ESRS Implementation Guide with ESRS Checklist

As the Corporate Sustainability Reporting Directive (CSRD) takes center stage, companies operating within the European Union are gearing up to meet the extensive directive’s reporting standards.

To successfully navigate the complex landscape of the EU Sustainability Reporting Standards (ESRS) and ensure compliant reporting practices, implementing efficient workflows and determining the data necessary to collect in accordance with the ESRS is crucial.

In this practical guide, we will walk you through the process of streamlining your reporting procedures, while utilizing software to simplify the journey. This guide is structured according to the comprehensive framework of the ESRS, starting with the concept and the foundation for your reporting and then delving deeper into the disclosures for each Environmental, Social, and Governance (ESG) standard.

The ESRS checklists will provide you with insights to navigate the specific data requirements linked to CSRD more effectively, empowering your organization to meet reporting obligations while driving sustainable practices forward.

Note that EFRAG provides non-authoritative implementation guidance related to questions on the ESRS that were asked on the EFRAG ESRS Q&A Platform. Please find the latest explanations below:

• Compilation of Explanations – January to November 2024

What are the ESRS?

The EU Sustainability Reporting Standards (ESRS) are a comprehensive set of reporting standards that all companies subject to the CSRD must adhere to.

Developed by the European Financial Reporting Advisory Group (EFRAG), these standards aim to streamline sustainability reporting by providing a unified framework for companies across the EU.

The ESRS were adopted as a delegated act by the European Commission on July 31, 2023.

Note: The Omnibus Package, which was presented in February 2025 by the EU Commission, specifies that there will be a ESRS Revision, to reduce data points, clarify provisions, and align with other legislation. This is planned within the current year 2025. Updated will be presented in this blogarticle.

What Forms the Basis of the ESRS?

The development process of the ESRS was based on key frameworks, including the EU Taxonomy Regulation, the Sustainable Finance Disclosure Regulation (SFDR), as well as existing international sustainability standards and disclosure recommendations from initiatives such as the Global Reporting Initiative (GRI) or the Task Force on Climate-Related Financial Disclosures (TCFD).

Further, EFRAG works closely with the IFRS Foundation’s International Sustainability Standards Board (ISSB). 

While the ISSB standards aim at creating a global basis of sustainability-related financial language on which countries can base their building blocks, the ESRS take a multi-stakeholder perspective to also fulfill the broader information requirements of stakeholders other than investors.

Therefore, the ESRS go further where needed and require companies to report a wider range of information to meet the EU’s ambitions consistent with the EU’s legal framework.

ESRS Guide: How to Navigate the ESRS Requirements

The European Sustainability Reporting Standards can be understood as:

(1) the cross-cutting standards representing the foundation of your reporting, and
(2) the topical ESG standards covering environment, social, and governance, each of which need to cover the four disclosure areas (1.Governance, 2. Strategy, 3. Impact, risk and opportunity management, 4. Metrics and targets) that are specified within the general disclosures.

Following the Cross-Cutting ESRS: How to Establish a Solid Reporting Foundation

The cross-cutting ESRS-standards provide the framework and structure on what to include and how to present information in your final report. As such, they set the baseline for appropriate, systematic reporting practices, providing guidance and disclosures on how you can identify risks, impacts and opportunities and assess your double materiality.

ESRS 1: General Requirements

The general requirements of ESRS 1 outline the disclosure expectations from applicable companies. They explain the mandatory concepts and principles to apply when preparing sustainability statements under the CSRD and state that a company must disclose all material information about its sustainability-related impacts, risks and opportunities in accordance with the ESRS. 

ESRS 2: General Disclosures

ESRS 2 presents cross-cutting requirements for general disclosures in the sustainability reporting that also need to be covered within the topical standards. It also requires you to disclose specific compliance information such as approximations in relation to your company’s value chain and boundaries. 

