On July 31, 2023, the European Commission reached a significant milestone by adopting the European Sustainability Reporting Standards ('ESRS') to be applied by all companies falling under the scope of the Corporate Sustainability Reporting Directive ('CSRD').

For a refresher on the CSRD's requirements, check this article.

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What are the ESRS

The ESRS are a set of guidelines that ensure a structured and uniform approach to sustainability reporting. They cover a wide range of topics, including environmental impacts, social responsibilities, employee matters, human rights, and anti-corruption measures.

What makes the ESRS unique is their emphasis on comprehensive reporting that goes beyond merely disclosing policies and objectives. It encourages companies to provide insights into their actual performance and the outcomes of their sustainability initiatives. This holistic approach encompasses both the company's own operations and its value chain.

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Standards Classification

The ESRS framework distinguishes between cross-cutting, topical and sector-specific standards.

The cross-cutting ESRS serve as a fundamental framework for sustainability reporting, acting as a backbone upon which specific company details are built. These cross-cutting standards form a common ground, applicable to all businesses, and provide guidance on reporting governance, strategy, risk management, and sustainability-related performance metrics.

Topical ESRS are designed to delve into specific environmental, social, and governance ('ESG') themes. They refer to information on crucial sustainability issues, such as climate change, biodiversity, human rights, and anti-corruption. The Topical ESRS play a pivotal role in guiding companies to provide comprehensive and theme-specific information, ensuring transparency and facilitating comparability among different organisations.

Lastly, sector-specific standards bring standardisation and comparability to the next level by prescribing specific information requirements for each sector. For instance, an automobile company might heavily emphasise reporting on emissions and waste management, while a tech company may highlight their data protection and labour practices. This approach enables stakeholders to gain a deeper understanding of a company's sustainability efforts and performance in the specific areas that matter most for its business and industry.

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CSRD, Double Materiality & ESRS

Double materiality acts like a two-way mirror, reflecting not only how a company impacts the environment and society, but also how sustainability issues impact the company's performance. This concept highlights the interconnectedness between a company's actions and their broader environmental and societal implications.

In the context of the ESRS, embracing double materiality ensures that your sustainability report offers a comprehensive and holistic view of your organisation's sustainability efforts. By considering both the impact that the company has on the environment and society, as well as how sustainability issues can affect its performance, the report becomes more insightful and valuable.

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Want to dive deeper?

Follow the following links to check the ESRS Annexes:

- General requirements.

- General disclosures.

- Climate Change.

- Pollution.

- Water and marine resources.

- Biodiversity and ecosystems.

- Resource use and circular economy.

- Own workforce.

- Workers in the value chain; affected communities; and consumers and end users.

- Business conduct.

The sector-specific standards are still under development. The European Financial Reporting Advisory Group ('EFRAG') published a sector classification, including general rules on its interpretation and application, in September 2024. However, the EU has decided to delay the adoption of sector-specific standards until June 2026, postponing the sustainability reporting obligations on this particular information, as well as for third-country companies with a €150 million turnover in the EU and which have at least one subsidiary or branch in the EU.

At an international level, GRI are the most used international standards. The ESRS are aligned with the GRI methodologies, although they introduced some additional requirements stemming from the CSRD. More on this topic in this article.

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