Understanding ESRS Standards: 5 Essential Questions

What is the main objective of the ESRS (European Sustainability Reporting Standards)?

The ESRS standards aim to specify the sustainability information that a company must publish according to Directive 2013/34/EU, as amended by Directive (EU) 2022/2464. These standards make it possible to understand the significant impacts of the company on people and the environment, as well as the substantial effects of sustainability issues on the company’s performance, results and financial situation.

What are the three categories of ESRS standards?

The ESRS standards are divided into three categories:

– Cross-cutting rules, applicable to all companies and covering general sustainability issues.

– Thematic standards, which deal with specific sustainability topics (environmental, social and governance).

– Sectoral rules, relevant for specific economic sectors and not sufficiently covered by the other categories.

What is meant by “double materiality” in the context of ESRS standards?

The double materiality includes two dimensions:

– Materiality of impact: refers to the positive or negative impacts of the company on people or the environment.

– Financial materiality: concerns the significant financial effects that risks or opportunities related to sustainability may have on the company itself.

How is the level of disaggregation required for reporting defined?

The level of disaggregation must ensure an adequate understanding of material impacts, risks and opportunities, considering geographical factors, specific sectors or significant activities. Disaggregation is required to prevent material information from being improperly obscured or aggregated.

What are the qualitative characteristics required for the information provided under the ESRS standards?

The qualitative characteristics required for information in ESRS are:

– Relevance: the information must be relevant to stakeholders and useful for understanding the impacts, risks and opportunities of the company.

– Fair representation: Information must be accurate, complete, and neutral.

– Comparability: Data must be presented in a way that allows comparisons over time and between different entities.

– Verifiability: the information must be able to be verified by third parties.

– Comprehensibility: the contents must be clear and accessible for the recipients of the information.