The four reporting areas according to ESRS 2 cover:

• Governance (GOV): Includes the governance processes, controls and procedures used to monitor and manage impacts, risks and opportunities‍
• Strategy (SBM): How the business model/strategy interacts with its material impacts, risks and opportunities, including the strategy for addressing them‍
• Impact, risk and opportunity management (IRO): Includes the process by which impacts, risks and opportunities are identified, assessed and managed through policies and actions‍
• Metrics and targets (MT): How a company measures its performance, including progress toward its goals and targets

The “General disclosures” standard is structured in a four-pillar system analog to TCFD (Task Force on Climate-Related Financial Disclosures) / ISSB (International Sustainability Standards Board), allowing for alignment with these standards.

While ESRS 2 is mandatory for all companies, further disclosure requirements result from your double materiality analysis.

Find out more about ESRS 1 and ESRS 2 in our detailed blogpost: ESRS1 and ESRS 2: The Cross-Cutting Standards

Topical ESRS-Standards: Fulfill the Requirements You are Subject to Within Each ESG Standard

Disclosures related to the topical ESG standards that apply to you will be derived from your double materiality analysis for each of these standards. 

The standards also aim to teach companies how to adapt their business practices in line with the transition toward a sustainable economy, and how these changes contribute to the objectives of the European Green Deal and other EU strategic and regulatory frameworks.

ESRS E1-E5: Environment

The topical environmental standard outlines disclosures for companies to report on specific environmental topics. Further, it gives companies an understanding of actual or potential impacts from their resource use and/or distribution and commercialization.

• ESRS E1 Climate Change‍
• ‍ESRS E2 Pollution ‍
• ‍ESRS E3 Water and Marine Resources
• ESRS E4 Biodiversity and Ecosystems ‍
• ‍ESRS E5 Circular Economy 

Check the following article for more details: ESRS E1-E5: The Topical Environmental Standards

ESRS S1-S4: Social

The topical social standard provides a disclosures for companies to report on four specific social topics related to human-centric issues, both internally and externally (more details on the ESRS S1-S5: Topical Social Standard). 

• ‍ESRS S1 Own Workforce 
• ESRS S2 Workers in the Value Chain 
• ESRS S3 Affected Communities
• ESRS S4 Consumers and End-Users
  

ESRS G1: Governance

The topical governance standard sets a reporting standard for companies to disclose their business strategy and approach, processes, procedures and performance.

• ESRS G1 Business Conduct

In the blog post "ESRS G1: The Topical Governance Standard" we have broken down the ESRS G1.

Sunhat’s ESRS Disclosure Checklists: How to Efficiently Collect Required Data for Disclosures

Use the embedded ESRS checklists in Sunhat to identify gaps and get started with your implementation plan for the upcoming reporting standards. By breaking down the extensive policy documents and requirements into manageable checklist items within the Sunhat workspace, the software solution helps you to tackle disclosures preparations right away: 

1. Identify which processes and data you already have at hand and which are missing to commence your reporting preparations. 

If you have not started reporting yet, you can use the checklist as a starting point for your CSRD project roadmap. Tick off each item, once you establish the corresponding processes.

2. Keep track of the data collections you need to implement based on your initial data gap analysis, and use the suggested set of tasks to get started with collecting and maintaining data in a consistent and continuous manner. 

It is important to be able to provide information and context on how data is collected, analyzed and reviewed internally or by third parties such as suppliers and partners to report auditable disclosures

The ESRS checklists in Sunhat catalog all disclosures of ESRS 2 and the topical standards. For example, the topical standard ESRS E1 Climate Change encompasses 9 disclosures ranging from subjects on transition plan for climate change mitigation (ESRS E1-1) to potential financial effects from material physical and transition risks and potential climate-related opportunities (ESRS E1-9). In addition, it includes the ESRS 2 SBM-3 and ESRS 2 IRO-1 both part of ESRS 2 (General Disclosures).

