[Draft] ESRS 1 General requirements
This paper has been prepared by the EFRAG Secretariat for discussion at a public meeting of EFRAG
Sustainability Reporting Board. The paper does not represent the official views of EFRAG or any
individual member of the EFRAG Sustainability Reporting Board, EFRAG Sustainability Reporting TEG
or the EFRAG Administrative Board. The paper is made available to enable the public to follow the
discussions in the meeting. Tentative decisions are made in public and reported in the EFRAG Update.
EFRAG positions, as approved by the EFRAG Sustainability Reporting Board, are published as draft
standards, discussion or position papers, or in any other form considered appropriate in the
circumstances.
DRAFT AS OF 15 NOVEMBER 2022 PREPARED
SOLELY FOR APPROVAL BY THE EFRAG SRB
AND STILL SUBJECT TO EDITORIAL REVIEW
BEFORE IT IS FINALLY ISSUED
DISCLAIMER
[Draft] ESRS 1 General requirements is set out in paragraphs 1 – 134 and the following
appendices, that have the same authority as the main body of the [draft] standard):
– Appendix A: Defined terms;
– Appendix B: Application Requirements;
– Appendix C: Qualitative characteristics of information;
– Appendix D: List of phased-in Disclosure Requirements;
– Appendix E: Structure of ESRS sustainability statements;
[Draft] ESRS 1 is accompanied by the following illustrative appendices, that are non-authoritative:
– Appendix F: Flowchart for determining disclosures to be included;
– Appendix G: Example of structure of ESRS sustainability statements; and
– Appendix H: Example of incorporation by reference.
The [draft] Standard also uses terms defined in other [draft] ESRS and shall be read in the context
of its objective.
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Table of contents
Objective 4
1 Categories of [draft] standards and disclosures under [draft] European Sustainability Reporting
Standards 4
1.1 Complying with [draft] ESRS 4
1.2 Cross-Cutting Standards and reporting areas 5
1.3 Topical ESRS 5
1.4 Entity-specific disclosures 6
1.5 Cross-cutting Requirements for policies, actions and targets 7
2 Qualitative characteristics of information 8
3 Double materiality as the basis for sustainability disclosures 8
3.1 Stakeholders and their relevance to the materiality assessment process 8
3.2 Material matters and materiality of information 9
3.3. Double materiality 11
3.4 Impact materiality 11
3.5 Financial materiality 12
3.6 Material impacts or risks arising from actions to address sustainability matters 13
3.7 Level of disaggregation 13
4 Sustainability due diligence 14
5 Value chain 16
5.1 Reporting undertaking and value chain 16
5.2 Estimation using sector averages and proxies 17
6 Time horizon 18
6.1 Reporting period 18
6.2 Linking past, present and future 18
6.3 Reporting progress against the base year 18
6.4 Definition of short-, medium- and long-term for reporting purposes 18
7 Preparation and presentation of sustainability information 19
7.1 Presenting comparative information 19
7.2 Sources of estimation and outcome uncertainty 20
7.3 Updating disclosures about events after the end of the reporting period 20
7.4 Changes in preparation or presentation of sustainability information 21
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7.5 Reporting errors in prior periods 21
7.6 Consolidated reporting and subsidiary exemption 21
7.7 Information on intellectual property, know-how or results of innovation 22
8 Structure of sustainability statements 22
8.1 General presentation requirement 22
8.2 Content and structure of the sustainability statements 23
9 Linkages with other parts of corporate reporting and connected information 23
9.1 Incorporation by reference 24
9.2 Connected information and connectivity with financial statements 24
10. Transitional provisions 26
10.1. Transitional provision related to chapter 1.4 Entity-specific disclosures 26
10.2 Transitional provision related to chapter 5 Value chain 26
10.3 Transitional provision related to chapter 7.1 Presenting comparative information 27
10.4 Transitional provision: List of Disclosure Requirements that are phased-in for [draft] ESRS
to year 2 or subsequent years 27
Appendix A: Defined terms 28
Appendix B: Application Requirements 30
3.3 Application requirements – Double materiality as the basis for sustainability disclosures 30
5.2 Application requirements – Reporting undertaking and value chain 37
8.2 Application requirements – Content and structure of the sustainability statements 37
Appendix C: Qualitative characteristics of information 38
Appendix D: List of phased-in Disclosure Requirements 42
Appendix E: Flowchart for determining disclosures to be included 44
Appendix F: Structure of ESRS sustainability statements 45
Appendix G: Example of structure of ESRS sustainability statements 46
Appendix H: Example of incorporation by reference 47
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Objective
1. The objective of this [draft] Standard is to set out the general requirements that undertakings
shall comply with when preparing and presenting sustainability-related information under the
Accounting Directive as amended by the Corporate Sustainability Reporting Directive (CSRD).
1 Categories of [draft] standards and disclosures under [draft]
European Sustainability Reporting Standards
1.1 Complying with [draft] ESRS
2. The undertaking shall disclose, in accordance with applicable [draft] ESRS, all the material
information regarding impacts, risks and opportunities in relation to environmental, social, and
governance matters. The information shall enable the understanding of the undertaking’s
impacts on those matters and how they affect the undertaking’s financial development,
performance and position.
3. In all [draft] ESRS, the term “impacts” refers to positive and negative sustainability-related
impacts that are connected with the undertaking’s business, as identified through an impact
materiality assessment process (see chapter 3.5). The term “risks and opportunities” refers to
the undertaking’s sustainability-related financial risks and opportunities, as identified through
a financial materiality assessment process (see chapter 3.6). Collectively, these are referred
to as “impacts, risks and opportunities”.
4. The undertaking shall present material sustainability-related information as part of its
management report (see chapter 8).
5. Sustainability-related information shall cover the reporting areas, as defined under
paragraph 10 below, subject to materiality.
6. [Draft] ESRS structures the information to be disclosed in Disclosure Requirements.
Disclosure Requirements consist of more granular datapoints. The term “datapoint” in this
context also refers to a narrative sub-element of a Disclosure Requirement.
7. [Draft] ESRS use the following terms for Disclosure Requirements and datapoints:
(a) shall disclose – indicates the provision prescribed by a Disclosure Requirement or
datapoint (see chapter 3);
(b) shall consider – indicates a list of items that the undertaking is expected to consider –
if they are applicable – in the preparation of the reporting prescribed by a Disclosure
Requirement or datapoint; and
(c) may disclose – indicates a voluntary disclosure to encourage good practice.
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1.2 Cross-Cutting Standards and reporting areas
8. [Draft] ESRS 1 General requirements and [draft] ESRS 2 General disclosures are Cross-
Cutting Standards, meaning that they apply to all sustainability matters.
9. [Draft] ESRS 1 is composed of the following chapters:
Chapter 1: Categories of [draft] Standards and Disclosures under [draft] European
Sustainability Reporting Standards (ESRS);
Chapter 2: Qualitative characteristics of information;
Chapter 3: Double materiality as the basis for sustainability disclosures;
Chapter 4: Sustainability due diligence;
Chapter 5: Value chain;
Chapter 6: Time horizon;
Chapter 7: Preparation and presentation of sustainability information;
Chapter 8: Structure of sustainability statements;
Chapter 9: Linkages with other parts of corporate reporting and connected information;
Chapter 10: Transitional provisions.
10. The Disclosure Requirements in [draft] ESRS 2 General disclosures, in the [draft] topical ESRS
and in [draft] sector-specific ESRS cover the following reporting areas:
(a) Governance (GOV): the governance processes, controls and procedures used to
monitor and manage impacts, risks and opportunities (see [draft] ESRS 2, chapter 2
Governance);
(b) Strategy (SBM): how the undertaking’s strategy and business model(s) interact with
its material impacts, risks and opportunities, including the strategy for addressing them
(see [draft] ESRS 2, chapter 3 Strategy);
(c) Impact, risk and opportunity management (IRO): the process(es) by which impacts,
risks and opportunities are identified, assessed and managed through policies and
actions (see [draft] ESRS 2, chapter 4 Impact, risk and opportunity management); and
(d) Metrics and targets (CCR-3): how the undertaking measures its performance,
including progress towards the targets it has set (see [draft] ESRS 2, chapter 5 Metrics
and targets).
1.3 Topical ESRS
11. A [draft] ESRS covers a topic and may be structured to cover several sub-topics and/or sub-
sub-topics where necessary. These are also referred to as “sustainability matters”. Disclosure
requirements prescribed by sector-agnostic or sector-specific ESRS are organised in
accordance with this topical approach. Appendix B to this [draft] Standard, paragraph AR 11,
presents the list of sustainability matters covered in [draft] topical ESRS.
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12. Topical ESRS include sector-agnostic and sector-specific Disclosure Requirements. To
achieve a high degree of comparability, information that has been assessed by the standard-
setter as likely to be material for all undertakings, or for all undertakings in a specific sector, is
reflected in:
(a) Sector-agnostic ESRS/Disclosure Requirements: applicable to all undertakings
independent of the sector(s) they operate in; and
(b) Sector-specific ESRS/Disclosure Requirements: applicable to all undertakings
within a sector. They address impacts, risks and opportunities not covered, or not
sufficiently covered, by sector-agnostic Disclosure Requirements. They provide also
sector-specific provisions to support the materiality assessment process.
13. ESRS 2 General disclosures establishes information to be mandatorily provided by the
undertaking at a general level, across all sustainability topics. The [draft] topical ESRS include
additional specific requirements of a topical nature that are necessary to comply with when
responding to some Disclosure Requirements of [draft] ESRS 2 General disclosures. [Draft]
ESRS 2 Appendix C lists such additional requirements. They are applicable when the
undertaking has assessed the relevant topic to be material, except for those in ESRS E1
Climate change and those in the other topical ESRS linked to Disclosure Requirement 2 IRO-
1 Description of the processes to identify and assess material sustainability impacts, risks and
opportunities, that are applicable regardless of the outcome of the materiality assessment.
1.4 Entity-specific disclosures
14. When the undertaking concludes that an impact, risk or opportunity not covered or covered
with insufficient granularity by an [draft] ESRS is material due to its specific facts and
circumstances (based on its materiality assessment), it shall provide additional entity-
specific disclosures to cover such impact, risk or opportunity.
15. The entity-specific disclosures shall enable readers to understand the undertaking’s impacts
in relation to environmental, social or governance matters as well as sustainability-related
risks and opportunities.
16. In developing entity-specific disclosures, the undertaking shall ensure that:
(a) the disclosures meet the qualitative characteristics of information as set out in chapter
2 Qualitative characteristics of information; and
(b) its disclosures include, where applicable, all material information related to the
reporting areas of governance; strategy; impact, risk and opportunity management;
and metrics and targets (see [draft] ESRS 2 chapters 2 to 5).
17. When determining the usefulness of metrics for inclusion in its entity-specific disclosures, the
undertaking shall consider whether:
(a) its chosen performance metrics provide insight into the likelihood that its practices are:
i. reducing negative outcomes and/or increasing positive outcomes for people
and the environment (for impacts); and/or
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ii. affecting financial performance, position and cash-flows over the short-,
medium- and long-term (for risks and opportunities);
(b) the measured outcomes are sufficiently reliable, that is, they do not involve an
excessive amount of hypotheses and unknowns that would render the metrics too
arbitrary to provide a faithful representation; and
(c) there is sufficient contextual information to interpret performance metrics
appropriately, and whether variations in such contextual information may impact
comparability of the metrics over time.
