ESRS - short and compact

The European Sustainability Reporting Standards (ESRS) are a central component of the Corporate Sustainability Reporting Directive (CSRD) and define how companies in the EU must report on their sustainability performance. The ESRS are intended to ensure uniform, transparent and comparable sustainability reporting.

The standards cover comprehensive environmental, social and governance (ESG) topics and are and are based on international frameworks such as the GRI standards, IFRS S1 & S2 and the TCFD. Nevertheless, there are some special features, such as double materiality.

With the European Sustainability Reporting Standards, the EU wants to ensure that sustainability information is just as reliable and relevant to decision-making as financial reports – an important step towards promoting sustainable business models and capital flows.

ESRS Straße Wald

Helpful tools for compliance with the European Sustainability Reporting Standards

ESRS Knowledge

1 What are the European Sustainability Reporting Standards (ESRS)?

The European Sustainability Reporting Standards are binding reporting standards for sustainability reporting by companies in the European Union. They weredeveloped by the European Financial Reporting Advisory Group (EFRAG) on behalf of the European Commissionand form the basis of the Corporate Sustainability Reporting Directive (CSRD)which has applied to large companies since 2024.

Connection between ESRS and CSRD

The CSRD specifies which companies must report on sustainability, while the European Sustainability Reporting Standards define what exactly must be reported and how. This means that

  • The CSRD obliges companies to report on sustainability, replaces the previous Non-Financial Reporting Directive (NFRD) and significantly expands the group of companies required to report.
  • The European Sustainability Reporting Standards are the concrete reporting standards that companies must use to fulfill the CSRD requirements. They ensure that sustainability information is recorded in a detailed, standardized and comparable manner.

In short, the CSRD makes reporting mandatory and specifies which companies are affected – the ESRS provide the framework for the content and methodology.

Objectives of the European Sustainability Reporting Standards

The ESRS are intended to ensure that companies report comprehensively, transparently and comparably on sustainability aspects.

Companies affected

The ESRS apply to all EU companies that fall under the CSRD reporting obligation:

  • Large companies that fulfill at least two of the following three criteria:
    • Balance sheet total: over 25 million euros
    • Net sales: over 50 million euros
    • More than 250 employees
  • Capital market-oriented SMEs from 2026 (with the option to defer until 2028).

Important innovation: Omnibus package to simplify sustainability reporting

In the Budapest Declaration of November 2024, the European Commission announced an omnibus package to harmonize the CSRD, the Corporate Sustainability Due Diligence Directive (CSDDD) and the EU taxonomy more closely. The aim is to simplify reporting obligations for companies and reduce bureaucratic hurdles.

The implementation deadlines and thresholds that determine companies’ reporting obligations could also be adjusted again. Further details are expected in the coming months.

Further European Sustainability Reporting Standards

In addition to the comprehensive ESRS, which is relevant for large companies and which is the main focus of this article, EFRAG has published two other standards:

  1. ESRS LSME (ESRS for Listed Small- and Medium-Sized Enterprises): The ESRS LSME standard offers simplified and proportionally adjusted reporting for small and medium-sized listed companies, while the comprehensive ESRS standard requires detailed and in-depth disclosure of all relevant sustainability aspects in accordance with the CSRD.
  2. ESRS VSME (Voluntary Sustainability Reporting Standard for non-listed SMEs): The ESRS VSME standard offers voluntary and greatly reduced reporting that is geared to the limited resources of very small companies. We have created a helpful Word report template for the VSME standard.

2 Structure and standards: How are the ESRS structured?

The European Sustainability Reporting Standards are divided into different categories to ensure comprehensive and transparent reporting. They consist of general requirements, topic-specific standards for the environment (E), society (S) and governance (G) as well as sector- and company-specific regulations.

General requirements: ESRS 1 & ESRS 2

The overarching standards ESRS 1 and ESRS 2 set out the basic principles and general disclosure requirements.

ESRS 1 sets out the structure of the European Sustainability Reporting Standards, explains the requirements for their preparation and the underlying concepts. It also defines basic requirements for the preparation and presentation of sustainability-related information. The reporting period for a company’s sustainability statement is the same as the reporting period for the company’s annual financial statements.

