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In April 2021, the European Commission adopted a legislative proposal for a corporate sustainability reporting directive (CSRD), requiring organisations within its scope to report using a double materiality perspective in compliance with the European sustainability reporting standards (ESRS) adopted by the European Commission as delegated acts.
The objective of the ESRS is to specify the sustainability information that a organisation must disclose in its sustainability report. It is important to note that reporting in accordance with ESRS does not exempt organisations from other obligations under European Union law.
ESRS specifies the information an organisation must disclose about its material impacts, risks, and opportunities (IRO) in relation to environmental, social, and governance (ESG) sustainability matters. However, ESRS does not require organisations to disclose information on ESG topics the organisation has assessed as non-material (see Appendix E Flowchart for determining disclosures under ESRS, ENG PDF file, page 37). The information disclosed following ESRS enables users of the sustainability statement to understand the organisation’s material impacts on people and the environment and the material effects of sustainability matters on the organisation's development, performance and position.
There are three categories of ESRS: (a) cross-cutting standards; (b) topical standards (Environmental, Social, and Governance standards); (c) sector-specific standards.
Cross-cutting standards and topical standards are sector-agnostic, meaning that they apply to all organisations regardless of which sector or sectors the organisation operates in.
All topical standards include policies, actions, and targets. Pay attention to these details if you plan to include a specific standard in your sustainability report.
You can read the full ESRS description here. Different language versions are available.
Keep in mind that these descriptions are based on the ESRS, not the ESRS listed small, medium enterprises (LSME)*. You can find more information about this here.
If you want to understand the sustainability report better, review the 'Sustainability reporting' section, where you’ll find the answers to questions on this topic.
*The ESRS LSME will be issued as a delegated act and effective on 1 January 2026 with the option to opt out for an additional two years.
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ESRS 1 General requirements
ESRS 2 General disclosures
E1 Climate change
E2 Pollution
E3 Water and marine resources
E4 Biodiversity and ecosystems
ESRS 1, General requirements, sets general principles to be applied when reporting according to ESRS and does not itself set specific disclosure requirements.
ESRS 2, General disclosures, specifies essential information to be disclosed regardless of which sustainability matter is being considered. It’s mandatory for all organisations under the CSRD scope.
ESRS E1, Climate change, enables businesses to address climate change by reducing their GHG emissions
Adherence to standards
Many jurisdictions are increasingly mandating sustainability reporting. Compliance with frameworks like the Corporate Sustainability Reporting Directive (CSRD) and other regional standards is essential to avoid legal penalties.
Attracting investors
Sustainability reporting can make your SME more attractive to investors who prioritise environmental, social, and governance (ESG) criteria. Transparent reporting can open doors to green finance and investment opportunities.
Market differentiation
By highlighting your sustainability efforts, your SME can differentiate itself from competitors, attract environmentally and socially conscious customers, and enhance its brand reputation.
E5 Resource use and circular economy
S1 Own workforce
S2 Workers in the value chain
S3 Affected communities
S4 Consumers and end-users
G1 Business conduct
ESRS E2, Pollution, specifies information to be disclosed about emissions into air, water and soil.
ESRS E3, Water and marine resources, sets disclosures about water consumption, withdrawal and discharges, and extraction and use of marine resources.
ESRS E4, Biodiversity and ecosystems, enables us to discover systemic risks and remedial opportunities concerning biodiversity.
ESRS E5, Resource use and circular economy, specifies information about material and waste flows, demonstrating the organisation’s readiness for circular strategies.
ESRS S1, Own workforce, requires a detailed overview of human resources, including information about both employees and non-employees.
ESRS S2, Workers in the value chain, requires information on working conditions, equal treatment, and human rights in the material parts of the value chain.
ESRS S3, Affected communities, requires transparency about impacts on communities and indigenous people that are affected by the organisation’s activities through their operations and value chain.
ESRS S4, Consumers and end users, requires the assessment and management of the organisation’s impact on private consumers and end-users of its products and services.
ESRS G1, Business conduct, focuses on organisational ethics and culture, relationship management with suppliers, and use of political influence.
Identifying and mitigating risks
Sustainability reporting helps your SME identify potential environmental and social risks in your operations and supply chains, enabling it to mitigate these risks proactively.
Improved efficiency and cost savings
Reporting on sustainability can lead to better resource management, reduced waste, and energy savings, which can lower operational costs and improve efficiency.
Enhanced communication
Regular reporting fosters transparency and builds trust with stakeholders, including customers, employees, suppliers, and the community. It demonstrates your commitment to sustainable practices.
Long-term viability
Sustainability reporting helps you prepare for future regulatory changes and market demands. By embedding sustainability into your business model, your SME can ensure long-term viability and resilience.
Building trust
Transparent reporting enhances the trust of consumers, partners, and the broader community, reinforcing the SME’s reputation as a responsible and ethical business.
Encouraging innovation
The process of sustainability reporting can drive innovation in products, services, and processes as your SME seeks new ways to reduce its environmental impact and improve social outcomes.
Aligning with global trends
As global awareness and demand for sustainable practices grow, SMEs that report on their sustainability initiatives can better align with consumer preferences and global market trends.