18. When developing its entity-specific disclosures, the undertaking shall carefully consider:
(a) comparability between undertakings, while still ensuring relevance of the information
provided, even if comparability may be limited for entity-specific disclosures. The
undertaking shall consider whether available and relevant frameworks, initiatives,
reporting standards and benchmarks (such as technical material issued by the
International Sustainability Standard Board or the Global Reporting Initiative) provide
elements that can support comparability to the maximum extent possible; and
(b) comparability over time: consistency of methodologies and disclosures is a key factor
for achieving comparability over time.
19. Further guidance for developing entity-specific disclosures can be found by considering the
information required under [draft] topical ESRS that address similar sustainability matters.
1.5 Cross-cutting Requirements for policies, actions and targets
20. To harmonise the content of certain categories of disclosures in a multi-topical
environment, Cross-cutting Requirements (CCR) prescribe, as mandated under [draft]
ESRS 2, the content to be reported under topical disclosure when reporting the
disclosure about policies, actions, metrics and targets. In this context and in relation with
the reporting areas:
(a) policies refer to a set or framework of general objectives and management decisions
that the undertaking uses for detailed implementation decision-making (see Cross-
cutting Requirement 2 CCR-1 Policies adopted to manage material sustainability
matters);
(b) actions refer to (i) activities and action plans (including transition plans) that are
undertaken to ensure that the undertaking delivers against targets set and through
which the undertaking seeks to address material impacts, risks and opportunities; and
(ii) decisions to support these with financial, human or technological resources (see
Cross-cutting Requirement 2 CCR-2 Actions and resources in relation to material
impacts, risks and opportunities);
(c) metrics refer to qualitative and quantitative indicators that the undertaking uses to
measure and report on the effectiveness of the delivery of its sustainability-related
policies and against its targets over time. Metrics also support the measurement of the
undertaking’s results in respect of affected people, the environment and the
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undertaking (see Cross-cutting Requirement 2 CCR-3 Tracking effectiveness of
policies and actions through metrics and targets); and
(d) targets refer to measurable, outcome-oriented goals that the undertaking aims to
achieve in relation to material impacts, risks or opportunities (see Cross-cutting
Requirement 2 CCR-3 Tracking effectiveness of policies and actions through metrics
and targets).
21. The Cross-cutting Requirements, referred to in paragraph 20, shall be applied:
(a) alongside the Disclosure Requirements in the given [draft] topical ESRS, when the
undertaking is required by [draft] ESRS to describe policies, actions, and targets; and
(b) when the undertaking reports on material impacts, risks and opportunities not covered
by [draft] topical ESRS or not covered with sufficient granularity, which are covered by
entity-specific disclosures.
2 Qualitative characteristics of information
22. When preparing its sustainability statements, the undertaking shall apply:
(a) the fundamental qualitative characteristics of information, i.e., relevance and faithful
representation; and
(b) the enhancing qualitative characteristics of information, i.e., comparability, verifiability
and understandability.
23. These qualitative characteristics of information are defined and described in Appendix C of
this [draft] Standard.
3 Double materiality as the basis for sustainability disclosures
24. The undertaking shall report sustainability matters based on the double materiality principle as
defined and explained in this chapter.
3.1 Stakeholders and their relevance to the materiality assessment process
25. Stakeholders are those who can affect or be affected by the undertaking. There are two main
groups of stakeholders:
(a) affected stakeholders: individuals or groups whose interests are affected or could be
affected – positively or negatively – by the undertaking’s activities and its direct and
indirect business relationships across its value chain; and
(b) users of sustainability statements: primary users of general-purpose financial reporting
(existing and potential investors, lenders and other creditors, including asset
managers, credit institutions, insurance undertakings), as well as other users,
including the undertaking’s business partners, trade unions and social partners, civil
society and non-governmental organisations, governments, analysts and academics.
26. Some, but not all, stakeholders may belong to both groups defined in paragraph 25.
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27. Engagement with affected stakeholders is central to the undertaking’s on-going sustainability
materiality assessment and due diligence process (see chapter 4 Sustainability due diligence).
This includes its processes to identify and assess actual and potential negative impacts
(alongside other elements), which then inform the assessment process to identify the material
impacts for the purposes of sustainability reporting (see chapter 3.4 Impact materiality).
3.2 Material matters and materiality of information
28. Performing a materiality assessment (see chapter 3.4 Impact materiality and 3.5 Financial
materiality) is necessary for the undertaking to identify the material impacts, risks and
opportunities to be reported.
29. The Application Requirements in Appendix B include the list of sustainability matters covered
in [draft] topical ESRS, categorised in topics, sub-topics and sub-sub-topics, to support the
materiality assessment. Appendix E provides an illustrative flowchart of which Disclosure
Requirements and datapoints are mandatory based on the materiality assessment described
in this chapter.
30. For this purpose, a sustainability matter is “material” for the undertaking when it meets the
criteria defined for impact materiality (see chapter 3.4 Impact materiality) or financial materiality
(see chapter 3.5 Financial materiality) or both.
31. The undertaking shall disclose the following mandatory information:
(a) [draft] ESRS 2 General disclosures, i.e., all its Disclosure Requirements (including
their datapoints);
(b) the datapoints prescribed in topical [draft] ESRS that are listed in Appendix D of
ESRS 2 General disclosures that stem from other EU legislation;
(c) [draft] ESRS E1 Climate change, i.e., all its Disclosure Requirements (including their
datapoints);
(d) the following Disclosure Requirements (including their datapoints) of [Draft] ESRS S1
Own workforce: S1- 6 Characteristics of the Undertaking’s Employees, S1- 7
Characteristics of non-employee workers in the undertaking’s value chain and S1- 8
Collective bargaining coverage and social dialogue; and
(e) only for undertakings with 250 or more employees, Disclosure Requirements
(including their datapoints) on policies, actions and targets in ESRS S1 Own workforce
(Disclosure Requirements from S1-1 to S1-5).
32. When the undertaking concludes that a sustainability matter is material as a result of its
materiality assessment, it shall:
(a) report according to the Disclosure Requirements (including Application Requirements)
related to that specific sustainability matter in the relevant [draft] ESRS (i.e., topical or
sector-specific); and
(b) develop and report additional appropriate entity-specific disclosures (refer to chapter
1.4 of this [draft] ESRS) when the material sustainability matter, or a specific
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disclosure related to a matter, is not covered by a [draft] ESRS or is covered with
insufficient granularity.
33. When reporting on policies, actions and targets following either ESRS 2 or for material topics
following a topical ESRS, the undertaking cannot omit a Disclosure Requirement or a datapoint
of a disclosure requirement. However, if the undertaking cannot disclose the information
prescribed by the Disclosure Requirements on policies, actions and targets, because it has
not implemented the respective policies, actions and targets, it shall disclose this to be the
case and it may report a timeframe in which it aims to have such policies, actions or targets in
place.
34. When reporting on a material sustainability matter according to the Metrics and Targets section
of the relevant [draft] ESRS, the undertaking may omit:
(a) the information prescribed by a Disclosure Requirement, if it assesses such
information to be not material; and
(b) the information prescribed by a datapoint of a Disclosure Requirement, if it assesses
such information to be not material, and concludes that such information is not needed
to meet the disclosure objective of the specific Disclosure Requirement.
35. A specific information prescribed by a Disclosure Requirement (including its datapoints) or an
entity-specific disclosure shall be included when the undertaking assesses it to be relevant
from one or more of the perspectives in (a), (b) and (c):
(a) the significance of the information in relation to the matter it purports to depict or
explain;
(b) the capacity of such information to meet the users’ needs allowing for proper decision-
making; and
(c) the need for transparency towards stakeholders.
36. The undertaking shall establish how it applies the criteria, including appropriate thresholds, to
determine:
(a) whether the information may be omitted per paragraph 33 above; and
(b) to determine the information to be disclosed as entity-specific disclosures.
37. If the undertaking concludes that a topic is not material and therefore it omits all the Disclosure
Requirements in a [draft] topical standard, it shall briefly explain the conclusions of its
materiality assessment for the topic (see Disclosure Requirement 2 IRO-2). The mandatory
information listed in paragraph 31 has to be reported also if it refers to a topic assessed to be
not material.
38. When the undertaking omits information prescribed by either a Disclosure Requirement or a
datapoint of a Disclosure Requirement in the Metrics and Targets chapter of a [draft] ESRS,
such information is considered to be implicitly disclosed as “not material for the undertaking”.
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3.3. Double materiality
39. Double materiality has two dimensions: impact materiality and financial materiality.
40. Impact materiality and financial materiality assessments are inter-related and the
interdependencies between the two dimensions shall be considered. In general, the starting
point is the assessment of impacts. A sustainability impact may be financially material from
inception or become financially material when it translates or is likely to translate into financial
effects in the short-, medium-, or long-term. Irrespective of them being financially material,
impacts are captured by the impact materiality perspective.
41. In determining the materiality of impacts, risks and opportunities in the undertaking’s value
chain, the undertaking shall focus its identification and assessment of impacts, risks and
opportunities on areas where they are deemed likely to arise, based on the nature of the
activities, business relationships, geographies or other risk factors concerned, consistent with
its materiality assessment.
42. The undertaking shall consider how it is affected by its dependence on the availability of natural
and social resources at appropriate prices and quality, independently of its potential impacts
on those resources.
43. To identify its principal impacts, risks and opportunities, the undertaking shall determine which
ones are material, and therefore reported upon in its sustainability statements, applying the
double materiality principle.
44. The undertaking shall explain how it applies the criteria set under chapters 3.4 Impact
materiality and 3.5 Financial materiality below, using appropriate thresholds. Appropriate
thresholds are necessary to determine which impacts, risks and opportunities are identified
and addressed by the undertaking as material (also referred to in respect of impacts as “most
significant” in the international instruments UN Guiding Principles on Business and Human
Rights and OECD Guidelines for Multinational Enterprises mentioned in chapter 4
Sustainability due diligence) and to determine which sustainability matters are material for
reporting purposes.
3.4 Impact materiality
45. A sustainability matter is material from an impact perspective when it pertains to the
undertaking’s material actual or potential, positive or negative impacts on people or the
environment over the short-, medium- or long term. A material sustainability matter from an
impact perspective includes impacts caused or contributed to by the undertaking and impacts
which are directly linked to the undertaking’s own operations, its products, and services
through its business relationships. Business relationships include the undertaking’s upstream
and downstream value chain and are not limited to direct contractual relationships.
46. In this context, impacts on people or the environment include impacts in relation to
environmental, social and governance matters.
47. The materiality assessment of a negative impact is informed by the sustainability due diligence
process defined in the international instruments of the UN Guiding Principles on Business and
Human Rights and the OECD Guidelines for Multinational Enterprises. For actual negative
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impacts, materiality is based on the severity of the impact, while for potential negative impacts
it is based on the severity and likelihood of the impact. Severity is based on
(a) the scale;
(b) scope; and
(c) irremediable character of the impact.
