ESRS – All You Need to Know about the standards
ESRS – short for European Sustainability Reporting Standards. ESRS are mandatory disclosure standards that companies obliged to report under CSRD must adhere to. The aim is to standardise ESG (Environmental, Social, Governance) aspects in corporate sustainability reporting.
The three (3) categories in ESRS standards that cover all ESG aspects.
The ESRS define a set of specific disclosure requirements across ESG matters, organised into three categories:
- Cross-cutting standards, which establish general requirements applicable to all subjects covered by the Corporate Sustainability Reporting Directive (CSRD).
- Topical standards, which dive into the specifics of ESG matters.
- Sector specific standards, which address sector specific sustainability areas and reporting requirements. These are currently under development and are aimed to be finalised and adopted by the European Commission by June 2026.
What are the ESRS standards?
The ESRS standards include two (2) cross-cutting standards and ten (10) topical standards. The topical standards are divided into five (5) standards covering environmental topics, four (4) covering social topics and one standard covering governance.
Cross-Cutting Standards define general requirements and general disclosures:
The cross-cutting standards, ESRS 1 and ESRS 2, define requirement and disclosures that are mandatory for all reporting companies.
ESRS 1 General requirements cover important concepts and principles which must be followed when reporting under the CSRD. This include introducing double materiality as the foundation for sustainability reporting and the methodology to follow. ESRS also defines how and where the sustainability information should be reported.
ESRS 2 General disclosures defines the general information companies need to report as part of their sustainability statement. This includes information on how sustainability is managed in the company (GOV) and included in strategy, business model and value chain (SBM). ESRS also require description of how material impacts, risks and opportunities are identified and managed (IRO) and dictates minimum reporting requirements related to policies, actions, targets and metrics (MDR).
ESRS topical standards explained
Topical standards define reporting requirements for the company’s material topics
The topical standards cover 10 environmental, social and governance topics.
| ESRS Environmental standards | Sub-topics |
|---|---|
| ESRS E1 climate change | Climate change adaptation, climate change mitigation, energy |
| ESRS E2 pollution | Pollution of air, of water, of soil, of living organisms and food resources, substances of concern, substances of very high concern, microplastics |
| ESRS E3 water and marine resources | Water, marine resources |
| ESRS E4 biodiversity and ecosystems | Direct impact drivers of biodiversity loss, impacts on the state of species, on the extent and condition of ecosystems, impacts and dependencies on ecosystem services |
| ESRS E5 resource use and circular economy | Resource inflows, including resource use, resource outflows related to products and services, waste |
| ESRS Social standards | Sub-topics |
|---|---|
| ESRS S1 Own workforce | Working conditions, equal treatment and opportunities for all, other work-related rights |
| ESRS S2 workers in the value chain | Working conditions, equal treatment and opportunities for all, other work-related rights |
| ESRS S3 affected communities | Communities’ economic, social and cultural rights, communities’ civil and political rights, rights of indigenous peoples |
| ESRS S4 consumers and end-users | Information-related impacts for consumers and/or end-users, personal safety of consumers and/or end-users, social inclusion of consumers and/or end-users |
| ESRS Governance standard | Sub-topics |
|---|---|
| ESRS G1 business conduct | Corporate culture, protection of whistle-blowers, animal welfare, political engagement and lobbying activities, management of relationships with suppliers including payment practices, corruption and bribery |
💡 The obligation to report on the topical standards depends on the results of the company’s double materiality assessment. However, if a company finds that climate change is not material and omits all disclosures in E1, they need to provide a detailed explanation of the materiality assessment results leading to the conclusion of climate change not being material. If other topics than climate change are found non-material, only a brief explanation of the materiality results is required.
As with ESRS 2, all topical standards cover disclosure requirements on how the sustainability topic is managed in the company (GOV) and how it is covered in the company’s strategy and business model (SBM). Each topical standard provides detailed requirements for identifying and managing impacts, risks and opportunities (IRO), and the policies, actions, metrics and targets relevant to each topic.