 Our disclosure checklist gives an overview on: 

• the objective of the disclosure
• the list of requirements to report on each main disclosure topic
• the applicable general disclosures from ESRS 2
• the corresponding application requirements from the appendices, which provide additional guidance on how to disclose requirements, e.g. tables and calculation formulas
• guidance in form of the reference texts

To enhance your understanding of the specific data requested within the ESRS, we will provide an example from Sunhat’s CSRD module structure for Disclosure Requirement "ESRS E1-6 Gross Scopes 1,2,3 and Total GHG Emissions" that is linked to the explanations provided from EFRAG. 

Sunhat provides a pragmatic breakdown of the Disclosure Requirements (e.g., ESRS E1-6) into the paragraphs with the regulatory text as well as the single datapoints as defined by the EFRAG datapoint list (see the example below).

Example Structure: ESRS E1-6 Gross Scopes 1,2,3 and Total GHG Emissions

Full Standard Text (= general statement of the requirements from the ESRS delegated regulation)

44. The undertaking shall disclose in metric tonnes of CO2eq its: (a) gross Scope 1 GHG emissions; (b) gross Scope 2 GHG emissions; (c) gross Scope 3 GHG emissions; and (d) total GHG emissions.

Data points (= individual separable data points as defined in the EFRAG data point list)

• Gross Scope 1 GHG emissions
• Gross Scope 2 GHG emissions
• Gross Scope 3 GHG emissions
• Total GHG emissions

Objective per data point (= objective of the requirements from the ESRS delegated regulation)

45. The objective of the Disclosure Requirement in paragraph 44 in respect of: 

• Gross Scope 1 GHG emissions as required by paragraph 44 (a) is to provide an understanding of the direct impacts of the undertaking on climate change and the proportion of its total GHG emissions that are regulated under emission trading schemes. 

• Gross Scope 2 GHG emissions as required by paragraph 44 (b) is to provide an understanding of the indirect impacts on climate change caused by the undertaking’s consumed energy whether externally purchased or acquired. 

• Gross Scope 3 GHG emissions as required by paragraph 44 (c) is to provide an understanding of the GHG emissions that occur in the undertaking’s upstream and downstream value chain beyond its Scope 1 and 2 GHG emissions. For many undertakings, Scope 3 GHG emissions may be the main component of their GHG inventory and are an important driver of the undertaking’s transition risks.

• Total GHG emissions as required by paragraph 44 (d) is to provide an overall understanding of the undertaking’s GHG emissions and whether they occur from its own operations or the usptream and donwstream value chain. This disclosure is a prerequisite for measuring progress towards reducing GHG emissions in accordance with the undertaking’s climate-related targets and EU policy goals.

The information from this Disclosure Requirement is also needed to understand the undertaking’s climate-related transition risks.

Application Requirements (= information on what to consider and how to report the requirements from the Appendix A to the ESRS regulation)

AR 39 (mandatory). When preparing the information for reporting GHG emissions as required by paragraph 44, the undertaking shall: 

• Consider the principles, requirements and guidance provided by the GHG Protocol Corporate Standard (version 2004). The undertaking may consider Commission Recommendation (EU) 2021/2279 or the requirements stipulated by EN ISO 14064- 1:2018. If the undertaking already applies the GHG accounting methodology of ISO 14064- 1: 2018, it shall nevertheless comply with the requirements of this standard (e.g., regarding reporting boundaries and the disclosure of market-based Scope 2 GHG emissions);
• Disclose the methodologies, significant assumptions and emissions factors used to calculate or measure GHG emissions accompanied by the reasons why they were chosen, and provide a reference or link to any calculation tools used;
• Include emissions of CO2, CH4, N2O, HFCs, PFCs, SF6, and NF3. Additional GHG may be considered when significant; and
• Use the most recent Global Warming Potential (GWP) values published by the IPCC based on a 100-year time horizon to calculate CO2eq emissions of non-CO2 gases.

Other application requirements applicable: 

• AR 40, AR 41, AR 42, AR 48, AR 51, AR 53 (mandatory)
• AR 49, AR 50, AR 52, AR 54, AR 55 (optional)

This example serves as a practical reference, showcasing the type of information you need to gather and report. By following our ESRS disclosure lists, you can align your workflows to meet the specific requirements outlined by the directive’s standards.