In the case of a potential negative human rights impact, the severity of the impact takes
precedence over its likelihood. Materiality is based on:
(a) the scale and scope of the impact for actual positive impacts;
(b) while for potential positive impacts, it is based on the scale, scope and likelihood of
the impact.
3.5 Financial materiality
48. The scope of financial materiality for sustainability reporting is an expansion of the scope of
materiality used in the process of determining which information should be included in the
undertaking’s financial statements.
49. The materiality assessment process described in paragraph 43 includes, but is not limited to,
the identification of information that is useful to investors, lenders and other creditors when
they, as primary users of general-purpose financial reporting, assess the effects of
sustainability matters on the undertaking’s cash flows, financial position and financial
performance. In particular, information is considered material for primary users of general-
purpose financial reporting if omitting, misstating or obscuring that information could
reasonably be expected to influence decisions that they make on the basis of the undertaking’s
sustainability statements.
50. A sustainability matter is material from a financial perspective if it triggers or may trigger
material financial effects on the undertaking’s development, including cash flows, financial
position and financial performance, in the short-, medium- or long-term. This is the case, in
particular, when it generates or may generate risks or opportunities that significantly influence
or are likely to significantly influence its future cash flows. Future cash flows, together with
other critical factors such as business model, strategy, access to finance and cost of capital,
are likely to influence the financial position and financial performance of the undertaking in the
short-, medium- or long-term. Risks and opportunities may derive from past events or future
events and may have effects in relation to:
(a) assets and liabilities already recognised in financial reporting or that may be
recognised as a result of future events; or
(b) factors of value creation that do not meet the financial accounting definition of assets
and liabilities and/or the related recognition criteria but contribute to the generation of
cash flows and more generally to the development of the undertaking. The latter
factors are generally referred to as “capitals” in frameworks promoting a multi-capital
approach.
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51. Financial materiality of a sustainability matter is not constrained to matters that are within the
control of the undertaking but includes material risks and opportunities attributable to business
relationships with other undertakings/stakeholders beyond the scope of financial reporting.
52. Dependencies from natural and social resources are sources of financial risks or opportunities.
Dependencies may trigger effects in two possible ways:
(a) they may influence the undertaking’s ability to continue to use or obtain the resources
needed in its business process, as well as the quality and pricing of those resources;
and
(b) they may affect the undertaking’s ability to rely on relationships needed in its business
processes in acceptable terms.
53. The materiality of risks and opportunities is assessed based on a combination of a likelihood
of occurrence and potential size of financial effects.
3.6 Material impacts or risks arising from actions to address sustainability matters
54. The undertaking’s materiality assessment process shall encompass situations where its
actions to address certain impacts or risks, or to benefit from certain opportunities in relation
to a sustainability matter, might have material adverse impacts or cause material risks in
relation to one or several other sustainability matters. For example:
(a) an action plan to decarbonise production that involves abandoning certain products
might have material negative impacts on an undertaking’s own workforce and result
in material risks due to redundancy payments; or
(b) an action plan of an automotive supplier to focus on the supply of e-vehicles might
lead to stranded assets for the production of supply parts for conventional vehicles.
55. In such situations, the undertaking shall:
(a) mention the existence of material adverse impacts or material risks together with the
actions that generate them, with a cross-reference to the topic to which the impacts or
risks relate; and
(b) provide a description of how the material adverse impacts or material risks are
addressed under the topic to which they relate.
3.7 Level of disaggregation
56. When needed for a proper understanding of its material impacts, risks and opportunities, the
undertaking shall disaggregate the reported information:
(a) by country when there are significant variations of material impacts, risks and
opportunities across countries and when presenting the information aggregated at a
higher level would obscure material impacts, risks and opportunities; or
(b) in relation to a significant site or a significant asset, when material impacts, risks and
opportunities are linked to a specific location or asset.
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57. When defining the appropriate level of disaggregation for reporting, the undertaking shall
consider the disaggregation adopted in its materiality assessment. Depending on the facts and
circumstances, a disaggregation by subsidiary may be necessary.
58. Where data from different levels, or multiple locations within a level, is aggregated, the
undertaking shall ensure that this aggregation does not obscure the specificity and context
necessary to interpret the information. The undertaking shall not aggregate material items that
differ in nature.
59. When the undertaking presents information disaggregated by sectors, it shall adopt the ESRS
sector classification. When a [draft] topical or sector-specific ESRS requires that a specific
level of disaggregation is adopted in preparing a specific material item of information, the
requirement in the [draft] topical or sector-specific ESRS shall prevail.
4 Sustainability due diligence
60. The outcome of the undertaking’s sustainability due diligence process (referred to as “due
diligence” in the international instruments mentioned below) inform the undertaking’s
assessment of its material impacts, risks and opportunities. [Draft] ESRS do not mandate any
requirement about sustainability due diligence per se; nor do they extend or modify the role of
governance bodies.
61. Sustainability due diligence is the process by which undertakings identify, prevent, mitigate
and account for material actual and potential negative impacts on the environment and people
connected with their business. These include impacts directly caused by the undertaking and
impacts to which the undertaking contributes through its activities, as well as impacts that are
otherwise directly linked to the undertaking’s own operations, its products or services through
its business relationships. Sustainability due diligence is an on-going practice that responds
to changes in the undertaking’s strategy, business model, activities, business relationships,
operating, sourcing and selling contexts. This process is described in the international
instruments of the UN Guiding Principles on Business and Human Rights and the OECD
Guidelines for Multinational Enterprises.
62. These international instruments identify a number of steps in the sustainability due diligence
process, including the identification and assessment of negative impacts connected with the
undertaking’s business through its activities and business relationships. Where an
undertaking cannot address all impacts at once, the due diligence process allows for action
to be prioritised based on the severity and likelihood of the impacts. It is this aspect of the
sustainability due diligence process that informs the assessment of material impacts (see
chapter 3.4 Impact materiality). The identification of material impacts also supports the
identification of material sustainability risks and opportunities, which are often a product of
such impacts.
63. The core elements of due diligence are reflected directly in Disclosure Requirements set out
in ESRS 2 and in the topical ESRS, as illustrated below:
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(a) embedding sustainability due diligence in governance, strategy and business model1.
This is addressed under:
i. Disclosure Requirement 2 GOV-2: Information provided to, and sustainability
matters addressed by, the undertaking’s administrative, management and
supervisory bodies;
i. Disclosure Requirement 2 GOV-3: Integration of sustainability strategies and
performance in incentive schemes; and
ii. Disclosure Requirement 2 SBM-3: Material impacts, risks and opportunities
and their interaction with strategy and business model(s).
(b) engaging with affected stakeholders2. This is addressed under:
i. Disclosure Requirement 2 GOV-2: Information provided to, and sustainability
matters addressed by, the undertaking’s administrative, management and
supervisory bodies;
ii. Disclosure Requirement 2 SBM-2: Interests and views of stakeholders;
iii. Disclosure Requirement 2 IRO-1: Description of the processes to identify and
assess material sustainability impacts, risks and opportunities;
iv. Cross-cutting Requirement 2 CCR-1: Policies adopted to manage material
sustainability matters; and
v. Topical ESRS: reflecting the different stages and purposes of stakeholder
engagement throughout the sustainability due diligence process.
(c) identifying and assessing negative impacts on people and the environment3. This is
addressed under:
i. Disclosure Requirement 2 IRO-1: Description of the processes to identify and
assess material sustainability impacts, risks and opportunities; and
ii. Disclosure Requirement 2 SBM-3: Material impacts, risks and opportunities
and their interaction with strategy and business model(s);
1 As reflected in (a) UN Guiding Principle 16 and its commentary; and the UN Interpretive Guide, Questions 21 and 25 as well
as (b) OECD Guidelines Chapter II on General Policies (para A.10), and chapter IV on Human Rights (para 4; and para 44 of
the Commentary); and OECD Due Diligence Guidance, Section II (1.1 and 1.2) and Annex, Questions 14 and 15.
2 As reflected in (a) UN Guiding Principle 18 and its Commentary, UN Guiding Principle 20, Commentary to UN Guiding
Principles 21 and 29, and UN Guiding Principle 31(h) and its Commentary; and the UN Interpretive Guide, Questions 30, 33, 42
and 76 as well as (b) OECD Guidelines Chapter II on General Policies (para A.14 and para 25 of the Commentary); and OECD
Due Diligence Guidance, Section II (2.1.c, 2.3. 2.4.a, 3.1.b and 3.1.f) and Annex Questions 8-11.
3 As reflected in (a) UN Guiding Principles 17, 18 and 24 and their Commentaries, and the Commentary to UN Guiding Principle
29; and the UN Interpretive Guide, Questions 9, 12-13, 27-28, 36-42, and 85-89 and (b) OECD Guidelines Chapter II on General
Policies (paras A.10-11 and para 14 of the Commentary), and Chapter IV on Human Rights (paras 1-2 and paras 41-43 of the
Commentary); and OECD Due Diligence Guidance, Section II (2.1-2.4) and Annex Questions 3-5, and 19-31).
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(d) taking action to address negative impacts on people and the environment4. This is
addressed under:
i. Cross-cutting Requirement 2 CCR-2: Actions and resources in relation to
material impacts, risks and opportunities; and
ii. Topical ESRS: reflecting the range of actions, including transition plans
through which impacts are addressed; and
(e) tracking the effectiveness of these efforts5. This is addressed under:
i. Cross-cutting Requirement 2 CCR-3 Tracking effectiveness of policies and
actions through metrics and targets; and
ii. Topical ESRS: regarding performance metrics and targets.
5 Value chain
5.1 Reporting undertaking and value chain
64. The reporting undertaking for the sustainability statements shall be the one retained for the
related financial statements. For example, if the reporting undertaking is a group and if the
parent company is required to prepare consolidated financial statements, the consolidated
financial and sustainability statements will be for the parent and its subsidiaries.
65. The scope of the sustainability statements shall be extended beyond the reporting undertaking,
such that they integrate in the reporting the material impacts, risks and opportunities of the
undertaking’s upstream and downstream value chain:
(a) following the outcome of its materiality assessment and of its sustainability due
diligence activities; and
(b) in accordance with specific requirements of topical or sector-specific ESRS, when they
exist.
66. The aim of this integration of reporting is to include information on the material impacts, risks
and opportunities connected to the undertaking through its direct and indirect business
relationships in the upstream and/or downstream value chain (‘value chain information’). This
does not require information on each and every entity in the value chain, but the inclusion of
material value chain information.
67. The undertaking shall include material value chain information when this is necessary to:
4 As reflected in (a) UN Guiding Principles 19, 22 and 23 and their Commentaries; and the UN Interpretive Guide, Questions
11, 32, 46-47, 64-68 and 82-83 and (b) OECD Guidelines Chapter II on General Policies (paras A.12 and paras 18-22 of the
Commentary), and Chapter IV on Human Rights (paras 3 and 42-43 of the Commentary); and OECD Due Diligence Guidance,
Section II (3.1-3.2) and Annex Questions 32-40).