The ESRS will also include sector-specific standards that are under development. EFRAG expects that draft sector standards will be available for the first 8-10 sectors during 2024. Some of the first sector standards will cover oil and gas; mining, quarrying and coal mining; road transportation; and agriculture, farming and fisheries. The sector standards will apply from 2026.
What is the difference between ESRS 1 and ESRS 2?
ESRS 1 General requirements defines the foundations of reporting according to the ESRS standards, such as the double materiality process, and mandates that a company must discloseall material information about its sustainability-related impacts, risks and opportunities in accordance with the ESRS.
ESRS 2 General Disclosures specifies general information that all companies need to include in their sustainability statement, covering the topics of governance (GOV), strategy and business model (SBM), the identification and management of impacts, risks and opportunities (IRO), and minimum disclosure requirements on policies, actions, metrics and targets (MDR).
How to comply with ESRS standards
| 1. Frame your ESRS reporting | 2. Double materiality assessment | 3. Do data collection and gap analysis | 4. Data collection time |
- Frame your ESRS reporting
Define your reporting boundaries. ESRS reporting boundaries goes beyond the boundaries used in financial reporting. This means that in addition to defining the boundaries of your own operations, you need to include direct and indirect business relationships across your value chain. The relevant actors to include from the value chain are those that either are likely exposed to actual and potential impacts or represent strong dependencies in your business model in terms of products and services, i.e. your most important suppliers and customers.
- Double materiality assessment
Conduct your double materiality assessment to identify the impacts, risks and opportunities associated with the sustainability topics (matters) defined in the ESRS. The double materiality concept means that you need to assess negative and positive impacts of your operations on sustainability issues (impact materiality) as well as the risks and opportunities to your business arising from the sustainability issues (financial materiality). The double materiality concept is often referred to looking at sustainability from both an inside-out and an outside-in point of view.
In the ESRS world, stakeholders are an important aspect when conducting the double materiality assessment. ESRS considers two main categories of stakeholders: affected stakeholders, that is individuals or groups that are or could be affected by the company’s activities and the direct and indirect business relationships across the value chain, and users of sustainability statement, such as investors and other creditors, business partners, trade unions etc.
By identifying the impacts, risks and opportunities associated with the sustainability topics, you identify which sustainability topics are material to your operations. The assessment can follow a top-down approach, where you go through each sustainability topic and identify any impacts, risk and opportunities associated with the topic, or a bottom-up approach where you work from impacts, risks or opportunities already identified.
- Do data collection and do gap analysis
After identifying your material topics, you need to check with the standard which disclosure requirements and associated data point will apply to you. Note that some information may be voluntary or covered by a phasing-in period depending on the company size or type of disclosure.
This is a good time to do review your existing sustainability reporting disclosures to see how well they align with ESRS requirements and to identify areas that need improvement.
A thorough gap analysis will identify what information and data points you already cover in existing reporting, and what information and data you need to start collecting. Maybe you even need to update some of the methodology or calculations used for existing data. Based on the result of your gap analysis, you can then set a plan for how and when you will be able to start collecting the data, and when it will be available for reporting.
- Data collection time
In addition to providing an overview of what data you collect or need to start collecting, a gap analysis can also indicate if you need to renew your data collection methods or systems. With ESRS, it is expected that companies need to collect on a lot more data to a greater detail. Read more here.
A digital approach to CSRD reporting is a must!
CSRD reporting has been created to be in electronic format from the beginning. Therefore, the CSRD sustainability statement cannot be done manually. In addition to topical reporting requirements, companies under CSRD must deliver their report with electronically tagged information and deliver their CSRD report to the European Single Access Point (from 2028 onwards).
It is impossible to create a CSRD report that complies with the requirements without using software specifically designed for CSRD reporting. Ecobio Manager handles the electronic tagging for you and helps deliver it to the ESAP.
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