ESRS: The ABC of ESG Reporting
To make it easier for companies to report on their sustainability activities, the European Union has introduced the CSRD (Corporate Sustainability Reporting Directive). This rule requires companies to report on three key areas: Environment, Social, and Governance (ESG). The CSRD outlines who needs to report and starting when, but it doesn't specify exactly what details need to be included for each ESG topic. To clear up these requirements, the European Sustainability Reporting Standards (ESRS) were created.
What are the ESRS?
The ESRS build on the CSRD to help companies figure out exactly what sustainability information their reports should include. Essentially, the ESRS detail the specific information a company must report about its environmental, social, and governance impacts, risks, and opportunities.
The goal of the ESRS is to standardize and clarify sustainability reporting across companies in the EU. These standards help ensure that reports are consistent and comparable, making it easier to understand a company’s impact on people and the environment and how sustainability affects the company’s growth, performance, and standing.
Structure of the ESRS
The ESRS framework is split into four parts: a general section and three specific sections. The general part outlines how companies should set up and apply their sustainability strategies and policies. The three specific sections discuss the goals, action plans, and metrics that need to be reported for the ESG areas.
ESRS Standards
There are cross-cutting and thematic standards that apply to all companies, no matter what industry they are in.
Cross-Cutting Standards
1. ESRS 1: Details the structure of the ESRS standards, covers dual-material concerns, reporting along the value chain, and sets the basic rules for compiling and presenting sustainability information.
2. ESRS 2: Specifies the general reporting requirements for all major sustainability themes, including governance, strategy, impacts, risks, opportunities, and standards and goals.
Three Topical Standards of ESG
1. Environmental Standards (E): Includes standards E1 to E5, covering climate change, pollution, water and marine resources, resource use, and the circular economy.
2. Social Standards (S): Includes standards S1 to S4, focusing on direct employees, workers in the value chain, community impact, and customers and end-users.
3. Good Governance Standards (G): Includes standard G1, which addresses business operations.
These standards are designed to make sustainability reports more transparent, uniform, and easier to compare across different sectors, ensuring comprehensive coverage of all critical aspects of sustainability.
To help you grasp how the European Union guides organizations in their sustainability reporting, the table below breaks down the main parts of the European Sustainability Reporting Standards (ESRS). This includes an overview of the foundational structure and the essential cross-cutting standards which are crucial for detailed and effective reporting across different sectors. These standards aim to make sustainability reports clearer, more consistent, and easier to compare, ensuring that all important aspects of sustainability are comprehensively covered.
ESRS Structure |
Description |
| Basic Section | Outlines how sustainability policies and strategies should be set up and implemented across the organization. |
| Cross-Cutting Standards | Standards that apply across all sectors and aspects of sustainability reporting. |
| Specific Sections (ESG) | Cover specific objectives, action plans, and measurement points for environmental, social, and governance aspects. |
Cross-Cutting Standards |
Details |
| ESRS 1 |
Explains the structure of the ESRS standards, discusses double materiality, reporting on the value chain, and sets general requirements for compiling and presenting sustainability information. |
| ESRS 2 |
Establishes the reporting requirements for information that the company must provide at a general level for all key sustainability themes, relating to the reporting areas of Governance, strategy, impact, risk, and opportunity management, as well as standards and objectives. |
ESG Pillar |
Standard Code |
Topic |
Description |
| Environmental | ESRS E1 | Climate Change | Addresses reporting on how a company's operations impact climate change and its related activities, such as emissions and energy use. |
| Environmental | ESRS E2 | Pollution | Focuses on the company's pollutant release and waste management strategies. |
| Environmental | ESRS E3 | Water | Covers water use, efficiency, and management in company operations. |
| Environmental | ESRS E4 | Marine Resources | Discusses impacts on marine ecosystems and resource sustainability. |
| Environmental | ESRS E5 | Resource Use and Circular Economy | Explores the usage of natural resources and the implementation of circular economy principles. |
| Social | ESRS S1 | Own Employees | Relates to the treatment, conditions, and development of the company's direct employees. |
| Social | ESRS S2 | Workers in the Value Chain | Considers social factors affecting workers throughout the company’s supply chain. |
| Social | ESRS S3 | Community Impact | Examines how the company affects local communities and its engagement practices. |
| Social | ESRS S4 | Customers and End Users | Focuses on issues affecting customers and end-users, including product safety and customer satisfaction. |
| Governance | ESRS G1 | Business Operations | Outlines the governance practices concerning the organization's operations and ethical standards. |
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In this blog post, we take a closer look at the concept of double materiality. We discuss what it means, why it is important, and how it can be applied by organizations.
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