5 As reflected in (a) UN Guiding Principles 20 and 31(g) and their Commentaries; and the UN Interpretive Guide, Questions 49-
53 and 80 and (b) OECD Due Diligence Guidance, Section II (4.1 and 5.1) and Annex Questions 41-47.
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(a) allow users of sustainability statements to understand the undertaking’s material
impacts, risks and opportunities; and/or
(b) produce a set of information that meets the qualitative characteristics of information
(refer to Appendix C).
68. When determining at which level (within its own operations and its upstream and downstream
value chain) a material sustainability matter arises, the undertaking shall use its assessment
of impacts, risks and opportunities following the double materiality principle (see chapter 3
Double materiality as the basis for sustainability disclosures).
69. When associates or joint ventures, accounted for under the equity method or proportionally
consolidated in the financial statements, are part of the undertaking’s value chain, the
undertaking shall include their information, following paragraph 66, consistent with the
approach adopted for the other business relationships in the value chain. In this case, when
determining impact metrics, the data of the associate or joint venture are not limited to the
share of equity held, but taken into account on the basis of the impacts that are directly linked
to the undertaking’s products and services through its business relationships.
5.2 Estimation using sector averages and proxies
70. The undertaking’s ability to obtain the necessary value chain information, as well as its
capacity to contribute to the management of impacts, risks and opportunities arising in the
value chain, may vary depending on various factors, such as the undertaking’s contractual
arrangements, the level of control that it exercises on the operations outside the consolidation
scope and its buying power. When the undertaking does not have the ability to control the
activities of its value chain and its business relationships, obtaining value chain information
may be more challenging.
71. If collecting the information about the undertaking’s upstream and downstream value chain as
required by paragraph 66 is impracticable, (i.e. the undertaking cannot collect the necessary
data after making reasonable efforts to do so), the undertaking shall estimate the information
to be reported about its upstream and downstream value chain, by using all reasonable and
supportable information, such as sector-average data and other proxies. Obtaining value chain
data could also be challenging in the case of SMEs and other value chain entities that are not
in the scope of the CSRD. Reference is made to Disclosure Requirement 2 BP-2 Disclosures
in relation to specific circumstances.
72. With reference to policies, actions, and targets, the reporting includes the value chain
information to the extent that those policies, actions, and targets involve the actors in the value
chain. With reference to metrics, in many cases, in particular for environmental matters for
which proxies are available, an undertaking may be able to comply with the reporting
requirements without collecting data from the actors in its value chain, for example, in case of
calculating an undertaking’s GHG Scope 3 emissions.
73. The incorporation of estimates made using sector-average data or other proxies shall not result
in information that does not meet the qualitative characteristics of information (see chapter 2
Qualitative characteristics of information and paragraph 88ainty).
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74. One way through which the undertaking can demonstrate reasonable effort in collecting data
from actors in its value chain, is where the undertaking may use its leverage over its value
chain or may increase leverage over the value chain, e.g. through collaboration with other
companies and stakeholders that could help to do so.
6 Time horizon
6.1 Reporting period
75. The reporting period for the undertaking’s sustainability statements shall be consistent with
that of its financial statements.
6.2 Linking past, present and future
76. The undertaking shall establish appropriate linkage in its sustainability statements between
retrospective and forward-looking information, when relevant, to foster a clear understanding
of how historical data relate to future-oriented data.
6.3 Reporting progress against the base year
77. A base year is the historical reference date or period for which information is available and
against which subsequent information can be compared over time.
78. The undertaking shall present comparative information in respect of the base year for amounts
reported in the current period when reporting the developments and progress towards a target,
unless the relevant Disclosure Requirement already defines how to report progress. The
undertaking may also include historical information about achieved milestones between the
base year and the reporting period when this is relevant information.
6.4 Definition of short-, medium- and long-term for reporting purposes
79. When preparing its sustainability statements, the undertaking shall adopt the following time
intervals as of the end of the reporting period:
(a) for short-term: the period adopted by the undertaking as reporting period in its financial
statements;
(b) for medium-term: from the end of the reporting period for short-term per (a) above to
five years; and
(c) for long-term: more than five years.
80. The undertaking shall use an additional breakdown for long-term when impacts or actions are
expected in period longer than five years and the time difference between them is such that
an additional breakdown is necessary to provide relevant information to users of sustainability
statements.
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81. If different definitions of medium- or long-term time horizons are required for specific items of
disclosure in a [draft] topical or sector specific ESRS, the definitions in the [draft] topical or
sector specific ESRS prevail.
82. There may be circumstances where the use of the time intervals in paragraph 78 for medium-
or long-term results in non-relevant information, as the undertaking uses a different definition
for (i) its processes of identification and management of material impacts, risks and
opportunities or (ii) the definition of its actions and setting targets. These circumstances may
be due to industry-specific characteristics, such as cash flow and business cycles, the
expected duration of capital investments, the time horizons over which the users of
sustainability statements conduct their assessments and the planning horizons typically used
in an undertaking’s industry for decision-making. In these circumstances, the undertaking may
adopt a different definition of medium- and/or long-term (refer to Disclosure Requirement 2 BP
–2 Disclosures in relation to specific circumstances).
7 Preparation and presentation of sustainability information
83. This chapter provides general requirements to be applied when preparing and presenting
sustainability information.
7.1 Presenting comparative information
84. The undertaking shall disclose one year of comparative information in respect of all metrics
disclosed in the current period. When such information would be relevant to an understanding
of the current period’s sustainability disclosures, the undertaking shall also disclose
comparative information for narrative and descriptive sustainability disclosures.
85. When providing sustainability-related financial disclosures an undertaking shall disclose
comparative information that reflects updated estimates. When the undertaking reports
comparative information that differs from the information reported in the previous period it shall
disclose:
(a) the difference between the amount reported in the previous period and the revised
comparative amount; and
(b) the reasons for the revision of the amounts.
86. Sometimes, it is impracticable to adjust comparative information for one or more prior periods
to achieve comparability with the current period. For example, data might not have been
collected in the prior period(s) in a way that allows either retrospective application of a new
definition of a metric or target or retrospective restatement to correct a prior period error, and
it may be impracticable to recreate the information (refer to paragraphs 11 and 12 of ESRS 2).
When it is impracticable to adjust comparative information for one or more prior periods, the
undertaking shall disclose this fact.
87. When a [draft] topical standard requires the undertaking to present more than one comparative
period for a metric or datapoint, the requirements of that [draft] Standard shall prevail.
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7.2 Sources of estimation and outcome uncertainty
88. When metrics, including value chain information (see chapter 5 Value chain), cannot be
measured directly and can only be estimated, measurement uncertainty may arise.
89. The use of reasonable assumptions and estimates, including scenario or sensitivity analysis,
is an essential part of preparing sustainability-related metrics and does not undermine the
usefulness of the information, if the assumptions and estimates are accurately described and
explained. Even a high level of measurement uncertainty would not necessarily prevent such
an assumption or estimate from providing useful information or meeting the qualitative
characteristics of information (refer to Appendix C).
90. When sustainability-related disclosures include or are related to financial data and
assumptions, such data and assumptions shall be consistent to the extent possible with the
corresponding financial data and assumptions used in the undertaking’s financial statements.
91. Some [draft] ESRS require the disclosure of information such as explanations about possible
future events that have uncertain outcomes. In judging whether information about such
possible future events is material, the undertaking shall refer to the criteria in Chapter 3 Double
materiality as the basis for sustainability disclosures and consider:
(a) the potential effects of the events on the value, timing and certainty of the
undertaking’s future cash flows, financial position and performance including in the
long term (the possible outcome);
(b) the potential effects of the events on the determinants of severity and on the likelihood
of material impacts on people or the environment; and
(c) the full range of possible outcomes and the likelihood of the possible outcomes within
that range.
92. When assessing the possible outcomes, the undertaking shall consider all relevant facts and
circumstances, including information about low-probability and high-impact outcomes, which,
when aggregated, could become material. For example, the undertaking might be exposed to
several sustainability-related impacts or risks, each of which could cause the same type of
disruption; such as disruptions to the undertaking’s supply chain. Information about an
individual source of risk might not be material if disruption from that source is highly unlikely to
occur. However, information about the aggregate risk (the risk of supply chain disruption from
all sources) might be material. (Refer to Disclosure Requirement 2 BP-2 Disclosures in relation
to specific circumstances).
7.3 Updating disclosures about events after the end of the reporting period
93. In some cases, an undertaking may receive information after the reporting period but before
the management report is approved for issuance. If such information provides evidence or
insights about conditions existing at period end, the undertaking shall consider it and, where
appropriate, update estimates and sustainability disclosures, in the light of the new information.
94. When such information provides evidence or insights about conditions that arise after the
reporting period end, the undertaking shall provide qualitative or narrative information
indicating the existence, nature and potential consequences of these post-year end events.
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7.4 Changes in preparation or presentation of sustainability information
95. The definition and calculation of metrics, including metrics used to set and monitor targets,
shall be consistent over time. If a metric or target is redefined or replaced, an undertaking shall
provide restated comparative figures, unless it is impracticable to do so. Reference is made to
Disclosure Requirement 2 BP-2 Disclosure in relation to specific circumstances.
7.5 Reporting errors in prior periods
96. The undertaking shall correct material prior period errors by restating the comparative amounts
for the prior period(s) disclosed unless it is impracticable to do so.
97. Prior period errors are omissions from, and misstatements in, the undertaking’s sustainability
statements for one or more prior periods. Such errors arise from a failure to use, or misuse of,
reliable information that:
(a) was available when the management report that includes the sustainability statements
for those periods was authorised for issuance; and
(b) could reasonably be expected to have been obtained and considered in the
preparation of sustainability disclosures included in these reports.
98. Such errors include: the effects of mathematical mistakes, mistakes in applying the definitions
for metrics and targets, oversights or misinterpretations of facts, and fraud.
99. Potential errors in the current period discovered in that period are corrected before the
management report is authorised for issue. However, material errors are sometimes not
discovered until a subsequent period.
100. When it is impracticable to determine the effect of an error on all prior periods presented,
the undertaking shall restate the comparative information to correct the error from the earliest
date practicable. When correcting disclosures for a prior period, the undertaking shall not use
hindsight either in making assumptions about what the management’s intentions would have
been in a prior period or in estimating the amounts disclosed in a prior period. This requirement
applies to correction of both backward-looking and forward-looking disclosures.
101. Corrections of errors are distinguished from changes in estimates. Estimates are to be
revised as soon as additional information becomes available (refer to Disclosure Requirement
2 BP-2 Disclosures in relation to specific circumstances).
7.6 Consolidated reporting and subsidiary exemption
102. When the undertaking is reporting at a consolidated level the undertaking shall perform
its assessment of material impacts, risks and opportunities for the entire consolidated group,
regardless of its group legal structure. It shall ensure that all subsidiaries are covered in a way
that allows for the unbiased identification of material impacts, risks and opportunities. Criteria
and thresholds for assessing an impact, risk or opportunity as material shall be determined
based on chapter 3 Double materiality as the basis for sustainability information.