  • Defines reporting principles
  • Contains the concept of double materiality
  • Describes the coherence with other standards

ESRS 2 defines the requirements for information that a company must generally provide on all material sustainability aspects of the following areas in the sustainability report: Governance, strategy, impacts, risks and opportunities (IROs) as well as key figures and targets.

  • Includes the basic reporting obligations for all companies
  • Defines the structure of the sustainability report
  • Defines requirements for governance, strategy and risk management

Thematic ESRS standards

The thematic European Sustainability Reporting Standards cover the three sustainability dimensions Environment (E), Social (S) and Governance (G).

The ESRS E1 standard defines a company’s disclosure requirements in relation to its impact on climate change, efforts to limit global warming to 1.5 degrees in accordance with the Paris Agreement and adaptation strategies to actual and expected climatic changes.

It also contains disclosure requirements on how companies deal with their greenhouse gas emissions (Scope 1-3 emissions) and the associated risks, as well as the obligation to provide information on the company’s energy consumption and energy mix.

This section covers the company’s actual and potential impacts on air, water and soil pollution. It highlights the company’s actions and strategies to prevent and mitigate such pollution and adapt to a sustainable economy. The standard also considers the financial implications of these environmental impacts. It also includes information on substances of concern that the company produces or uses and their potential impact on people and the environment.

The main objective of this standard is to enable users to recognize the actual and potential impacts of the company on water and marine resources. In addition, companies should present their measures to mitigate negative impacts and protect these resources.

The standard also requires a description of how a company adapts its business strategies in line with sustainable water use. Finally, companies should provide information on material risks, opportunities and impacts arising from their relationship with water and marine resources. For “water”, the standard refers to surface water and groundwater and for “marine resources” to their use, return and associated activities.

The ESRS E4 standard aims to require companies to clearly state in their sustainability reports how they affect biodiversity and ecosystems. Both positive and negative impacts, including the company’s role in the loss of biodiversity, should be taken into account. The company should also present its measures to mitigate these impacts and restore biodiversity.

The business strategy is expected to be in line with various global and EU biodiversity directives. Companies should also report on their material risks and opportunities and their financial implications in relation to biodiversity. The standard considers the company’s relationship with different habitats and ecosystems. In this context, “biodiversity” refers to the variability of organisms and their ecosystems.

ESRS E5 is about the company’s impact on resource efficiency, the use of renewable resources and the prevention of depletion of non-renewable resources. Companies should report their actions and their results to mitigate negative impacts in this area, including measures to decouple economic growth from the use of materials.

The standard emphasizes the need to adapt business strategies to minimize waste and maximize resource efficiency. The “circular economy” describes a system that maximizes the value of products and materials by promoting their use optimization, reuse and recycling. It is designed to help companies master the transformation from a linear to a circular economy.

This standard stipulates that the company must report on the positive and negative influences of the company on its own workforce, measures taken and their results, as well as financial risks and opportunities.

The focus is on the social aspects of (i) working conditions, (ii) equal treatment and opportunities for all, and (iii) other labor-related rights such as child and forced labor. Companies should explain how they address these factors and what material IROs result from them.

The ESRS S1 standard only refers to the company’s workforce, including non-employees, but not to external workers in the value chain.

The standard defines disclosure requirements for companies to make the impact of their business activities on workers in their value chain transparent. Companies should explain their approach to assessing and addressing impacts on working conditions, equal treatment & opportunities and other labor-related rights. The standard applies to all workers in the value chain who are not part of the “own workforce”.

This area sets out how companies impact affected communities through their business activities. Businesses must set out their approach to addressing impacts on (i) economic, social and cultural rights of communities, (ii) civil and political rights of communities, and (iii) specific rights of indigenous peoples, as well as the opportunities and risks of dependence on these communities.

Affected communities are individuals or groups who live or work in the same area that is or could be affected by the company’s activities or its value chain.

The ESRS S4 standard sets disclosure requirements to help readers of the report understand an organization’s impact on consumers and/or end users in the context of its business, products and services. Companies should explain their approach to issues such as (i) information-related impacts on consumers and/or end-users (e.g. privacy, freedom of expression), (ii) personal safety (e.g. health and safety, personal security and child protection), and (iii) social inclusion of consumers (e.g. non-discrimination, access to products and services and responsible marketing practices). Misuse of the products by consumers is not part of this standard.

