The CSRD requires companies to disclose a broad range of data relating to their environmental, social, and governance practices. The European Commission has committed to revising ESRS within six months of Omnibus adoption to reduce data points and clarify requirements. These revisions are expected to significantly streamline reporting by reducing mandatory disclosures and data points, clarifying requirements, shifting focus to quantitative metrics, enhancing materiality guidance, and simplifying reporting templates—changes that will benefit all reporters regardless of size. We will update the requirements below when more details are available.
While the Omnibus proposal aims to simplify these requirements, the core structure remains.
Here's the outline of what your report will need to include:
General Disclosures (ESRS 1 & ESRS 2):
All companies will need to complete the general disclosures, ESRS 1 and ESRS 2. These sections align closely with the typical structure of an annual report.
ESRS 1 outlines the general requirements for sustainability reporting, including:
- Double Materiality Assessment: Companies must report both on how sustainability matters affect their financial performance (financial materiality) and on how their activities impact the environment and society (impact materiality). They will need to include the process by which they determine materiality.
- Sustainability Statements: Disclosures must be integrated into the company's management report and be subject to a limited audit assurance. Note: Under the Omnibus proposal, there will be no requirement to move to reasonable assurance in the future.
ESRS 2 provides the framework for general disclosures that all companies must include. These are organized into the following key areas:
- Governance: How sustainability is governed within the organization, including roles, responsibilities, and procedures for monitoring ESG risks and opportunities.
- Strategy: How sustainability is integrated into the company's business model and strategy, including impacts on and from sustainability-related risks and opportunities.
- Impact, Risks, and Opportunities: A description of how the company's activities affect the environment and society, as well as how external sustainability factors present risks or opportunities to the company.
- Metrics and Targets: Quantitative data on sustainability performance, including targets for improving the company's ESG footprint over time.
Topical Standards (ESRS E, S, G)
In addition to the general disclosures, companies must report on relevant ESG topics using the 10 Topical Standards under three main categories: Environmental, Social, and Governance. For each of these sections, companies will need to disclose any relevant risks, impacts, and opportunities that are material for the company. Then, companies should disclose the policies, actions and targets in place to mitigate those risks and impacts.
Environmental Standards (ESRS E1-E5):
- ESRS E1 (Climate Change): Disclose how climate-related risks and opportunities affect the company, along with data on greenhouse gas emissions (Scope 1, 2, and 3), energy use, and mitigation strategies. Companies will need to include a credible transition plan that aligns to the Paris Agreement. For most companies, this section will be required.
- ESRS E2 (Pollution): Report on the company's emissions of pollutants into air, water, and soil, including information on how these are being reduced.
- ESRS E3 (Water and Marine Resources): Information on water consumption, conservation, and the impact on marine ecosystems.
- ESRS E4 (Biodiversity and Ecosystems): Data on how the company's activities affect biodiversity, including deforestation, habitat destruction, and biodiversity protection efforts.
- ESRS E5 (Resource Use and Circular Economy): Details on material use, waste production, and how the company is transitioning towards a circular economy (e.g., recycling, sustainable sourcing).
Social Standards (ESRS S1-S4):
- ESRS S1 (Own Workforce): Information on the company's treatment of employees, including working conditions, diversity and inclusion, wages, and health and safety.
- ESRS S2 (Workers in the Value Chain): Disclosures on how the company ensures fair labor practices for workers in its supply chain, including human rights due diligence. Note: Under the Omnibus proposal, companies cannot request information from value chain partners with fewer than 1,000 employees.
- ESRS S3 (Affected Communities): Information on how the company's operations impact local communities, including displacement, community relations, and contributions to local economies.
- ESRS S4 (Consumers and End-users): Data on how the company's products and services impact end-users, including product safety, privacy, and accessibility.
Governance Standards (ESRS G1):
- ESRS G1 (Governance, Risk Management, and Internal Control): Companies must disclose governance structures, policies, and processes related to managing sustainability risks, including board oversight, executive responsibility, and compliance with legal and ethical standards. This will include both qualitative and quantitative components.
Other Reporting Requirements:
- Sector-Specific Standards: While the CSRD originally required sector-specific standards, the Omnibus proposal eliminates this requirement.
- Audit Assurance: All sustainability reports must be subject to a limited audit assurance to ensure the reliability of the disclosed data. However, the Omnibus proposal removes the planned progression to reasonable assurance.