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103. Where the undertaking identifies significant differences between material impacts, risks
or opportunities at group level and material impacts, risks or opportunities of one or more of
its subsidiaries, the undertaking shall provide an adequate description of the impacts, risks
and opportunities, as appropriate, of the subsidiary or subsidiaries concerned.
104. When assessing whether the differences between material impacts, risks or opportunities
at group level and material impacts, risks or opportunities of one or more of its subsidiaries are
significant, the undertaking may consider different circumstances, such as whether the
subsidiary or subsidiaries operate in a different sector than the rest of the group or the
circumstances reflected in chapter 3.7 Level of disaggregation.
7.7 Information on intellectual property, know-how or results of innovation
105. When disclosing on its strategy, plans and actions, where a specific piece of information
corresponding to intellectual property, know-how or the results of innovation is relevant to meet
the objective of a Disclosure Requirement, the undertaking may nevertheless omit that specific
piece of information if it meets all of the following criteria:
(a) it is secret in the sense that it is not, as a body or in the precise configuration and
assembly of its components, generally known among or readily accessible to persons
within the circles that normally deal with the kind of information in question;
(b) it has commercial value because it is secret; and
(c) it has been subject to reasonable steps by the undertaking to keep it secret.
106. In case a specific piece of information corresponding to intellectual property, know-how
or the results of innovation is omitted because it meets these criteria, the undertaking shall
comply with the disclosure requirement in question by disclosing all required information with
the exception of that specific piece of information.
107. The undertaking shall make every reasonable effort to ensure that beyond the omission
of the specific information, the overall relevance of the disclosure is not impaired.
8 Structure of sustainability statements
108. This chapter provides the basis for the presentation of the information about sustainability
matters prepared in compliance with the CSRD and the [draft] ESRS (i.e., sustainability
statements) within the undertaking’s management report. Such information is presented in a
dedicated section of the management report identified as the sustainability statements.
Appendix G provides an illustrative example on the requirements of this chapter.
8.1 General presentation requirement
109. Sustainability information shall be presented:
(a) in a way that allows a distinction between information required by disclosures in [draft]
ESRS and other information included in the management report; and
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(b) under a structure that facilitates access to and understanding of the sustainability
statements, both in human and machine-readable formats.
8.2 Content and structure of the sustainability statements
110. Except for the possibility to incorporate information by reference in chapter 9.1, the
undertaking shall report all the applicable disclosures (sector-agnostic, sector-specific and
entity-specific) required by [draft] ESRS as per chapter 1 Categories of [draft] standards and
disclosures under [draft] ESRS, within a single section of the management report.
111. The undertaking shall report, in its sustainability statements, the disclosures pursuant to
Article 8 of Regulation 2020/852 (EU Taxonomy) on the establishment of a framework to
facilitate sustainable investment and identify such disclosures.
112. Subject to the provisions of chapter 2 Qualitative characteristics of information, the
undertaking may include in its sustainability statements additional disclosures stemming from
(i) local legislations, and (ii) generally accepted sustainability reporting pronouncements of
other standard setting bodies and non-mandatory guidance including sector-specific guidance
(such as technical material issued by the International Sustainability Standard Board or the
Global Reporting Initiative). Such disclosures shall be clearly identified with an appropriate
reference to the related legislation, pronouncement or guidance and shall complement [draft]
ESRS Disclosure Requirements (see Disclosure Requirement 2 BP-2).
113. The undertaking shall structure its sustainability statements in four parts: general
information, environmental information, social information and governance information in the
order prescribed in Appendix F. Respecting the provision in chapter 3.6, when information
provided in one part is also covering information to be reported in another part, the undertaking
may refer in one part to information presented in another part, avoiding duplications. The
undertaking may apply the detailed structure illustrated in Appendix G.
114. When reporting the disclosures required by [draft] sector-specific ESRS, the undertaking
shall group those disclosures by cross-cutting reporting areas and, where applicable, by
sustainability topics and report them alongside the relevant sector-agnostic disclosures.
115. Where the undertaking develops material entity-specific disclosures in accordance with
chapter 1.4 Entity-specific disclosures, it shall report those disclosures alongside the most
relevant sector-agnostic and sector-specific disclosures.
9 Linkages with other parts of corporate reporting and connected
information
116. The undertaking shall provide information that enables users of its sustainability
statements to assess the connections between various information about impacts, risks and
opportunities in these statements and related information in other parts of its corporate
reporting.
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9.1 Incorporation by reference
117. Provided that the conditions in paragraph 117 are met, information prescribed by a
Disclosure Requirement of an [draft] ESRS (including a specific datapoint prescribed by a
Disclosure Requirement) may be incorporated in the sustainability statements by reference to:
(a) another section of the management report;
(b) the financial statements;
(c) the corporate governance report (if not part of the management report);
(d) the remuneration report required by the 2007/36/EC directive; and
(e) public disclosures under regulation 575/2013 (Pillar 3 disclosures) [and the regulation
implementing Directive 2009/138/EC (Solvency II)].
118. Incorporation by reference to the documents listed in paragraph 116 is allowed, provided
that the disclosures incorporated by reference:
(a) constitute a separate element of information clearly identified as addressing the
relevant Disclosure Requirement (or the relevant specific datapoint prescribed by a
Disclosure Requirement) in such other document (as per paragraph 116 (a) to (e)
respectively);
(b) are published at the same time as the management report;
(c) are subject to at least the same level of assurance as the sustainability statements;
and
(d) are available with the same technical digitalisation requirements as other information
pertaining to the sustainability statements.
119. Provided that the conditions in paragraph 117 are met, information prescribed by a
Disclosure Requirement of a [draft] ESRS (including a specific datapoint prescribed by a
Disclosure Requirement) may be incorporated in the sustainability statements by reference to
the EU Eco-Management and Audit Scheme (EMAS). In this case, the undertaking shall
ensure that the information incorporated by reference is produced using the same basis for
preparation of ESRS information, including scope of consolidation and treatment of value chain
information.
120. In the preparation of its sustainability statements using incorporation by reference, the
undertaking shall consider the overall cohesiveness of the reported information and ensure
that the incorporation by reference does not impair the readability of the sustainability
statements. Appendix H is an illustrative example of incorporation by reference. Reference is
made to Disclosure Requirement 2 BP-2.
9.2 Connected information and connectivity with financial statements
121. The undertaking shall describe the relationships between different pieces of information.
Doing so could require connecting narrative information on governance, strategy and risk
management to related metrics and targets. For example, to allow users to assess connections
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in information, the undertaking might need to explain the effect or likely effect of its
sustainability strategy on its financial statements or financial plans, or on metrics and targets
used to measure progress against performance. Furthermore, the undertaking might need to
explain how its use of natural resources and changes within its supply chain could amplify,
change or reduce its material sustainability impact, risks and opportunities. It may need to link
this information to the potential or actual effect(s) on its production costs, its strategic response
to mitigate such impacts, risks and its related investment in new assets. This information may
also need to be linked to information in the financial statements and to specific metrics and
targets. Information that describes connections shall be clear and concise.
122. When the sustainability statements include monetary amounts or other quantitative data
points that are above a threshold for material information and are directly presented in financial
statements, the undertaking shall include a reference to the relevant paragraph of its financial
statements where the corresponding information can be found.
123. In some cases, sustainability statements may include monetary amounts or other
quantitative datapoints above a threshold for material information that are either an
aggregation of, or a part of, monetary amounts or quantitative data presented in the
undertaking’s financial statements. If this is the case, the undertaking shall explain how these
relate to the most relevant amount(s) presented in the financial statements. This disclosure
shall include a reference to the line item and/or to the relevant paragraph(s) of its financial
statements where the corresponding information can be found. For significant amounts, a
reconciliation shall be provided, and it may be presented in a tabular form.
124. When there is no direct or indirect link, the undertaking shall state (based on a threshold
for material information) the consistency of data, assumptions used, and qualitative information
included in its sustainability statements with the corresponding data, assumptions and
qualitative information included in the financial statements. This may occur when the
sustainability statements include:
(a) monetary amounts or other quantitative data linked or interdependent with monetary
amounts or other quantitative data presented in financial statements, but a direct
reconciliation is not possible; or
(b) qualitative information linked or interdependent with qualitative information presented
in financial statements.
125. Consistency as required by paragraph 122 shall be at the level of a single data point and
shall include a reference to the relevant line item / paragraph of a footnote of the financial
statements. When significant data, assumptions and qualitative information are not consistent,
the undertaking shall state that fact and explain the reason.
126. Examples of items for which the statement in paragraph 122 subject to the threshold for
material information is required are:
(a) when the same metric is presented as of the reporting date in financial statements and
in forecast for future periods in the sustainability statements; and
(b) when macroeconomic or business projections are used to develop metrics in the
sustainability statements and they are also relevant in estimating the recoverable
amount of assets, the amount of liabilities or provisions in financial statements.
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127. [Draft] topical and sector-specific ESRS may include requirements to include
reconciliations or to illustrate consistency of data and assumptions for specific Disclosure
Requirements. In such cases, the requirements in these [draft] ESRS shall prevail.
10. Transitional provisions
10.1. Transitional provision related to chapter 1.4 Entity-specific disclosures
128. The extent to which sustainability matters are covered by [draft] ESRS is expected to
evolve as further sector-agnostic and sector-specific Disclosure Requirements are
developed. Therefore, the need for entity-specific disclosures is likely to decrease over time.
129. When defining its entity-specific disclosures, the undertaking may adopt transitional
measures for their preparation in the first three annual sustainability statements under which
it shall as a priority:
(a) introduce in its reporting those entity-specific disclosures that it reported in prior
periods, if these disclosures meet or are adapted to meet the characteristics of quality
referred to under chapter 2 Qualitative characteristics of information; and
(b) complement its disclosure, prepared on the basis of the [draft] sector-agnostic ESRS,
with an appropriate set of additional disclosures to cover sustainability matters that
are material for the undertaking in its sector(s), using the available best practice and/or
available frameworks or reporting standards [such as Appendix B for IFRS S2
(industry-specific climate standard) and GRI Sector Standards].
10.2 Transitional provision related to chapter 5 Value chain
130. For the first three years of application of sustainability reporting under [draft] ESRS of an
undertaking, if not all the necessary information regarding the value chain is available, the
undertaking shall explain the efforts made to obtain the value chain information, the reasons
why this information could not be obtained, and the plans of the undertaking to obtain such
information in the future. In any case, also in the first three years, the undertaking is expected
to use in-house available value chain information when applying chapter 5 Value chain.
131. For the first three years of preparation of its sustainability reporting applying [draft] ESRS,
in order to limit the burden for SMEs that are a part of the value chain, the incorporation of
information on impacts, risks and opportunities on matters connected to the undertaking by its
direct and indirect business relationships in the upstream and/or downstream value chain (as
required by paragraph 65) is not required, except for the following, for which undertakings are
allowed to report using solely value chain information available in-house:
(a) datapoints listed in Appendix D of [draft] ESRS 2;
(b) [draft] ESRS 2 General disclosures; and
(c) Disclosure Requirements on policies, actions and targets in the [draft] topical ESRS.
