European Sustainability Reporting Standards (ESRS)

The standards were developed by the European Financial Reporting Advisory Group and adopted by the European Commission. There are cross-cutting standards on general requirements and general disclosures, followed by topical standards on climate, pollution, water, biodiversity, the company’s own workforce, workers in the value chain, affected communities, consumers and business conduct. Each contains disclosure requirements broken down into data points. A company applies them after its double materiality assessment, which tells it which topics it must report on; some general disclosures apply regardless. Sector-specific standards were planned and, along with some of the content, have been under review for simplification. Reports are tagged digitally so that data can be compared. Preparers and assurance providers meet the ESRS as a checklist of data points with defined methods. Auditors test each data point against its definition, so the standards give the directive a measurable shape that a company either meets or leaves with a gap to explain.

A European retailer works through the ESRS after its materiality assessment shows climate, workforce and supply chain labour as material. The reporting team lists every data point under those standards, finds that it holds no data on value-chain workers, and starts a supplier survey. It records the gap as a phase-in item with a plan.