Structure of the ESRS – Standards Structure of the ESRS Reporting

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

What are the ESRS?

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

Cross-Cutting Standards

ESRS 1 – General Requirements

Describes the basic principles and general requirements for sustainability reporting, including the principle of double materiality.
Contains guidelines for assessing sustainability topics based on impact and financial materiality.
Specifies reporting areas such as governance, strategy, and impact, risk, and opportunity management.
Requires transparency about the value chain and how companies deal with indirect sustainability implications.
Addresses qualitative characteristics of information, such as comparability, verifiability, and understandability.
Defines the approach for due diligence and the integration of sustainability in the decision-making process.
Describes the structure of the sustainability statement and the coherence with other parts of company reports.

ESRS 2 – General Disclosures

Contains mandatory reporting requirements for governance, strategy, and risk management.
Specifies requirements for policies, objectives, and performance indicators.
Serves as a basis for structuring reports within the thematic standards.
Requires companies to provide explanations on their risk management and the impact of sustainability topics on their business strategy.
Addresses 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 financial impact of climate change.
ESRS E2: Pollution – Measures and describes the impact of air, water, and soil pollution caused by business activities, including reduction plans and regulatory compliance.
ESRS E3: Water and Marine Resources – Requires insights into water use, discharges, water scarcity risks, and impact on marine ecosystems.
ESRS E4: Biodiversity and Ecosystems – Analyzes the impact of business activities on biodiversity, including risk management and restoration measures.
ESRS E5: Resource Use and Circular Economy – Emphasizes efficient use of resources, 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 – Evaluation of labor rights, working conditions, and compliance with social standards in the supply chain.
ESRS S3: Affected Communities – Impact analysis of business activities 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 – Description of compliance with laws and regulations, ethical business conduct, anti-corruption, tax transparency, and data protection.
Transparency about governance structures, remuneration policy, and compliance programs.
Obligations regarding due diligence in the supply chain and integrity in business relationships.

Minimum Disclosure Requirements (MDR)

The ESRS standards contain Minimum Disclosure Requirements (MDR) that require companies to report on policies, actions, objectives, and performance indicators. They include disclosures about policies, action plans, financial resources, measurable goals, and transparency requirements in case of non-compliance.

Policies

Description of the strategy and internal policies per ESG theme.
Scope of policy and any exclusions.
Assignment of responsibilities within the organization.
External standards or initiatives that are followed.
Transparency about the accessibility and communication of policy to stakeholders.

Actions and Implementation

Explanation of the actions taken and planned per ESG theme.
Financial and other resources allocated for action plans.
Time horizon for execution and expected impact.
Measurement of progress and results of actions.

Objectives and KPIs

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

Performance and Monitoring

Description of the measurement methodologies and assumptions used.
Stakeholder involvement in performance monitoring.
Changes in targets and measurement methodologies applied.

Transparency in Case of Non-Compliance

If a company has not established policies, actions, or measurable outcome-oriented objectives, it is required to make specific disclosures as required in Chapter 4.2 MDR – ESRS 2. This includes:

Reasons for the absence of policy: Explanation of why certain policies have not been implemented.
Timeframe for future policy implementation: If a policy has not yet been introduced, the company must report when it plans to implement it.
Reasons for the absence of actions: Clarification of why specific actions have not been undertaken.
Timeframe for future actions: The expected period in which the company will implement its actions.
Reasons for the absence of measurable objectives: Justification for why no outcome-oriented objectives have been established.
Timeframe for setting measurable objectives: If targets are to be set later, the company must indicate the timeframe within which this will happen.
Effectiveness of policies and actions: Description of how effectiveness is monitored, including related risks and opportunities.
Methodologies for evaluation: Description of the 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 measurement methods used.
Baseline year for progress measurement: The starting point from which progress is assessed.

These transparency requirements ensure that stakeholders gain insight into the company's sustainability ambitions and strategic priorities, even if certain policies or objectives have not yet been fully implemented.

The Future of Sustainability Reporting with ESRS

ESRS reporting represents a crucial step in the future of transparent and responsible business operations. Through a standardized approach, it not only provides companies with a framework for reporting, but also a strategic tool to embed sustainability in their core activities. The emphasis on double materiality and value chain reporting ensures that

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