132. Starting from the fourth year of application, the undertaking shall incorporate information
on impacts, risks and opportunities on matters connected to the undertaking by its direct and
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indirect business relationships in the upstream and/or downstream, as required by paragraph
66. In this context, the information required by ESRS to be obtained from SME undertakings
in their value chains will not exceed the content of the future ESRS standard on listed SMEs.
10.3 Transitional provision related to chapter 7.1 Presenting comparative information
133. To ease the first-time application of this [draft] Standard, an undertaking may defer the
presentation of comparative information as required by chapter 7.1 Presenting comparative
information by one year.
10.4 Transitional provision: List of Disclosure Requirements that are phased-in for
[draft] ESRS to year 2 or subsequent years
134. Appendix D sets phase-in provisions for the Disclosure Requirements or datapoints of
Disclosure Requirements in topical [Draft] ESRS that may be omitted or that are not applicable
in the first year(s) of preparation of the sustainability statements applying [Draft] ESRS.
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Appendix A: Defined terms
This appendix is an integral part of the proposed [draft] ESRS 1 and has the same authority as the
other parts of the [draft] Standard.
Actions Actions refer to (i) activities and action plans (including transition plans) that are
undertaken to ensure that the undertaking delivers against targets set and through
which the undertaking seeks to address material impacts, risks and opportunities;
and (ii) decisions to support these with financial, human or technological resources.
Actors in the
value chain
Actors in the value chain are individuals or entities in the upstream or downstream
value chain. An undertaking is considered downstream from the undertaking (e.g.,
distributors, customers) when it receives products or services from the undertaking;
it is considered upstream from the undertaking (e.g., suppliers) when it provides
products or services that are used in the development of the undertaking’s own
products or services.
Business
relationships
Business relationships include the undertaking’s relationships with business
partners, entities in its value chain, and any other non-State or State undertaking
directly linked to its business operations, products or services. Business
relationships are not limited to direct contractual relationships.
Double
materiality
Double materiality has two dimensions: impact materiality and financial materiality.
A sustainability matter meets the criterion of double materiality if it is material from
both perspectives or only either from the impact perspective or the financial
perspective.
ESRS Sectors Groups of economic activities classified into sectors and sector groups for the
purpose of applying sector-specific [Draft] ESRS.
Financial
materiality
A sustainability matter is material from a financial perspective if it triggers or may
trigger material financial effects on the undertaking’s development, performance,
and position in the short-, medium- or long-term. This is the case, in particular, when
it generates or may generate risks or opportunities that influence or are likely to
influence significantly its future cash flows.
Impact
materiality
A sustainability matter is material from an impact perspective when it pertains to the
undertaking’s material actual or potential, positive or negative impacts on people or
the environment over the short-, medium- or long-term. A material sustainability
matter from an impact perspective also includes impacts caused or contributed to
by the undertaking and impacts which are directly linked to the undertaking’s
operations, products, and services through its business relationships.
Metrics Qualitative and quantitative indicators that the undertaking uses to measure and
report on the effectiveness of the delivery of its sustainability-related policies and
against its targets over time. Metrics also support the measurement of the
undertaking’s results in respect of affected people, the environment and the
undertaking.
Policy A policy is a set or framework of general objectives and management principles that
the undertaking uses for decision-making. A policy implements the undertaking’s
strategy or management decisions related to a material sustainability matter. Each
policy is under the responsibility of defined person(s), specifies its perimeter of
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application, and includes one or more objectives (linked when applicable to
measurable targets). A policy is validated and reviewed following the undertakings’
applicable governance rules. A policy is implemented through actions or action
plans.
Stakeholder(s) Stakeholders are those who can affect or be affected by the undertaking.
There are two main groups of stakeholders:
(a) affected stakeholders: individuals or groups whose interests are affected or
could be affected – positively or negatively – by the undertaking’s activities and
its direct and indirect business relationships across its value chain; and
(b) users of sustainability statements: primary users of general-purpose financial
reporting (existing and potential investors, lenders and other creditors including
asset managers, credit institutions, insurance undertakings), as well as other
users, including the undertaking’s business partners, trade unions and social
partners, civil society and non-governmental organisations, governments,
analysts and academics.
Some, but not all, stakeholders may belong to the two groups.
Sustainability
matters
Sustainability matters are sustainability factors as defined in Article 2, point (24) of
Regulation (EU) 2019/2088 of the European Parliament and the Council, that is
environmental, social and employee matters, respect for human rights, anti‐
corruption and anti‐bribery matters; and governance factors.
Sustainability
statements
A separately identifiable section or the parts of the management report that contain
the sustainability information required by the applicable [draft] ESRS.
Targets Measurable, outcome-oriented goals that the undertaking aims to achieve in relation
to material impacts, risks or opportunities.
Value chain Value chain is the full range of activities, resources and relationships related to the
undertaking’s business model(s) and the external environment in which it operates.
A value chain encompasses the activities, resources and relationships an
undertaking uses and relies on to create its products or services from conception to
delivery, consumption and end-of-life. Relevant activities, resources and
relationships include:
a) those in the undertaking’s operations, such as human resource;
b) those along its supply, marketing and distribution channels, such as
materials and service sourcing and product and service sale and delivery;
and
c) the financing, geographical, geopolitical and regulatory environments in
which the undertaking operates.
Note: Entities upstream from the undertaking (e.g., suppliers) provide products or
services that are used in the development of the undertaking’s products or services.
Entities downstream from the undertaking (e.g., distributors, customers) receive
products or services from the undertaking.
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Appendix B: Application Requirements
This appendix is an integral part of the proposed [draft] ESRS 1 and has the same authority as the
other parts of the [draft] Standard.
This appendix states application requirements for:
(1) the assessment of double materiality
(2) value chain; and
(3) content and structure of the sustainability statements.
3.3 Application requirements – Double materiality as the basis for sustainability
disclosures
Stakeholders and their relevance to the materiality assessment process
AR 1. Common categories of stakeholders are: lenders, shareholders and other investors,
business partners, employees and other workers, suppliers, trade unions, civil society and
non-governmental organisations, consumers, customers, end-users, governments, local
communities and vulnerable groups, authorities (including regulators, supervisors and
central banks).
AR 2. Nature may be considered as a silent stakeholder. In this case, ecological data and
data on the conservation of species may support the undertaking’s materiality assessment.
AR 3. The materiality assessment is informed by the dialogue with some categories of
affected stakeholders. The undertaking may engage with some categories of affected
stakeholders or their representatives (such as employees or trade unions), along with
users of sustainability reporting and other experts, to provide inputs or feedback on its
conclusions regarding its material impacts, risks and opportunities.
Materiality assessment and determination of material sustainability matters
AR 4. In assessing impact materiality and determining the material matters to be reported,
the undertaking shall consider the following four steps:
(a) understanding of the context in relation to its impacts including its activities, business
relationships, sustainability context and stakeholders;
(b) identification of actual and potential impacts (both negative and positive), through
engaging with relevant stakeholders and experts. In this step the undertaking may rely
on scientific and analytical research on impacts on sustainability matters;
(c) assessment of the materiality of its actual and potential impacts; and
(d) determination of the material matters. In this step, the undertaking shall adopt
thresholds to determine which of the impacts will be covered in its sustainability
statements.
Characteristics of severity
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AR 5. The severity is determined by the following factors:
(a) scale: how grave the negative impact is/how beneficial the positive impact is for people
or the environment;
(b) scope: how widespread the negative/positive impacts are. In case of environmental
impacts, the scope may be understood as the extent of environmental damage or a
geographical perimeter. In case of impacts on people, the scope may be understood
as the number of people adversely affected; and
(c) irremediable character: whether and to what extent the negative impacts could be
remediated, i.e., restoring the environment or affected people to their prior state.
AR 6. Any of the three characteristics (scale, scope, and irremediable character) can
make an impact severe. In the case of a potential negative human rights impact, the
severity of the impact takes precedence over its likelihood.
Impacts directly linked to the undertaking
AR 7. As an illustration:
(a) if the undertaking uses cobalt in its products that is mined using child labour, the
negative impact (i.e., child labour) is directly linked to the undertaking’s products
through the tiers of business relationships in its supply chain. These relationships
include the smelter and minerals trader and the mining enterprise that uses child
labour, even though the undertaking has not caused or contributed to the negative
impact itself. Similarly, if the undertaking is procuring energy from specific on-shore
wind-parks, for example by having a contractual relationship with the operators of such
wind-parks or with distributors of energy from those wind-parks it is directly linked to
the negative impacts of land-use on biodiversity; and
(b) if the undertaking provides financial loans to an enterprise for business activities that,
in breach of agreed standards, result in the contamination of water and land
surrounding the operations, this negative impact is directly linked to the undertaking
through its relationship with the enterprise it provides the loans to.
Assessment of financial materiality
AR 8. The following are examples of how dependencies are sources of risks or
opportunities:
(a) when the undertaking’s business model depends, on a natural resource – like water –
it is likely to be affected by changes in the quality, availability and pricing of that
resource;
(b) when the undertaking’s activities result in negative impacts, e.g., on local
communities, it could become subject to stricter government regulation and/or trigger
consequences of a reputational nature. These have negative effects on the
undertaking’s brand and higher recruitment costs might arise; and
(c) when the undertaking’s business partners face material sustainability-related risks, the
undertaking could be exposed to related consequences as well.
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AR 9. The identification of risks and opportunities that affect or may affect the
undertaking’s financial development, performance and position is the starting point for
financial materiality assessment. In this context, the undertaking shall consider:
(a) the existence of triggers of financial effects (see paragraph 52);
(b) the materiality of these triggers;
(c) the classification of the material triggers as
i. risks (contributing to negative deviation in future expected cash inflows
or increase in deviation in future expected cash outflows and/or
negative deviation from expected change in capitals not recognised in
financial statements); or
ii. opportunities (contributing to positive deviation in future expected cash
inflows or decrease in deviation in future cash outflows and/or positive
deviation from expected change in capitals not recognised in financial
statements).
AR 10. Once the undertaking has identified its risks and opportunities, it shall determine
which of them are material for reporting. This shall be based on a combination of (i) the
likelihood of occurrence and (ii) the potential size of financial effects determined on the
basis of appropriate thresholds. In this step it shall consider the contribution of those risks
and opportunities to decrease or increase the undertaking’s future cash flows derived from:
(a) scenarios/forecasts that are deemed likely to materialise; and
(b) potential material financial effects related to sustainability matters deriving either from
situations with a below the “more likely than not” threshold or assets/liabilities not (or
not yet) reflected in financial statements. This includes:
i. potential situations that following the occurrence of future events may affect
cash flow generation potential;
ii. capitals that are not recognised as assets from an accounting and financial
reporting perspective but have a significant influence on financial
performance, such as natural, intellectual (organisational), human, social and
relationship capitals; and
iii. possible future events that may have an influence on the evolution of such
capitals.
