Structure of the ESRS – ESRS Reporting Framework

The European Sustainability Reporting Standards (ESRS) form the framework for sustainability reporting within the Corporate Sustainability Reporting Directive (CSRD). These guidelines are designed to support companies in reporting transparently and consistently on environmental, social, and governance (ESG) factors. This document provides an in-depth overview of the ESRS reporting structure, with detailed explanations of the various standards.

What are the ESRS?

The European Sustainability Reporting Standards (ESRS) are a set of guidelines that companies must follow to disclose sustainability information. They include obligations for reporting on environmental, social, and governance (ESG) factors. The ESRS are divided into:

Cross-cutting Standards

ESRS 1 – General Requirements

Outlines the basic principles and general requirements for sustainability reporting, including the double materiality principle.
Provides guidance on assessing sustainability topics based on impact and financial materiality.
Specifies reporting areas such as governance, strategy, and impact, risk, and opportunity management.
Requires transparency across the value chain and how companies deal with indirect sustainability implications.
Covers qualitative characteristics of information, such as comparability, verifiability, and clarity.
Defines the approach to due diligence and integrating sustainability into decision-making processes.
Describes the structure of the sustainability statement and its coherence with other parts of corporate reporting.

ESRS 2 – General Disclosures

Includes mandatory disclosure requirements for governance, strategy, and risk management.
Specifies the requirements for policies, targets, and performance indicators.
Serves as a foundation for structuring reports under the thematic standards.
Requires companies to explain their risk management approach and the impact of sustainability topics on their business strategy.
Covers the concept of double materiality analysis and how companies should apply it.

Thematic Standards

Environment (E)

ESRS E1: Climate Change – Reporting on CO2 emissions (Scope 1, 2, and 3), reduction targets, climate risks, and the financial impact of climate change.
ESRS E2: Pollution – Measures and describes the impact of air, water, and soil pollution from business activities, including reduction plans and regulatory compliance.
ESRS E3: Water and Marine Resources – Requires insight into water use, discharges, water scarcity risks, and impact on marine ecosystems.
ESRS E4: Biodiversity and Ecosystems – Analyzes the influence of business activities on biodiversity, including risk management and restoration efforts.
ESRS E5: Resource Use and Circular Economy – Emphasizes efficient use of materials, circular business models, and waste reduction strategies.

Social (S)

ESRS S1: Own Workforce – Reporting on working conditions, safety, wages, diversity, inclusion, and social dialogue.
ESRS S2: Workers in the Value Chain – Assessment of labor rights, working conditions, and compliance with social standards in the supply chain.
ESRS S3: Affected Communities – Impact analysis of business operations on local communities, including social cohesion and compensation measures.
ESRS S4: Consumers and End Users – Reporting on product safety, privacy protection, customer satisfaction, and ethical marketing.

Governance (G)

ESRS G1: Business Conduct – Describes compliance with laws and regulations, ethical business practices, anti-corruption, tax transparency, and data protection.
Transparency regarding governance structures, remuneration policies, and compliance programs.
Due diligence obligations in the supply chain and integrity in business relationships.

Minimum Disclosure Requirements (MDR)

The ESRS standards include Minimum Disclosure Requirements (MDR), obligating companies to report policies, actions, targets, and performance indicators. These include disclosures on policies, action plans, financial resources, measurable goals, and transparency obligations in cases of non-compliance.

Policies

Description of strategies and internal policies for each ESG topic.
Scope of the policy and any exclusions.
Assignment of responsibilities within the organization.
External standards or initiatives followed.
Transparency about policy accessibility and communication to stakeholders.

Actions and Implementation

Explanation of implemented and planned actions per ESG topic.
Financial and other resources allocated for action plans.
Timeline for execution and expected impact.
Measurement of progress and results of actions.

Targets and KPIs

Measurable and time-bound targets.
Linking objectives to policy goals.
Science-based targets (e.g., climate targets based on IPCC guidelines).
Baseline and reference year for comparison.

Performance and Monitoring

Description of measurement methodologies and assumptions.
Stakeholder engagement in monitoring performance.
Changes in targets and measurement methodologies.

Transparency in Case of Non-Compliance

If a company has not established policies, actions, or measurable outcome-oriented targets, it is required to disclose the following, as stated in section 4.2 MDR – ESRS 2:

Reasons for absence of policies: Explanation for not implementing certain policies.
Timeline for future policy implementation: If policies are not yet in place, companies must disclose when they plan to implement them.
Reasons for absence of actions: Clarification for why specific actions have not been taken.
Timeline for future actions: Expected timeframe for implementing planned actions.
Reasons for absence of measurable targets: Explanation for not setting outcome-oriented targets.
Timeline for establishing measurable targets: If targets are planned for later, companies must state when this will happen.
Effectiveness of policies and actions: Description of how effectiveness is monitored, including related risks and opportunities.
Evaluation methodologies: Description of processes and methodologies used to assess the effectiveness of policies and actions.
Level of ambition and measurement indicators: Definition of objectives and the qualitative or quantitative methods used.
Baseline year for progress measurement: The starting point from which progress is measured.

These transparency requirements ensure that stakeholders gain insight into a company’s sustainability ambitions and strategic priorities, even if certain policies or targets are not yet fully implemented.

The Future of Sustainability Reporting with ESRS

ESRS reporting represents a critical step toward transparent and responsible business practices. Through a standardized approach, it offers companies not only a reporting framework but also a strategic tool to embed sustainability into core business operations. The emphasis on double materiality and value chain reporting ensures that

companies account not only for their own impact but also for that of their entire ecosystem. This contributes to better-informed decision-making, increased transparency for stakeholders, and a more sustainable economic model aligned with the expectations of a changing world.