April 2025 update: On 26 February 2025, the European Commission released an Omnibus package of proposals to reduce sustainability reporting and due diligence requirements. As part of this Omnibus package only the largest companies would report under ESRS and the requirements may be subject to change in the future. For more detail on the proposals, see our article.

(This article was published on 1 August 2023 and updated on 24 January 2025*)

Mark Vaessen
Mark Vaessen

Partner

KPMG in the Netherlands

Companies in scope need to get ready now for enhanced sustainability reporting, as the European Commission (EC) has published the final text of its first set of twelve European Sustainability Reporting Standards (ESRS). For the first wave of companies, disclosures will be required as early as the 2024 reporting period.

Companies will need to assess which topics to report using the double materiality concept, which requires information that is material from either a financial perspective or an impact perspective. Companies will also need to include information from their value chain.

It is important to engage now to understand the requirements of this first set of ESRS and to assess how your company needs to adapt.

Now the final text of the ESRS is clear, companies in scope have no time to lose before these standards become mandatory. The scale and ambition of these standards is unparalleled and there are key differences to other international frameworks. Companies need to get ready to meet the challenges and realise the opportunities that enhanced reporting will bring.

Mark Vaessen, Chair,

Global Corporate & Sustainability Reporting Topic Team

Key features of current ESRS

    The ESRS set out detailed reporting requirements for companies in the scope of the CSRD1. Two cross-cutting standards provide general reporting concepts and include overarching disclosure requirements including multiple datapoints. Ten topical standards complement these with detailed disclosure requirements across environmental, social and governance topics. Together, these 12 ESRS require companies to provide information on:

    • their governance and strategy to address material sustainability topics;
    • the impacts, risks and opportunities arising from those topics; and
    • quantitative metrics and targets.
                              Key features of current ESRS
    Double materiality principles
    • Double materiality refers to two dimensions of materiality – ‘financial’ and ‘impact’.
    • Companies will need to perform materiality assessments for both dimensions and report matters that are material in either dimension for all sustainability-related topics.
    Reporting across a broad range of topics
    • ESRS require disclosures on material impacts, risks and opportunities across a broad range of environmental, social and governance topics. 
    • Following a materiality assessment, companies need to ensure they have the data, processes and expertise to report on topics that may be new to them, such as biodiversity or the circular economy.
    Governance
    • Companies need to clearly set out their governance of how they address sustainability-related topics, including how sustainability key performance indicators (KPIs) affect remuneration. 
    Reporting at the same time as the financial statements
    • Companies in scope will prepare a sustainability statement including the disclosures required by the ESRS as part of their management report, published at the same time as the financial statements.
    • It will be challenging for many companies to gather data in time.
    Reporting on impacts, risks and opportunities across the value chain
    • The standards require companies to identify and report on impacts, risks and opportunities from across the value chain.
    • Companies need to understand how this feature will impact their reporting and data gathering, even though the extent of data required from the value chain has reduced since the original drafts, and phase-in reliefs are available.
    Reporting on policies, action plans and targets
    • Companies need to be ready for the transparency of providing granular disclosures about their policies, action plans and targets across all material topics. 
    • While the standards themselves do not require companies to put in place new targets or implement new policies, the standards will bring greater visibility and scrutiny of their plans. Undertaking an implementation project therefore represents an opportunity to identify and address areas where companies are less mature than they would want to be.
    Assurance
    • Companies need to be prepared for disclosures to be subject to assurance. 
    • This will require a clear audit trail and documentation of processes and controls to support the disclosures provided.

    Interoperability with international standard-setting initiatives

      The CSRD requires the EC and EFRAG to take 'account, to the greatest extent possible, of the work of global standard-setting initiatives'. Both have worked with the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI) to increase interoperability.

      The ISSB and EFRAG have published a detailed, bottom-up analysis of the climate-related disclosure requirements in IFRS S2 Climate-related disclosures and corresponding requirements in ESRS 1 General Requirements, ESRS 2 and ESRS E1.

      Next steps

        Companies in scope can use ESRS Foundations, which provides useful guidance on how to apply the standards.

        ESRS Today

        Our latest insights and guidance on European Sustainability Reporting Standards
        Read more
        Download

        ESRS Foundations

        Read our publication

        Download

        * The discussion on interoperability has been updated to include the publication of joint guidance by the ISSB and EFRAG.   

        1 Corporate Sustainability Reporting Directive

        2 European Financial Reporting Advisory Group, which is mandated by the European Commission responsible for developing ESRS

        3 The EU’s Sustainable Finance Disclosure Regulation (Regulation (EU) 2019/2088)

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