Sustainability matters to be covered in materiality assessment for performance measures in
[draft] topical ESRS
AR 11. When performing its materiality assessment, the undertaking shall consider the
following list of sustainability matters covered in the topical ESRS. When, as a result of the
undertaking’s materiality assessment (see Disclosure Requirement 2 IRO-1), a given
sustainability matter in this list is assessed to be material, the undertaking shall report
according to the corresponding Disclosure Requirements of the relevant topical standard.
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AR 12. Using this list is not a substitute for the process of determining material matters.
This list is a tool to support the undertaking’s materiality assessment. The undertaking still
needs to consider its own specific circumstances when determining its material matters.
The undertaking also shall develop entity-specific disclosures on material impacts, risks
and opportunities not covered by [draft] ESRS as described in chapter 1.4 Entity-specific
disclosures.
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[Draft]
topical
standard
Sustainability matters covered in [draft] topical ESRS
Topic Sub-topic Sub-sub-topics
[draft]
ESRS E1
Climate
change6
• Energy
• GHG emissions
• Climate-related financial effects
[draft]
ESRS E2
Pollution • Pollution of air (both indoor and
outdoor)
• Pollution of water (including
groundwater)
• Pollution of soil
• Pollution of living organisms
and food resources
• Substances of concern
[draft]
ESRS E3
Water and
marine
resources
• Water withdrawals
• Water consumption
• Water use
• Water discharges in water
bodies and in the oceans
• Habitat degradation and
intensity of pressure on marine
resources
[draft]
ESRS E4
Biodiversity
and
ecosystems
• Direct impact drivers of
biodiversity loss
• Climate Change
• Land-use change
• Direct exploitation
• Invasive alien species
• Pollution
• Others
• Impacts on the state of species
Examples:
• Species population size
• Species global extinction risk
• Impacts on the extent and
condition of ecosystems
Examples:
• Land degradation
• Desertification
• Soil sealing
• Impacts and dependencies on
ecosystem services
[draft]
ESRS E5
Circular
economy
• Depletion of non-renewable
resources
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6 ESRS E1 Climate change is always mandatory.
[Draft]
topical
standard
Sustainability matters covered in [draft] topical ESRS
Topic Sub-topic Sub-sub-topics
• Regeneration of renewable
resources
• Circular business models
• Waste
[draft]
ESRS S1
Own
workforce
• Working conditions • Secure employment
• Working time
• Adequate wages
• Social dialogue
• Freedom of association
• Existence of work councils
• Collective bargaining, including
rate of workers covered by
collective agreements
• The information, consultation
and participation rights of
workers
• Work-life balance
• Health and safety
• Equal treatment and
opportunities for all
• Gender equality and equal pay
for work of equal value
• Training and skills development
• Employment and inclusion of
persons with disabilities
• Measures against violence and
harrassment in the workplace
Diversity
• Human rights, fundamental
freedoms, democratic
principles
• Child labour
• Forced labour
[draft]
ESRS S2
Workers in
the value
chain
• Working conditions • Secure employment
• Working time
• Adequate wages
• Social dialogue
• Freedom of association
• Existence of work councils
• Collective bargaining, including
rate of workers covered by
collective agreements
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[Draft]
topical
standard
Sustainability matters covered in [draft] topical ESRS
Topic Sub-topic Sub-sub-topics
• The information, consultation
and participation rights of
workers
• Work-life balance
• Health and safety
• Equal treatment and
opportunities for all
• Gender equality and equal pay
for work of equal value
• Non-discrimination
• Training and skills development
Equality in pay
• Employment and inclusion of
persons with disabilities
• Measures against violence and
harrassment in the workplace
•
• Human rights, fundamental
freedoms, democratic
principles
• Child labour
• Forced labour
[draft]
ESRS S3
Affected
communities
• Communities’ economic, social
and cultural rights
• Adequate housing
• Adequate food
• Water and sanitation
• Land-related impacts
• Security-related impacts
• Communities’ civil and political
rights
• Freedom of expression
• Freedom of assembly
• Impacts on human rights
defenders
• Rights of indigenous
communities
• Free, prior and informed
consent
• Self-determination
[draft]
ESRS S4
Consumers
and end-
users
• Information-related impacts • Privacy
• Freedom of expression
• Access to information
• Marketing practices
• Quality of information
• Complaints management
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5.2 Application requirements – Reporting undertaking and value chain
AR 13. When collecting value chain information as required by paragraph 66 is
impracticable, the undertaking shall estimate the information to be reported using all
reasonable and supportable information. This includes, but is not limited to, internal and
external information, such as data from indirect sources, sector-average data, sample
analyses, market and peer groups data, other proxies or spend-based data.
AR 14. When considering the expanded scope of the reported information in accordance
with paragraph 66, only the elements of the value chain with material Impacts, risks or
opportunities are reported on. For instance, the undertaking may – based on the materiality
assessment – consider the working conditions and the affected communities to be material
for a group of farmers, while the CO2-emissions are material in other elements of the value
chain.
8.2 Application requirements – Content and structure of the sustainability statements
AR 15. As an illustration for paragraph 113 in chapter 8.2 Content and structure of the
sustainability statements, the undertaking that reports on policies covering environment
and social in the same policy may refer, in the part dedicated to environment, to the other
part or vice versa. Consolidated presentation of policies across topics is allowed.
[Draft]
topical
standard
Sustainability matters covered in [draft] topical ESRS
Topic Sub-topic Sub-sub-topics
• Personal safety of consumers
and end-users
• Health and safety
• Security of a person
• Protection of children
• Social inclusion of consumers
and end-users
• Non-discrimination
• Access to products and
services
[draft]
ESRS G1
Business
conduct
• Protection of whistle-blowers
• Corporate culture
• Animal welfare
• Political engagement and
lobbying activities
• Management of relationships
with suppliers including
payment practices
• Corruption and bribery
• Prevention and detection
including training
• Incidents
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Appendix C: Qualitative characteristics of information
This appendix is an integral part of the [draft] ESRS 1 and has the same authority as the other parts of
the [draft] Standard.
This appendix states the qualitative characteristics that the information presented in sustainability
statements prepared according to [draft] ESRS shall meet.
Relevance
QC1. Sustainability information is relevant when it may make a difference in the decisions of users
under a double materiality approach (see chapter 3 Double materiality as the basis for [draft] ESRS
disclosures).
QC2. Information may make a difference in a decision even if some users choose not to take
advantage of it or are already aware of it from other sources. Sustainability information may impact
decisions of users if it has predictive value, confirmatory value or both. Information has predictive
value if it can be used as an input to processes employed by users to predict future outcomes.
Sustainability-related financial information does not need to be a prediction or forecast to have
predictive value, but rather has predictive value it employed by users in making their own
predictions.
QC3. Information has confirmatory value if it provides feedback about (confirms or changes)
previous evaluations.
QC4. Materiality is an entity-specific aspect of relevance based on the nature or magnitude, or
both, of the sustainability matters to which the information relates, as assessed in the context of
the undertaking’s sustainability reporting. Refer to Chapter 3 Double materiality as the basis for
sustainability disclosures.
Faithful representation
QC5. To be useful, the information must not only represent relevant phenomena, it must also
faithfully represent the substance of the phenomena that it purports to represent. Faithful
representation requires information to be (i) complete, (ii) neutral and (iii) free from error.
QC6. A complete depiction of sustainability-related impacts, risks and opportunities includes all
material information necessary for the users to understand that impact, risk or opportunity. This
includes how the undertaking has adapted its strategy, risk management and governance in
response to that impact, risk or opportunity, as well as the metrics identified to set targets and
measure performance.
QC7. A neutral depiction is without bias in its selection or disclosure of information. Information is
neutral if it is not slanted, weighted, emphasised, de-emphasised or otherwise manipulated to
make it more likely that the users will receive that information favourably or unfavourably. It shall
be balanced, so as to cover favourable/positive and unfavourable/negative aspects. Both negative
and positive material impacts from an impact materiality perspective as well as material risks and
opportunities from a financial materiality perspective shall receive equal attention. Any aspirational
sustainability information, for example targets or plans shall cover both aspirations and factors that
could prevent the undertaking from achieving these aspirations in order to have a neutral depiction.
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QC8. Neutrality is supported by the exercise of prudence which is the exercise of caution when
making judgements under conditions of uncertainty. Information shall not be netted or
compensated to be neutral. The exercise of prudence means that opportunities are not overstated
and risks are not understated. Equally, the exercise of prudence does not allow for the
understatement of opportunities or the overstatement of risks. The undertaking may present net
information, in addition to absolute values, if such presentation does not obscure relevant
information and includes a clear explanation about the effects of the netting and the reasons for
the netting.
QC9. Information can be accurate without being perfectly precise in all respects. Accurate
information implies that the undertaking has implemented adequate processes and internal
controls to avoid material errors or material misstatements. As such, estimates shall be presented
with a clear emphasis on their possible limitations and associated uncertainty (see chapter 7.2
Sources of estimation and outcome uncertainty). The amount of precision needed and attainable,
and the factors that make information accurate, depend on the nature of the information and the
nature of the matters it addresses. For example, accuracy requires that:
a) factual information is free from material error;
b) descriptions are precise;
c) estimates, approximations and forecasts are clearly identified as such;
d) no material errors have been made in selecting and applying an appropriate process for
developing an estimate, approximation or forecast, and the inputs to that process are
reasonable and supportable;
e) assertions are reasonable and based on information of sufficient quality and quantity; and
f) information about judgements about the future faithfully reflects both those judgements
and the information on which they are based.
Comparability
QC10. Sustainability information is comparable when it can be compared with information provided
by the undertaking in previous periods and, can be compared with information provided by other
undertakings, in particular those with similar activities or operating within the same industry. A point
of reference for comparison can be a target, a baseline, an industry benchmark, comparable
information from either other undertakings or from an internationally recognised organisation, etc.
QC11. Consistency is related to, but is not the same as, comparability. Consistency refers to the
use of the same approaches or methods for the same sustainability matter, from period to period
by the undertaking and other undertakings. Consistency helps to achieve the goal of comparability.
QC12. Comparability is not uniformity. For information to be comparable, like components shall
look alike and different components shall look different. Comparability of sustainability information
is not enhanced by making unlike things look alike any more than it is enhanced by making like
things look different.
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Verifiability
QC13. Verifiability helps to give users confidence that information is complete, neutral and
accurate. Sustainability information is verifiable if it is possible to corroborate either such
information itself or the inputs used to derive it.
QC14. Verifiability means that various knowledgeable and independent observers could reach
consensus, although not necessarily complete agreement, that a particular depiction is a faithful
representation. Sustainability information shall be provided in a way that enhances their
verifiability, for example:
a) including information that can be corroborated by comparing it with other information
available to users about the undertaking’s business, about other businesses or about the
external environment;
b) providing information about inputs and methods of calculation used to produce estimates
or approximations; and
c) providing information reviewed and agreed by the undertaking’s board, board committees
or equivalent bodies.
