The European Sustainability Reporting Standards (ESRS) were published a year ago. We have reported on them on several occasions. However, as companies begin to engage more with the standards in preparation for their first reporting year 2025, the question is: where to start?
Reading the entire document of around 250 pages, over 280 pages in the German version, is a daunting task. Nevertheless, we recommend that anyone who has to prepare a report should read the original document (especially ESRS 1 and ESRS 2) at least once before they start.
While we have deliberately incorporated the original standard text for all disclosure requirements and application requirements of ESRS 2 and the thematic standards into the software, nothing prepares you as well as looking back to the original source. To make it a little easier for you to get started, we will give you some tips on reading the ESRS in this blog.
Table of contents
- Overview of the European Sustainability Reporting Standards (ESRS)
- ESRS 1 General Requirements
- ESRS 2 General information
- Topic standards in the ESRS
- Read, understand and implement the disclosure requirements in the ESRS
- Conclusion: ESRS original texts are indispensable
1. overview of the European Sustainability Reporting Standards (ESRS)
First of all, an overview: The European Sustainability Reporting Standards consist of two overarching standards and ten topic-specific standards. In addition, there will be sector-specific standards that have not yet been published. Each standard is a complete document in itself with its own introduction and annexes. However, due to the cross-references and the general context, they only really make sense as a complete package of standards.
Before you start reading Annex I (which contains all the standards), we recommend that you open Annex II , which contains a glossary of all the important terms used in the standards. It is recommended to always have the glossary at hand while reading, as it will clarify many questions that might arise. Each standard consists of a main body with several sections and paragraphs – including the disclosure requirements (DRs) in ESRS 2 and the thematic standards – and a standard-specific appendix. The appendices contain relevant contextual information and the application requirements (ARs).
2 ESRS 1 General requirements
ESRS 1 General Requirements sets out the basic rules for reporting, defines key terminology and provides an overview of the expected processes related to reporting. This standard should always be read at least once before embarking on the entire reporting process. Although some sections are very technical and specific to some processes, it still provides a good overall understanding of the reporting process used here and introduces important concepts such as the qualitative characteristics of information (ESRS 1, Appendix B). Depending on necessity and relevance, it may be helpful to re-read certain sections of ESRS 1 at a later date.
3 ESRS 2 General information
It will also be necessary for all sustainability managers to read ESRS 2 General Disclosures . As the second overarching standard, it also contains information that is relevant for all parties involved in the reporting process. It consists of the first set of disclosure requirements that are mandatory for all companies to report. It asks for general information about the company as well as fundamental relationships that are relevant for understanding ESG reporting in context, such as strategy, business model and governance approach.
It is recommended to read ESRS 2 before or during the materiality process , as the process and its results must be documented in the ESRS 2 disclosure requirements. You can save time and effort by considering the materiality and reporting processes as integrated rather than separate, sequential processes.
4. topic standards in the ESRS
The topic standards only need to be read if they have been identified as material, as the information they contain is very specific to the topic in question. Although it can be helpful to read all the standards to get the full picture of the ESRS, realistically you should focus on the parts that are relevant to you. For this reason, our software only displays the current standards that are relevant to you according to your dual materiality assessment. This ensures a better overview and a focus on the important parts.
5 The disclosure requirements in the ESRS
The same principles apply when reading the topic standards. Each standard first presents its objectives and the interaction with other ESRSs, then the disclosure requirements and finally the application requirements in the annex. However, you should read them in parallel. So after reading each disclosure requirement, look up the necessary definitions and read the corresponding application requirements to understand the entire requirement. This has also been implemented in our software, where all ARs are displayed together with the corresponding DR.
5.1. The structure of the ESRS disclosure requirements
The disclosure requirements are organized more or less according to the same general structure:
- Strategy
- Overarching DRs (Disclosure Requirements) that supplement the information required in ESRS 2
- Management of impacts, risks and opportunities
- Comprehensive DRs that supplement the information required in ESRS 2
- Strategy
- Measures
- Parameters and targets
- Goals
- Relevant parameters
- Expected financial impact (only for e-themes)
Even if not all standards contain all of these elements, recognizing this pattern will help you to better understand the standards and the DRs when reading them. The DRs for strategies, measures and objectives (PAT) have a similar structure. Once you have understood this structure, you will be able to grasp the other standards more easily.
5. 2. How should a disclosure obligation be read?
A disclosure obligation consists of several paragraphs, usually at least 3.
The first paragraph summarizes the requirement (in bold). “The company must …”
The second paragraph states the objective to be achieved by the declaration. “The aim of this disclosure requirement is to …”
Sometimes the third paragraph contains references to other parts of the standard, although this is not regularly the case.
Otherwise, the third and subsequent paragraphs divide the requirement into individual parts (with subparagraphs) that list the individual data points that must be included in order to fulfill the requirement stated in the first paragraph. It is often formulated as follows: “The information required in paragraph xx includes …”.*
This can include voluntary data points and other specifications.
The last paragraph sometimes contains information on how to deal with the disclosure requirement if the required information is not available to the company. This is usually formulated as follows: “If no data is available, the company estimates the figure and states that it has done so” or as follows: “If the company does not have a strategy, it states whether and, if so, when it will adopt a strategy. “*
*Please note that these are only examples and may vary depending on the standard.
5. 3 Understanding and implementing important elements of an ESRS disclosure requirement
Understanding this structure will help you to identify the most important parts of a DR and focus your attention on them. The application requirements then have the same authority as the DRs themselves. Therefore, these should always be reviewed carefully. They contain further data points (voluntary and mandatory), general notes and definitions, calculation aids and formulas, and suggestions for how to present the disclosed information (e.g. in a table).
Our software tool contains all the above-mentioned parts of a requirement, but also reformulates them in a shorter and more comprehensible description. This way, you know directly what needs to be done, but also have the option of reading the original wording of the standard. In addition, complex and extensive requirements are broken down into smaller sub-requirements that are easier to respond to.
It is recommended that you review each disclosure requirement before and after collecting the information and data to ensure that your disclosure requirement meets all elements of the DR and the attached ARs (Application Requirements, ARs).
6 Conclusion: Original texts are indispensable
The European Sustainability Reporting Standards (ESRS) are a comprehensive set of rules that prepare companies for sustainability reporting. Although the document is very extensive, it is advisable to read the original texts, especially ESRS 1 and ESRS 2, in order to develop a solid understanding of the reporting process. It is important to deal with the relevant content in a step-by-step and structured manner. With this guide in hand and the supporting software tools, you should now have a basic understanding of the ESRS and be well prepared for the first reporting year 2025. Enjoy reading!
