provide implementation guidance and explanatory details on how the disclosure should be interpreted and prepared in the report. ARs help companies understand definitions, methodologies, calculation approaches, and reporting expectations, promoting greater consistency and comparability across reporters.

Double materiality is the foundation of the ESRS. It requires organisations to assess both their impacts on people and the environment (impact materiality) and the sustainability-related risks and opportunities that could affect business performance (financial materiality).

The outcome of this process is a Double Materiality Assessment, which identifies the material impacts, risks, and opportunities (IROs) that determine what the organisation needs to report.

Information materiality helps organisations determine which disclosures are genuinely useful for investors and other stakeholders. Once material sustainability topics have been identified through the DMA, organisations should focus on reporting information that supports informed decision-making, rather than simply reporting every potentially applicable datapoint.

To achieve this, organisations should establish a clear approach for assessing information materiality, ensuring disclosures are focused on the information necessary to understand their material impacts, risks, and opportunities (IROs). In practice, this is often anchored in the IRO descriptions themselves, which provide the context needed to determine what information is decision-useful and should therefore be reported.

Phase-ins and reliefs provide organisations with additional flexibility when implementing the revised ESRS. They allow certain disclosures to be deferred, simplified, or estimated during the early years of reporting, supporting a progressive implementation approach while maintaining transparency and compliance. Examples include greater flexibility around anticipated financial effects, certain value chain disclosures, and the use of estimates and proxies where appropriate.

The applicability of phase-ins and reliefs is best assessed after completing a gap assessment. By identifying gaps in data, processes, and reporting capabilities, organisations can determine where reliefs may be required and incorporate these into their implementation roadmap, alongside plans to build capability over time.

Anticipated financial effects are qualitative and quantitative information that an organisation shall disclose to show how it expects its financial position, financial performance, and cash flows to change over the short, medium, and long term, given its strategy to manage material risks and opportunities.

Under the final ESRS, there is greater recognition that many organisations are still developing robust approaches to quantification. As a result:

• Extended phase-ins and reliefs are available for certain quantitative disclosures.
• Qualitative disclosures are expected where reliable quantification is not yet possible.
• Organisations have greater flexibility in the early years of reporting while methodologies, data, and assumptions continue to mature.

This means companies should focus on providing a clear, decision-useful explanation of expected financial impacts, while building the capability to quantify those impacts over time.

Current financial effects refer to the financial impacts that a sustainability matter is already having on the company during the reporting period or has already had in recent periods. It is important to note that current financial effects remain within scope of the revised ESRS and should be disclosed where material.

More flexibility is provided on the level of detail reported. Companies can avoid excessively granular disclosures where they do not improve decision-making.

Companies are provided with expanded possibilities to omit commercially sensitive, trade-secret or protected information under certain conditions, reducing companies concerns around disclosure of strategic or competitive information.

Introduced in the revised ESRS, the value chain cap limits the sustainability information that CSRD-reporting organisations can request from companies outside the scope of the regulation, such as SMEs and smaller suppliers. Its purpose is to reduce the reporting burden on value chain partners by focusing data requests on the information that is genuinely needed to understand and report material sustainability impacts, risks, and opportunities.

The revised ESRS allow companies, in specific circumstances, to omit or simplify certain disclosures where obtaining the information would require disproportionate cost or effort. Companies must nevertheless demonstrate that reasonable alternatives have been considered and document the rationale for relying on this relief.

Fair presentation is a core reporting principle requiring sustainability disclosures to provide a balanced, complete, and faithful representation of an organisation’s material sustainability impacts, risks, and opportunities. It acts as a final quality check, helping ensure sustainability information is understandable, reliable, and useful for stakeholder decision-making. Organisations should establish robust review and approval processes to ensure disclosures are complete, consistent, and transparent before publication.

PATM stands for Policies, Actions, Targets, and Metrics. It is introduced in the General Disclosure Requirements (GDR) section of ESRS 2 and forms the backbone of topical ESRS disclosures. For each material sustainability matter, companies are expected to disclose relevant policies, actions, targets, and metrics. Across the ESRS framework, this includes up to eight policy disclosures, eight action disclosures, and eleven target and metric disclosures, depending on the material topic and applicable reporting requirements.