QC15. Some sustainability information will be in the form of explanations or forward-looking
information. Those disclosures can be supportable by faithfully representing on a factual basis for
example the strategies, plans and risk analyses of the undertaking. To help users decide whether
to use such information, an undertaking shall describe the underlying assumptions and methods
of producing the information, as well as other factors that provide evidence that verify that it reflects
the actual plans or decisions made by the undertaking.
Understandability
QC16. Sustainability information is understandable when it is clear, and concise. Understandable
information enables any reasonable knowledgeable user to readily comprehend the information
being communicated.
QC17. For sustainability disclosures to be concise, they need to (a) avoid generic “boilerplate”
information, that is not specific to the undertaking; (b) avoid unnecessary duplication of information,
including information also provided in financial statements; and (c) use clear language and well-
structured sentences and paragraphs. Concise disclosures shall only include material information.
Complementary information presented pursuant paragraph 112 shall be provided in a way that
avoids obscuring material information.
QC18. Clarity might be enhanced by distinguishing information about developments in the
reporting period from “standing” information that remains relatively unchanged, from one period to
the next. This can be done for example, by separately describing features of an undertaking’s
sustainability-related governance and risk management processes that have changed since the
previous reporting period compared to those that remain unchanged.
QC19. The completeness, clarity and comparability of sustainability disclosures all rely on
information being presented as a coherent whole. For sustainability disclosures to be coherent,
they shall be presented in a way that explains the context and the relationships between the related
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information. Coherence also requires the undertaking to provide information in a way that allows
users to relate information about its sustainability-related impacts, risks and opportunities to
information in the undertaking’s financial statements.
QC20. If sustainability-related risks and opportunities discussed in the financial statements have
implications for sustainability reporting, the undertaking shall include in the sustainability
statements the information necessary for users to assess those implications and present
appropriate links to the financial statements (see chapter 9 Linkages with other parts of corporate
reporting and connected information). The level of information, granularity and technicality shall
be aligned with the needs and expectations of users. Abbreviations shall be avoided and the
units of measure shall be defined and disclosed.
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Appendix D: List of phased-in Disclosure Requirements
This appendix is an integral part of the [draft] ESRS 1 and has the same authority as the other parts of
the [draft] Standard.
[draft] ESRS
Disclosure
Requirement
Full name of the DR
Phase-in or effective date
(including the first year)
[draft] ESRS 2 2 SBM-1
Strategy, business model(s),
market positions and value
chains
The undertaking shall report the information
prescribed by ESRS 2 SBM-1 paragraph 39 (b)
breakdown of total revenue by ESRS sector and (c)
for sustainability statements with a reporting period
beginning January 1, 2025 or later.
[draft] ESRS E1 E1-9
Potential financial effects of
material physical and
transition risk and climate-
related opportunities
The undertaking may omit the information prescribed
by ESRS E1-9 for the first year of preparation of its
sustainability statements.
The undertaking may comply with ESRS E1-9
reporting qualitative disclosures only, for the first
three years of preparation of its sustainability
statements, if it is impracticable to prepare
quantitative disclosures.
[draft] ESRS E2 E2-6
Potential financial effects
from pollution-related
impacts, risks and
opportunities
Except for the information prescribed by paragraph
43 (b) on the operational and capital expenditures
occurred in the reporting period in conjunction with
major incidents and deposits, the undertaking may
comply with ESRS E2-6 reporting qualitative
disclosures only, for the first three years of
preparation of its sustainability statements.
[draft] ESRS E3 E3-5
Potential financial effects
from water and marine
resources-related impacts,
risks and opportunities
The undertaking may comply with ESRS E3-5
reporting qualitative disclosures only, for the first
three years of preparation of its sustainability
statements.
[draft] ESRS E4 E4-6
Potential financial effects
from biodiversity-related
impacts, dependencies, risks
and opportunities
The undertaking may comply with ESRS E4-6
reporting qualitative disclosures only, for the first
three years of preparation of its sustainability
statements.
[draft] ESRS E5 E5-6
Potential financial effects
from resource use and
circular economy-related
impacts, risks and
opportunities
The undertaking may comply with ESRS E5-6
reporting qualitative disclosures only, for the first
three years of preparation of its sustainability
statements.
[draft] ESRS S1 S1-6,
paragraph 42
Characteristics of the
Undertaking’s employees
The undertaking may omit the gender breakdowns
required in paragraph 41 (b) for the first year of
preparation of its sustainability statements.
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[draft] ESRS
Disclosure
Requirement
Full name of the DR
Phase-in or effective date
(including the first year)
[draft] ESRS S1
S1-7,
paragraph 48
Characteristics of non-
employee workers in the
undertaking’s own workforce
The undertaking may omit reporting for all datapoints
in this Disclosure Requirement for the first year of
preparation of its sustainability statements.
[draft] ESRS S1
S1-8,
paragraph 53
Training and Skills
Development indicators
The undertaking may omit the breakdowns by
employee category defined in para 51 (a) and (b) for
the first year of preparation of its sustainability
statements.
[draft] ESRS S1
S1-11,
paragraph 66
Adequate wages
The undertaking may omit reporting on adequate
wages for non-employee workers in own workforce
for the first year of preparation of its sustainability
statements.
[draft] ESRS S1 S1-12,
paragraph 72
Social Protection
The undertaking may omit reporting on non-employee
workers for the first year of preparation of its
sustainability statements.
[draft] ESRS S1
S1-16,
paragraph 92
Collective bargaining
coverage and social dialogue
The undertaking may omit reporting for this
Disclosure Requirement on non-employee workers in
own workforce and non-EEA countries for the first
year of preparation of its sustainability statements.
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YES
NO
YES
Disclose all DRs and
their datapoints
YES
The undertaking shall
include information required
by the datapoint
1) For policies, actions and targets: all the
DR related to the matter to be applied,
including their datapoints. If the
undertaking cannot disclose this
information, it shall state this in
accordance with chapter 4.2 of ESRS 2;
2) Apply ESRS 2 related AR included in the
relevant topical standard
NO
The undertaking may omit the
DR(s) / datapoint except for those
1) prescribed by EU law
(see ESRS 2 Appendix
D); and
2) prescribed by ESRS S1
Own workforce the
Disclosure Requirements
S1-6 Characteristics of
the undertaking’s
employees; S1-7
Characteristics of non-
employee workers in the
undertaking’s own
workforce; and S1-15
Diversity indicators
YES
Appendix E: Flowchart for determining disclosures to be
included
This appendix complements the [draft] ESRS 1. It provides a non-binding illustration of the materiality
assessment outlined in chapter 3.2 that leads to the identification of the information to be included in
the sustainability statements.
1) Disclosure Requirement (DR) in ESRS 2
or
2) DR in ESRS E1?
Is the sustainability matter material according
to the undertaking’s materiality assessment?
For metrics: is the DR material for
the undertaking?
Is the individual datapoint of
the metric DR material?
(*) Policies, actions resources and targets.
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Appendix F: Structure of ESRS sustainability statements
This appendix is an integral part of the proposed [draft] ESRS 1 and has the same authority as the
other parts of the [draft] Standard with respect to reporting in four parts as outlined in paragraph 113.
Part of the
management
report
[draft] ESRS
codification
Title of [draft] ESRS
1. General
information
[draft] ESRS 2 General disclosures, including information
provided under the Application Requirements of
[draft] topical ESRS listed in Appendix C of [draft]
ESRS 2.
2. Environmental
information
[draft] ESRS E1 Climate change
[draft] ESRS E2 Pollution
[draft] ESRS E3 Water and marine resources
[draft] ESRS E4 Biodiversity and ecosystems
[draft] ESRS E5 Resource use and circular economy
3. Social
information
[draft] ESRS S1 Own workforce
[draft] ESRS S2 Workers in the value chain
[draft] ESRS S3 Affected communities
[draft] ESRS S4 Consumers and end-users
4. Governance
information
[draft] ESRS G1 Business conduct
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Appendix G: Example of structure of ESRS sustainability
statements
This appendix complements the [draft] ESRS 1. It provides non-binding illustrations of the structure of
the sustainability statements outlined in chapter 8.2 Content and structure of the sustainability
statements.
2. Environmental information
3. Social information
4. Governance information
[draft] ESRS G1 Business conduct
• Impact, risk and opportunity management and Metrics
and targets DR from [draft] ESRS G1
• Additional DR from [draft] sector specific ESRS
• Potential additional entity specific information
[draft] ESRS 2 General Disclosures
• Specific topical DR from [draft] topical ESRS
• Additional DR from [draft] sector specific
ESRS
• Potential additional entity specific information
1. General information
Disclosures pursuant to Article 8 of the taxonomy
regulation
Management report
Sustainability statements
Analysis of the development and performance
of the undertaking’s business and its position
Description of the principal risks and
uncertainties
The undertaking’s likely future developments Corporate governance statement
[draft] ESRS E1 Climate change
• Impact, risk and opportunity management and Metrics
and targets DR from [draft] ESRS E1
• Additional DR from [draft] sector specific ESRS
• Potential additional entity specific information
[draft] ESRS E2 Pollution
• Impact, risk and opportunity management and Metrics
and targets DR from [draft] ESRS E2
• Additional DR from [draft] sector specific ESRS
• Potential additional entity specific information
[draft] ESRS E5 Resource Use and Circular Economy
• Impact, risk and opportunity management and Metrics
and targets DR from [draft] ESRS E5
• Additional DR from [draft] sector specific ESRS
• Potential additional entity specific information
[draft] ESRS S1 Own workforce
• Impact, risk and opportunity management and Metrics
and targets DR from [draft] ESRS S1
• Additional DR from [draft] sector specific ESRS
• Potential additional entity specific information
[draft] ESRS S2 Workers in the value chain
• Impact, risk and opportunity management and Metrics
and targets DR from [draft] ESRS S2
• Additional DR from [draft] sector specific ESRS
• Potential additional entity specific information
[draft] ESRS S4 Consumers and end-users
• Impact, risk and opportunity management and Metrics
and targets DR from [draft] ESRS S4
• Additional DR from [draft] sector specific ESRS
• Potential additional entity specific information
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Appendix H: Example of incorporation by reference
This appendix complements the [draft] ESRS 1. It provides non-binding illustrations of incorporation
by reference of another section of the management report into the sustainability statements as outlined
in chapter 9.1 Incorporation by reference.
3. Social information
4. Governance information
1. General information
Management report
Sustainability statements
1. Strategy and business (ESRS 2 SBM 1 paragraph XX)
1.1. Strategy, business model, market position and value chain
… (separate elements of information clearly identified as addressing the ESRS 2 Disclosure
Requirement SBM-1 Strategy, business model, market position and value chains) …
1.2. …
Disclosures incorporated by reference
The following information is incorporated by reference to other parts of the management report:
1. Strategy, business model, market position and value chains – (ESRS 2 SBM-1 paragraph XX)
2. …
2. Environmental information
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EFRAG is co-funded by the European
Union and EEA and EFTA countries.
The contents of the documents are
however the sole responsibility of the
EFRAG PTF- ESRS and do not
necessarily reflect those of the
European Union or the Directorate-
General for Financial Stability,
Financial Services and Capital
Markets Union (DG FISMA). Neither
the European Union nor DG FISMA
can be held responsible for them.