European Sustainability Reporting Standards (ESRS)
The following pages deal with the individual European Sustainability Reporting Standards (ESRS). The interdisciplinary standards ESRS 1 and ESRS 2 contain basic definitions and describe the relationship between the individual standards. The interdisciplinary standards deal with overarching topics such as the business model and corporate strategy, the main features of the value chain and considerations regarding the stakeholder and materiality analysis to be carried out, as well as the internal control system established with regard to reporting and the responsibility of the company's governing bodies on the topic of "sustainability".
ESRS 1
The first interdisciplinary standard defines the binding concepts and principles to be applied when preparing a sustainability report in accordance with the Corporate Sustainability Reporting Directive (CSRD). The aim of the standard is to provide readers with an understanding of the structure of the ESRS, the conventions governing how they are drawn up and the underlying concepts. It also describes the general requirements for the preparation and presentation of sustainability information. Unlike the other ESRS, ESRS 1 itself does not contain any disclosure requirements, but it does define the disclosure requirements for the other ESRS within certain reporting areas. These are explained in more detail below.
1. Structure and function of the ESRS
2. Scope and quality of disclosure requirements
3. The sustainability due diligence process
4. Sustainability declaration
5. Further information
ESRS 2
ESRS 2 is to be applied by all companies regardless of their area of business activity (sector-independent) and for all sustainability topics regardless of the results of the materiality analysis. It requires general disclosures to understand the context of the company and covers the previously explained reporting areas GOV, SBM, IRO and MT (see section 1 on ESRS 1). These are concretised in ESRS 2 and substantiated with specific disclosure requirements. For example, ESRS 1 stipulates that any errors in previous reporting periods are to be reported. ESRS 2 specifies the disclosures to be made in this regard.
1. Basis for preparations (BP)
2. Governance (GOV)
3. Strategy (SBM)
4. Management of impacts, risks and opportunities (IRO)
5. Minimum disclosure requirements (MDR)
Furthermore, in BP 1 and BP 2, ESRS 2 outlines the basis for the preparation (BP = "Basis for preparations") of the sustainability declaration as well as the minimum disclosure requirements (MDR = Minimum Disclosure Requirements) in relation to policies (MDR P), actions (MDR A), metrics (MDR M) and targets (MDR T). Governance (GOV) comprises the governance processes, controls and procedures used to monitor and manage impacts, risks and opportunities. Strategy & Business Model (SBM) covers the interaction of the company's strategy and business model with its material impacts, risks and opportunities, as well as the strategic handling of these. The management of impacts, risks and opportunities (IRO) includes the process by which the impacts, risks and opportunities are identified, assessed and managed by means of strategies and measures. Metrics and targets (MT) relate to the setting of targets and the assessment, monitoring and measurement of the company's performance in relation to its material impacts, risks and opportunities over time.
Additional requirements relating to the disclosure requirements of ESRS 2 are presented in Appendix C. The details are presented in the following bullet points 3 (SBM) and 4 (IRO).
The reporting areas "Governance", "Strategy" and "IRO Management" are also reflected in the topic-related standards to varying degrees. The overviews attached at the end of the newsletter illustrate where the disclosure requirements of ESRS 2 are supplemented by topic-related standards.
Of particular importance here is the disclosure requirement IRO 1, as this must always be reported regardless of the results of the materiality analysis for all environmental standards and the governance standard. The other supplements only need to be disclosed if the sustainability aspect in question is considered material. In principle, if information on disclosure requirements is contained directly in ESRS 2, it must be provided independently of the results of the materiality analysis; if this is not the case, the disclosure requirements only arise if a sustainability topic is considered to be material.
The interaction between general standards and topic-related standards can be illustrated using the example of the first environmental standard ESRS E1.
ESRS 1 provides the framework, which in the first step is filled with the general minimum disclosures resulting from ESRS 2 and in the second step is supplemented by the specific disclosures resulting from the topic-related standard, such as E1 GOV 3 (inclusion of sustainability-related performance in incentive schemes). The specific metrics and disclosure requirements for targets relating to climate change mitigation are then derived from the topic-related standard.
As in ESRS 1, there are additional application requirements to the actual regulations in ESRS 2 in Appendix A, which concretise and/or supplement individual disclosure requirements and have the same mandatory nature as the other parts of the standard. Appendix B of ESRS 2 contains a list of those data points that are to be provided on the basis of disclosure requirements regulated in general and topic-related standards under other EU legislation. Appendix C of ESRS 2 lists the disclosures that are to be taken into account when reporting on disclosure requirements in ESRS 2 on the basis of topic-related standards.
ESRS E1-E5 Environmental standards
There are altogether five environmental standards that address the environmental factors of "climate change", "environmental pollution", "water and marine resources", "biodiversity and ecosystems" and "resource utilisation and circular economy".
A. Topic-related standards Environment ESRS E1-E5
B. ESRS E1 Climate change
C. ESRS E2 Environmental pollution
D. ESRS E3 Water and marine resources
E. ESRS E4 Biodiversity and ecosystems
F. ESRS E5 Resource utilisation and circular economy