Optimize your Workflows and Set Up a Basis for CSRD Reporting with Sunhat’s Automation Software

To optimize your sustainability reporting process, incorporating software solutions for CSRD can prove valuable. By leveraging Sunhat’s dedicated software features, you can automate data collection, streamline analysis, and facilitate reporting tasks. 

Utilizing software can enhance efficiency, accuracy, and consistency of your internal processes that represent the basis for your digital reporting and third-party assurance.

With the many details and dense PDF which comes with each standard draft, it can be difficult to know where or how to start your transition to aligning with these standards. 

ESRS checklists in Sunhat help you assess where you already stand, reflect on what work you have already done, and how much work lies ahead.
‍To get started, try to answer the following questions:

• In what ways are you already aligned with ESRS requirements? Where do you need to make changes in order to align your current reporting? 
• How much of the requested qualitative and quantitative data do you already collect? What data points are still lacking?
• How do you collect and maintain the data required for reporting? Do you already track all topical ESRS issues as they relate to your company?
• What existing data collection processes can you build on, where do you need to adjust?
• Do you have a task force ready to take on the responsibilities of ensuring you meet ESRS requirements by your designated deadline?
• How do you ensure that your data and documentation is verified? 
• How do you involve your suppliers and partners in your internal processes to prepare ESRS disclosures?

Sunhat’s CSRD module guides you to set up all disclosure processes to kickstart your reporting preparations for the ESRS. 

The system allows you to oversee your preparation process and saves your progress on disclosures. Any final disclosures are easily accessible for your reporting exports and also serve as inputs to fulfill additional sustainability requirements, such as CDP or EcoVadis. 

With Sunhat, you can update and maintain relevant sustainability disclosures, metrics and data throughout the year to ensure audit-ready disclosures for the next reporting cycle.

Outlook on the ESRS Implementation

On July 31, the European Commission (EC) published the final first set of ESRS. The presented 12 standards apply to its first wave of affected companies from January 1, 2024. In October 2023 EFRAG launched a Q&A Platform to collect and answer questions on the implementation of the ESRS. To support the reporting preparation, EFRAG regularly publishes explanations based on the Q&A platform.

While the first group of standards applies to all industries and sectors, EFRAG is developing a second group of standards, the sector-specific ESRS standards. These will apply to all companies within a particular sector. Currently, EFRAG focuses on supporting companies in implementing the sector-independent ESRS. Nevertheless, EFRAG took the first steps towards developing sector-specific standards in 2024 (see the working paper here). The sector-specific standards address additional impacts, risks and opportunities which are not already covered in the existing requirements.

The final sector standards are expected to come into force from 2026. The draft standards for the oil and gas, mining, raw materials extraction and coal mining sectors are currently in the approval process for a public consultation. They will then be published to obtain feedback. Others are currently being developed. Details on the current status and process of sector-specific standards development can be found on the EFRAG project website.

EFRAG is also working on the development of the ESRS standards that will apply to non-EU groups. Companies that fall under the CSRD criteria (non-EU parent companies with more than €150 million net turnover in the EU and a branch in the EU) must disclose their sustainability performance based on the ESRS from 2029 for the 2028 financial year. Further details can be found in the current working paper and on the project page of EFRAG.

At the end of 2024, EFRAG submitted the voluntary sustainability reporting standard for non-listed SMEs (VSME) to the European Commission. All details and links to further information (such as a cost-benefit analysis) are available on EFRAG's VSME news page.

Have a look at the official website of the European Commission for the final versions of the standards and the Commission Delegated Regulation from July 31, 2023.

Summary: Practical Guide on ESRS Implementation

We have summarized the most important CSRD facts for you in the following guide. This also includes an example from Sunhat´s CSRD module structure for Disclosrue Requirements of one standard (ESRS E1-6).

Note: The Sunhat CSRD module contains all the guidance documents, requirements and structure templates for efficient and compliant responses - from ESRS 2 to Topical Standards.

If you are interested in the PDF version of this guide, please do not hesitate to contact us! :)

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