View source for ESRS (European Sustainability Reporting Standards) - IM

== What is ESRS? (European Sustainability Reporting Standards) ==

The '''European Sustainability Reporting Standards (ESRS)''' is the framework that supports the '''Corporate Sustainability Reporting Directive (CSRD)'''. It is a comprehensive ESG reporting standard introduced by the '''European Union''' to improve the quality and consistency of sustainability disclosures for companies operating in the EU.

[https://eur-lex.europa.eu/eli/reg_del/2023/2772/oj/eng Official EU Journal]

=== How Does ESRS Relate to ESG? ===
The ESRS is structured around the same '''Environmental (E)''', '''Social (S)''', and '''Governance (G)''' principles but introduces a '''more detailed structure''' with:
* '''Topical standards'''
* '''Sector-specific standards'''
* '''Entity-specific disclosures'''

ESRS emphasizes '''double materiality''', meaning companies must report both:
* '''Impact Materiality:''' Their effect on the environment and society.
* '''Financial Materiality:''' How sustainability factors affect their business.

== ESRS Structure Overview ==
The ESRS standards are organized into '''cross-cutting standards''' and '''topical standards'''.

=== Cross-Cutting Standards (General Requirements) ===
* '''ESRS 1:''' General requirements (explains the fundamental concepts for ESG reporting).
* '''ESRS 2:''' General disclosures (governance, strategy, and business model).

=== Topical Standards ===

==== Environmental Standards (E) ====
{| class="wikitable"
! Code
! Topic
! Description
|-
| '''ESRS E1''' || Climate Change || Greenhouse gas emissions (Scope 1, 2, and 3), energy efficiency, and adaptation strategies.
|-
| '''ESRS E2''' || Pollution || Air, water, and soil pollution, plus reduction strategies.
|-
| '''ESRS E3''' || Water & Marine Resources || Water management, consumption, and impacts on aquatic ecosystems.
|-
| '''ESRS E4''' || Biodiversity & Ecosystems || Impact on ecosystems, deforestation prevention, and conservation efforts.
|-
| '''ESRS E5''' || Resource Use & Circular Economy || Material efficiency, waste reduction, and circular economy practices.
|}

==== Social Standards (S) ====
{| class="wikitable"
! Code
! Topic
! Description
|-
| '''ESRS S1''' || Own Workforce || Workforce diversity, working conditions, and equal opportunity.
|-
| '''ESRS S2''' || Workers in the Value Chain || Labor rights, fair wages, and working conditions throughout the supply chain.
|-
| '''ESRS S3''' || Affected Communities || Impact on local communities and social investment.
|-
| '''ESRS S4''' || Consumers & End Users || Product safety, data privacy, and consumer protection.
|}

==== Governance Standards (G) ====
{| class="wikitable"
! Code
! Topic
! Description
|-
| '''ESRS G1''' || Business Conduct || Ethics, anti-corruption, and governance structures.
|}

== Key Differences Between ESRS and Traditional ESG Standards ==
{| class="wikitable"
! Aspect
! ESRS
! Other ESG Frameworks (e.g., GRI, SASB)
|-
| '''Approach''' || Mandatory for CSRD-covered companies || Voluntary (for non-CSRD markets)
|-
| '''Scope''' || Emphasis on '''double materiality''' || Focuses primarily on financial materiality
|-
| '''Granularity''' || Highly detailed with mandatory disclosures for key ESG topics || Often more flexible and principle-based
|-
| '''Sector-Specific''' || Expanding with dedicated sector standards || Industry-specific standards exist but are less integrated
|-
| '''Digital Format''' || Requires data in machine-readable format (XBRL) || Digital integration is encouraged but not mandatory
|}

== Who Must Follow ESRS? ==
* Companies operating in the EU that meet CSRD thresholds.
* Large non-EU companies with significant EU business presence (starting 2028).
* Initially applies to large listed companies; will expand to SMEs in future phases.

== Key Takeaway ==
The '''ESRS framework''' aligns with ESG but introduces a '''more structured, mandatory''' approach for companies in the EU, ensuring '''consistent, comparable, and transparent''' sustainability reporting.

[[Category:Information Model]]