The Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) represent significant advancements in the European Union's approach to sustainability reporting. Replacing the Non-Financial Reporting Directive (NFRD), the CSRD broadens the scope of companies required to report on sustainability-related matters, introduces more detailed reporting requirements, and mandates assurance of the reported information. The ESRS, as a set of guidelines under the CSRD, outline the specific standards companies must follow, focusing on environmental, social, and governance (ESG) criteria. Together, these regulations bring about considerable changes and challenges for companies, such as the need for more comprehensive data collection, increased transparency, and alignment with global sustainability goals. 

Understanding and navigating these complex requirements is essential for businesses to ensure compliance. However, due to the sheer scope and complexity of the CSRD and ESRS, many organizations and practitioners seem to be confused or unsure about concrete reporting requirements. Fortunately, several documents and resources have been published recently that help to better understand and to demystify the regulation. 

Now, let's explore six of these key documents that provide valuable insights and guidance on the CSRD and ESRS and its key concepts. 

Disclaimer: it is important to note that all resources and documents from EFRAG are non-authoritative, i.e. they are not legally binding. However, they are accepted as best practices among practitioners and thus can provide helpful interpretations and guidelines on certain topics.

1. EFRAG Implementation Guidance IG 1 - Materiality Assessment

The Implementation Guidance IG1 describes the unique approach of ESRS towards the materiality concept, how the materiality assessment is to be performed, how other existing resources can be leveraged and finishes up with frequently asked questions.

To summarize, the ESRS sustainability statement must provide relevant and accurate information about all impacts, risks, and opportunities (IROs) related to environmental, social, and governance matters, determined through a materiality assessment. In particular, ESRS requires a double materiality assessment (DMA). Double materiality is an approach to identifying and prioritizing sustainability issues that are most material (or critical) to an organization from the two perspectives “Impact materiality” and the “Financial materiality”. For more information on the Double Materiality Assessment, feel free to have a look at our blog post on the DMA. The DMA considers the entire value chain and identifies material IROs to be reported. The process includes stakeholder engagement and is guided by criteria like severity and likelihood. While ESRS do not mandate a specific method for this assessment, they require transparency in the process and allow flexibility in how it is conducted. The final report must disclose the material IROs and their interaction with the company's strategy.

2. EFRAG Implementation Guidance IG 2 - Value Chain

Given the complexity of the value chain concept, which is closely linked to the materiality assessment required by the ESRS (as outlined in IG 1), the Implementation Guidance IG2 provides a detailed exploration of how to effectively navigate value chain considerations under both the ESRS and CSRD.

To sum up, the sustainability statement must also include material IROs particularly related to the value chain, focusing on where these IROs might arise in the value chain (e.g. geographies, activities/sectors, operations, suppliers, customers, other relationships, etc.). While value chain information is not needed for all disclosures, it is necessary when connected to material IROs outside of the own operations due to business relationships. If this value chain data is unavailable, the company should estimate the missing information.

3. EFRAG Implementation Guidance IG 3 - Detailed ESRS datapoints and accompanying Explanatory Note

This document is arguably one of the most valuable resources for practitioners, as it simplifies the complex and interwoven regulations into clear, discrete data points within an Excel file. It’s important to emphasize that these data points are non-authoritative, meaning that reporting on all of them does not guarantee full CSRD compliance. However, this document serves as a highly useful tool for conducting an initial gap analysis, helping organizations identify available data and pinpoint what’s still missing. Click here for the detailed ESRS data points and the explanatory note. 

In the Excel file, the data points are defined for the cross-cutting standard ESRS 2 and each topical standard. In addition to a unique ID and the reference to the regulation, the Excel file defines for each data point the unit type, if its conditional or alternative, if its voluntary, to which other standards it relates to and if it is subject to certain phasing-in provisions for certain companies. In total, the file comprises roughly 1200 separate data points (depending on how one counts the data points for the Minimum Disclosure Requirements or MDRs).

4. EFRAG Draft ESRS Set 1 XBRL Taxonomy

As part of its mandate from the European Commission to develop a digital XBRL taxonomy for the ESRS, EFRAG released the first draft of the ESRS Set 1 XBRL Taxonomy in February 2024. This taxonomy serves as a classification system aligned with ESRS standards, defining and structuring data elements while clarifying mandatory data points for ESRS compliance. It is particularly valuable for companies advanced in their CSRD compliance journey, as it further disaggregates the required data points compared to the EFRAG IG3 data and provides insight into the tags that will be used in the digital tagging process. For more details, check out our blog post on the XBRL Taxonomy.

5. EFRAG ESRS Q&A Platform compilation of explanations

To aid practitioners and stakeholders in the implementation and interpretation of the ESRS, EFRAG has established a non-authoritative Q&A platform designed to address unresolved technical questions. To date, 93 questions have been published, categorized by topical area. Each entry provides the question, relevant ESRS references, key terms, background context, and expert answers from EFRAG. This platform serves as a valuable resource for clarifying complex terms, topics, and concepts, ensuring a comprehensive understanding of the ESRS.

6. Draft Commission Notice

In August 2024, the European Commission released a draft notice on the interpretation of certain legal provisions [...] as regards to sustainability reporting, providing additional clarifications on the requirements of the CSRD and ESRS, complementing the answers already published by EFRAG on their Q&A platform. This draft notice, which addresses frequently asked questions, aims to enhance legal certainty and improve the comparability of sustainability disclosures. Although the document is still in draft form and subject to change before the final notice is published, it serves as an important reference for resolving uncertainties in the interpretation and application of the ESRS, offering further guidance alongside EFRAG's technical responses.