The main objective of the ESRS G1 standard is to provide clear guidelines for companies so that the strategies, processes and performance in the area of corporate policy can be understood in the sustainability report. In particular, the following three main areas of corporate governance are considered:
(i) Corporate ethics and culture, e.g. the fight against corruption, the protection of whistleblowers;
(ii) The management of supplier relationships, especially with regard to payment practices;
(iii) The way in which companies exercise political influence and the resulting obligations, including lobbying.

Sector and company-specific standards (future)

In addition to the general and topic-specific European Sustainability Reporting Standards, EFRAG also plans to develop sector-specific standards that meet the particular sustainability challenges of individual sectors. These will be published in the coming years.

Darstellung der ESRS (European Sustainability Reporting Standards)

3 What are the requirements and obligations for companies?

The European Sustainability Reporting Standards place comprehensive requirements on companies that are obliged to report on sustainability. CSRD reporting is intended to increase transparency in the areas of environmental, social and governance (ESG) and enable better comparability.

Key requirements of the ESRS

Companies that fall under the CSRD reporting obligation must disclose their sustainability information in accordance with clearly defined requirements. The most important requirements are

  • Application of the principle of double materiality: companies must record and assess both the financial impact of sustainability issues (financial materiality) and their impact on the environment and society (impact materiality).
  • Comprehensive ESG reporting: The reports must cover environmental (E), social (S) and governance (G) aspects.
  • Integration into the management report: In future, sustainability information must be part of the annual report and is therefore subject to the same audit requirements as financial reporting.
  • Mandatory disclosure of key figures: Companies must provide quantitative and qualitative information on sustainability goals, strategies and risks.

The materiality assessment as a central element

A key component of the European Sustainability Reporting Standards is the double materiality assessment (DMA). Companies must identify which sustainability issues are relevant to their business model. The DMA is often used as a strategic tool by companies. A distinction is made between two perspectives:

  • Inside-out perspective: What impact does the company have on the environment and society?
  • Outside-in perspective: Which sustainability risks and opportunities influence the company’s financial situation?

Only topics that are classified as material must be dealt with in detail in the reports.

Content structure of ESRS reporting

Each thematic European Sustainability Reporting Standard (e.g. ESRS E1 for climate change or ESRS S1 for own employees) is structured according to a fixed scheme comprising four central reporting areas:

  1. Strategy – Which sustainability aspects are relevant for the company?
  2. Policies – Which internal guidelines govern these topics?
  3. Actions – What specific measures does the company implement?
  4. Targets – What goals does the company pursue and how is their achievement measured?

This structure ensures that companies not only report on their sustainability performance, but also define clear responsibilities, measures and targets.

Strategy

In the first section of each topic standard, the company must explain how the respective sustainability topic is linked to its overarching corporate strategy . Important questions are:

  • What relevance does the topic have for the business model?
  • What risks and opportunities are associated with this topic?
  • How does the topic affect long-term value creation?
  • How are stakeholder expectations taken into account?

Here, companies must also explain how the double materiality of the topic was assessed.

Policies (guidelines and specifications)

Companies must indicate whether they have internal guidelines, codes of conduct or company policies for the topic in question. These include:

  • Official sustainability guidelines
  • Governance structures for ESG issues
  • Measures to comply with regulatory requirements
  • Commitments to international standards such as GRI or UN Global Compact

If no guidelines exist, the company must justify this.

Actions (measures and processes)

This describes the specific measures the company is taking to implement its sustainability strategy. These include

  • Operational measures to reduce environmental impact
  • Programs for social sustainability (e.g. diversity, working conditions)
  • Supply chain management and ESG risk management
  • Investments in sustainable technologies or processes

Companies need to explain what processes are in place to monitor progress and minimize potential risks.

Targets (goals and key performance indicators)

In the final section, companies must explain which specific goals (targets) they are pursuing in the respective sustainability area and how they measure them. These include

  • Clearly defined ESG targets (e.g. 30% reduction in CO₂ emissions by 2030)
  • Indicators and KPIs for measuring success
  • Methodology for reviewing progress (e.g. annual reporting)
  • Link to remuneration models or internal incentives

If no measurable targets have been set, this must be justified.

