What are ESRS and which ones does a company need to report on?
What are ESRS and which ones does a company need to report on?
European Sustainability Reporting Standards (ESRS) are a set of guidelines developed to standardize and enhance the quality of sustainability reporting by companies within the European Union. These standards are part of the CSRD framework, which aims to improve transparency and accountability on environmental, social, and governance issues.
Objectives of ESRS:
Standardization: ESRS provides a consistent framework for companies to report on sustainability issues, facilitating comparability and reliability of the reported data.
Transparency: Enhances the visibility of companies' impacts on and dependencies related to ESG matters, thereby helping stakeholders make informed decisions.
Compliance: Ensures that companies meet the EU’s sustainability disclosure requirements, aligning with broader environmental and social goals
ESRS are divided into several key categories, each focusing on different aspects of sustainability:
Environmental Standards: Cover areas such as climate change mitigation, pollution, water and marine resources, biodiversity, and resource use.
Social Standards: Focus on social issues like workforce conditions, human rights, and community impacts.
Governance Standards: Address corporate governance issues, including business ethics, anti-corruption measures, and organizational governance
Under the CSRD, companies are required to report on specific ESRS based on their relevance and impact. Here’s a breakdown of the key ESRS companies need to consider:
General Disclosure Requirements (ESRS 1 and ESRS 2)
ESRS 1 (General Requirements): Provides the overall guidelines for sustainability reporting, including double materiality assessment and stakeholder engagement.
ESRS 2 (General Disclosures): Requires disclosures on the company's governance, strategy, policies, and risk management related to sustainability issues
Topic-Specific Standards
Climate Change (ESRS E1): Covers disclosures on greenhouse gas emissions, climate risks, and mitigation strategies.
Pollution (ESRS E2): Involves reporting on pollutants, waste management, and measures to prevent and reduce environmental impact.
Water and Marine Resources (ESRS E3): Requires disclosures on water usage, marine impact, and water conservation efforts.
Biodiversity and Ecosystems (ESRS E4): Focuses on the impact of company activities on biodiversity and ecosystems.
Resource Use and Circular Economy (ESRS E5): Encompasses reporting on resource consumption, efficiency, and circular economy practices.
Workforce (ESRS S1): Includes disclosures on employee conditions, diversity, and human rights within the workforce.
Communities (ESRS S2): Involves reporting on the impact of company activities on local communities and measures to enhance social well-being.
Consumers and End-users (ESRS S3): Requires disclosures on product safety, consumer rights, and customer relations.
Governance (ESRS G1): Covers disclosures on governance structures, business ethics, and anti-corruption measures.
Companies must conduct a double materiality assessment to determine which ESRS are relevant to their operations. This involves:
Financial Materiality: Identifying which ESG issues could significantly affect the company’s financial performance.
Impact Materiality: Assessing how the company’s activities impact the environment and society.
Based on this assessment, companies must report on the ESRS that are deemed material. This ensures that the reporting is comprehensive and relevant to the company’s specific context and operations.
For more detailed guidelines, companies can refer to the full ESRS documentation available through EFRAG’s website.
How does Greenly ensure that its data collection questionnaires meet the ESRS disclosure requirements?
How does Greenly ensure that its data collection questionnaires meet the ESRS disclosure requirements?
Greenly ensured that all datapoints and specific requirements of the ESRS were fully covered. For each datapoint, Greenly incorporated the relevant descriptions and requirements from both the Disclosure and Application Requirements into its questionnaires. Additionally, Greenly provides extra resources (not included in the ESRS) in its questionnaires to assist clients further, such as definitions of key concepts, more detailed methodology guidelines, and links to external resources.
Sources used include:
- Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023
- EFRAG - IG 3 - List of ESRS Datapoints.xlsx (Final Version, May 2024)
- EFRAG - IG 3 - List of ESRS Datapoints.pdf (Final Version, May 2024)
Why doesn’t Greenly include questionnaires in its Data Collection module that are a direct reflection of the list of ESRS datapoints?
Why doesn’t Greenly include questionnaires in its Data Collection module that are a direct reflection of the list of ESRS datapoints?
The main goal of the Data Collection module is to enhance the efficiency and quality of the data collection process. To achieve this, Greenly has chosen this approach for several reasons:
- Redundancy in ESRS datapoints: ESRS disclosure requirements often asks for the same information multiple times. To avoid duplication, Greenly uses centralized questionnaires that request each piece of information only once.
- Complexity in ESRS datapoints: Some datapoints combine multiple types of information, which increases the risk that companies may overlook parts of the required data. To address this, Greenly offers more structured and clear questionnaires.
- Support for multiple ESG frameworks: Greenly's system is compatible with various ESG frameworks (e.g., ISSB, SBTi, CDP). Our approach is to create common questionnaires that collect the necessary information once and then distribute it across the relevant datapoints of each framework. This streamlines the data collection process and promotes efficiency across all frameworks.
Does the software meet the specific requirements of the CSRD and ESRS for data collection and gap analysis?
Does the software meet the specific requirements of the CSRD and ESRS for data collection and gap analysis?
Yes, Greenly ensures that its questionnaires cover 100% of the datapoints outlined by ESRS. The questionnaires are organized by ESRS and DR, with filters available on the platform to help navigate through these categories.
Greenly has integrated all ESRS rules into its process and documentation, including the differentiation between mandatory (shall), recommended (should), and voluntary (may) information to be included according to double materiality results. It also accounts for phased-in disclosure requirements, indicating which questions are mandatory in which year, and identifying critical metrics where empty answers are not accepted.
Additionally, Greenly allows for refining the materiality of questionnaires/datapoints directly within the data collection module. This aligns with ESRS's double materiality guidelines, addressing cases where materiality decisions at the sub-topic or IRO level may not be precise enough.
Are there mandatory Table formats to respect in the Sustainability Report?
Are there mandatory Table formats to respect in the Sustainability Report?
Indeed there are a few datapoints (or groups of datapoints) for which a specific table format is required by EFRAG, and described in general in Application Requirements of ESRS documentation.
- AR 48 : table format for GHG emissions breakdown per GHG Protocol post and reporting year
- AR 55 : table format for Employee Headcount per gender
In the Greenly platform, all above mentioned datapoints are displayed in appropriate table format.