Reporting obligations and audit procedures

Compliance with the European Sustainability Reporting Standards is ensured by an obligation for an external audit is ensured. Companies must ensure that:

  • The double materiality assessment was implemented in compliance with the law and stakeholder perspectives were taken into account
  • The correct data points have been disclosed and the sustainability information is comprehensible and verifiable.
  • Reporting is aligned with international standards.
  • The ESRS data must be published in machine-readable format (XHTML, ESEF format) to enable digital evaluations.

Practical implementation for companies

To comply with the European Sustainability Reporting Standards, companies should implement the following steps:

  1. Implementation of a materiality assessment of the relevant ESG issues on the basis of double materiality.
  2. Inventory and gap analysis: Identification of existing sustainability data and gaps compared to ESRS requirements.
  3. Optimize data management and internal processes: Introduction of suitable IT systems for recording and analyzing ESG data.
  4. Integration into the annual report: Sustainability information must be integrated into the management report.
  5. Prepare external audit: Ensure that reporting standards and metrics are auditable.

The ESRS place high demands on companies, but at the same time offer the opportunity to strategically integrate sustainability into the business model and position themselves for the future.

Requirements for the audit of reports

  • Independent verification: Sustainability reports must be checked by external, independent auditors to ensure that the information disclosed is correct, comprehensible and comparable.
  • Limited assurance: The audit must be carried out at least at the level of a “limited assurance”, which means that the auditors carry out a limited audit of the sustainability data provided and assess its plausibility.
  • Reasonable assurance: In the long term, an extended audit obligation at the level of “reasonable assurance” is planned. This would include a detailed and in-depth audit of sustainability disclosures, similar to the audit of financial reports, in order to ensure even greater reliability.

Transparency and public accessibility

  • Publication in the European Single Access Point (ESAP): Companies are obliged to publish their sustainability reports centrally in the ESAP. This is intended to create uniform and transparent access to ESG data within the EU so that investors, authorities and other stakeholders can easily view and compare it.
  • Digital accessibility & machine readability: Sustainability information must be digitally available and machine-readable in accordance with the XBRL taxonomy. This facilitates the automated processing, analysis and comparability of reports, especially for financial institutions and supervisory authorities that need to efficiently evaluate large volumes of sustainability data.

4 How do the ESRS differ from other sustainability standards?

The European Sustainability Reporting Standards are not the only framework for sustainability reporting. In the past, many companies have already reported in accordance with voluntary standards such as the Global Reporting Initiative (GRI), the IFRS sustainability standards or the TCFD recommendations. But how do the ESRS differ from these existing frameworks and what overlaps are there?

Comparison with other standards

Standard Publisher Focus Key differences to the ESRS
GRI (Global Reporting Initiative) GRI Broad ESG reporting, globally recognized ESRS are strongly based on GRI, but are mandatory and contain additional EU-specific requirements.
IFRS S1 & S2 (International Sustainability Standards Board, ISSB) IFRS Foundation Financial materiality, focus on investors ESRS follow the concept of double materiality, while IFRS only considers the financial perspective.
TCFD (Task Force on Climate-Related Financial Disclosures) FSB Climate-related financial risks ESRS E1 adopts many of the requirements of the TCFD, but goes further with binding requirements.
EU Taxonomy EU Commission Sustainable economic activities, financial market players The ESRS are closely linked to the EU taxonomy and contain specific disclosure requirements for taxonomy-relevant activities.
SFDR (Sustainable Finance Disclosure Regulation) EU Commission Sustainability information for financial products The SFDR primarily affects financial market participants, while the ESRS affects companies in all sectors. Both sets of rules complement each other.

Are there any overlaps or harmonization?

  • The European Sustainability Reporting Standards were designed in such a way that they largely take existing standards into account in order to avoid multiple reporting. Important aspects of the GRI, IFRS, TCFD and EU taxonomy have been integrated into the ESRS:

    • GRI as a basis: The ESRS are strongly oriented towards the GRI methodology for sustainability reports. Companies that already report in accordance with GRI can retain many existing structures.
    • IFRS adaptation: While the IFRS sustainability standards S1 & S2 primarily contain investor-relevant information, the ESRS combine financial and social perspectives (dual materiality).
    • TCFD integration: The ESRS E1 climate report contains many TCFD requirements, such as the disclosure of climate-related risks and opportunities.
    • EU taxonomy and SFDR link: The ESRS take up central taxonomy criteria and ensure that companies report consistently on sustainable economic activities.
    • German Sustainability Code: The Sustainability Code itself originally created a standard for sustainability reporting. With the introduction of the CSRD, the DNK has transformed itself into a supporting service provider for the implementation of the ESRS.

What are the advantages of ESRS?

Compared to voluntary reporting standards, the European Sustainability Reporting Standards have some clear advantages:

  1. Mandatory: While GRI, IFRS S1 & S2 or TCFD can be used voluntarily, the ESRS are mandatory for all companies subject to CSRD.
  2. double materiality: ESRS require a more comprehensive analysis of a company’s impact on the environment and society – not just financial risks .
  3. Uniform framework for the EU: The ESRS create a clear, legally binding reporting framework for companies operating in the EU.
  4. Avoidance of multiple reporting: As the ESRS cover many international requirements, companies do not have to prepare several separate reports.

While companies that already report in accordance with GRI, TCFD or EMAS or have ISO certificates can transfer a lot of existing content to ESRS reporting, the double materiality assessment requires an in-depth examination of ESG topics.

5 Where is there further support for implementation?

Implementing the European Sustainability Reporting Standards is a complex task for companies. There are numerous official guidelines, regulatory documents and CSRD aids to ensure that reporting is efficient and compliant. Central sources and contact points are listed below.

Assistance and guidelines for implementation

EFRAG (European Financial Reporting Advisory Group)
EFRAG is the main body responsible for the development of the European Sustainability Reporting Standards. On the EFRAG website, companies can find all official documents, guidelines and explanations of the ESRS as well as current developments in sustainability reporting.

Guides and FAQs: EFRAG Implementation Guidelines

EU Commission
The European Commission provides extensive information on the legal requirements of the CSRD and on the links between the ESRS and other EU regulations (e.g. the EU taxonomy).

Guidelines and reporting requirements: CSRD and ESRS

IFRS Foundation and ISSB (International Sustainability Standards Board)
The IFRS Foundation and the International Sustainability Standards Board (ISSB) provide comprehensive information on global sustainability standards and their relation to ESRS. These resources are particularly useful for companies that already report in accordance with IFRS and wish to apply the ESRS as supplementary requirements.

Global Reporting Initiative (GRI)
The GRI provides guidelines on sustainability reporting that can help companies to implement ESRS requirements, particularly in the integration of double materiality.

Task Force on Climate-related Financial Disclosures (TCFD)
The TCFD makes recommendations on the reporting of climate-related risks. These recommendations are heavily incorporated into ESRS E1 reporting, particularly on the topics of climate-related risks and opportunities.

CSR Tools
We at CSR Tools are experts in all topics relating to sustainability reporting in accordance with CSRD and ESRS and offer a wide range of assistance:

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6. frequently asked questions (FAQ)

The European Sustainability Reporting Standards (ESRS) are binding reporting standards for sustainability reporting in accordance with the CSRD. They define which ESG information companies must disclose.

The ESRS apply to companies that fall under the CSRD reporting obligation. Implementation is staggered:

  • From 2024: Large capital market-oriented companies (>500 employees).
  • From 2025: All other large companies.
  • From 2026: Capital market-oriented SMEs (with deferral possible until 2028).

The ESRS will apply to large companies from the 2024 financial year. Listed SMEs have a transitional period until 2026.

The CSRD specifies who must report.
The ESRS specify what must be reported and how.

The ESRS include Environmental (E), Social (S) and Governance (G) with specific standards on topics such as climate change, social responsibility and corporate governance.

Companies must both:

  • Their impact on the environment & society (inside-out) as well as
  • Consider the financial risks of sustainability issues (outside-in).

The reporting of each ESRS follows a uniform structure:

  1. Strategy – relevance of the topic for the company
  2. Policies – company guidelines and specifications
  3. Actions – measures and implementation strategies
  4. Targets – sustainability goals and key figures

The ESRS are aligned with GRI, IFRS S1 & S2, TCFD and the EU Taxonomy to avoid multiple reporting.

Yes, sustainability reports must be audited by an external auditor, similar to financial reports.

EFRAG is the main body responsible for the development of the ESRS.
EFRAG website: https://www.efrag.org