The ESRS (European Sustainability Reporting Standards) framework consists of three primary

categories of standards:

ESRS 1 (General Requirements):

ESRS 1 sets out the fundamental principles and requirements for sustainability reporting.

It provides an overview of the structure and drafting conventions of the ESRS framework, defining

the categories of ESRS standards: cross-cutting, topical, and sector-specific.

It also establishes the double materiality principle as the basis for sustainability disclosures.

ESRS 2 (General Disclosures):

ESRS 2 outlines the core disclosure requirements applicable to all sustainability topics, ensuring

comparability and completeness.

It includes general governance, strategy, impact, risk, and opportunity management disclosures

applicable to all sustainability topics.

These disclosure requirements apply to all undertakings regardless of the specific sustainability

topics being reported.

Topical Standards:

The ESRS framework includes ten topical standards covering the three key dimensions of

sustainability:

Environmental (E): ESRS E1 (Climate Change), ESRS E2 (Pollution), ESRS E3 (Water & Marine

Resources), ESRS E4 (Biodiversity & Ecosystems), and ESRS E5 (Resource Use & Circular Economy).

Social (S): ESRS S1 (Own Workforce), ESRS S2 (Workers in the Value Chain), ESRS S3 (Affected

Communities), and ESRS S4 (Consumers & End-users).

Governance (G): ESRS G1 (Business Conduct).

These standards provide specific requirements on sustainability matters, complementing the general

disclosure requirements in ESRS 2.

Sector-Specific Standards:

Sector-specific ESRS are currently under development.

These will address sustainability matters specific to different industries, ensuring that sectoral

nuances are properly considered.

They aim to fill gaps not sufficiently covered by the topical standards by defining industry-specific

impacts, risks, and opportunities.

Why is C. ESRS 1; ESRS 2; topical standards; sector-specific standards the correct answer?

ESRS 1 (General Requirements) comes first, setting the foundation.

ESRS 2 (General Disclosures) follows, providing cross-cutting disclosure requirements.

Topical standards are next, covering specific sustainability topics.

Sector-specific standards are the final category, though they are still in development.

Thus, the correct order aligns with the official structure of the ESRS framework as mandated in

Commission Delegated Regulation (EU) 2023/2772​.

Official Commission Delegated Regulation (EU) 2023/2772, various EFRAG guidance documents, and

CSRD-related

Commission Delegated Regulation (EU) 2023/2772, Annex I: Structure of the ESRS framework​.

EFRAG Compilation of Explanations (January - November 2024): Explanation of ESRS categories​.

EFRAG Mapping of Sustainability Matters to Topical Disclosures (Q&A ID 177): Confirmation of ESRS

1, ESRS 2, and the ten topical standards​.

Preparing an ESRS report involves multiple key steps to ensure compliance with CSRD requirements.

Below is an evaluation of each option:

A . True – Internal controls and stakeholder engagement are critical for ensuring accurate

sustainability reporting. Stakeholders play a role in materiality assessments and governance

structures​.

B . True – Materiality assessment is essential to determine which sustainability matters are most

relevant for disclosure. The ESRS framework requires organizations to report only on material

sustainability topics​.

C . False – Stakeholder opinions are crucial in sustainability reporting. Organizations must engage

with employees, customers, investors, and affected communities to identify material sustainability

matters​.

D . True – Benchmarking and gap analysis help companies compare their sustainability performance

against ESRS requirements, industry best practices, and peer organizations​.

E . False – Sustainability reporting goes beyond financial data collection. The ESRS requires

environmental, social, and governance (ESG) disclosures, which include qualitative and quantitative

indicators​.

F . True – Planning for external assurance is critical under the CSRD mandate, as limited assurance is

required initially, progressing to reasonable assurance by 2028​.

Key Steps in ESRS Report Preparation

Step

Purpose

Internal Controls & Stakeholder Engagement

Ensure accuracy and transparency in reporting

Materiality Assessment

Identify key sustainability topics for disclosure

Benchmarking & Gap Analysis

Compare with industry standards and ESRS

requirements

External Assurance Planning

Prepare for third-party validation of sustainability data

Official Reference:

Commission Delegated Regulation (EU) 2023/2772, Sections on Materiality Assessment, Internal

Controls, and Assurance​.

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2023/2772, various EFRAG guidance documents, and reports related to CSRD, ESRS, stakeholder

engagement, double materiality, external assurance, and digital reporting Study guide Reference at

the end of each question

Under the ESRS framework, effective internal controls for assurance purposes must meet key

characteristics to ensure reliability, traceability, and auditability.

Correct Options Explained:

(A) Documentation & Implementation: Internal controls must be formally documented,

implemented as per the designated schedule, and consistently applied​.

(C) Testability by External Assurance Providers: Assurance providers must be able to verify the

controls, test their effectiveness, and ensure compliance with CSRD assurance requirements​.

Incorrect Options Explained:

(B) Same Staff Performing & Assuring the Control: A fundamental principle of internal control is the

separation of duties to avoid conflicts of interest. The control must be performed by one team and

assured independently​.

(D) No Need for Documentation: Proper documentation is mandatory for internal controls to enable

traceability, testing, and regulatory compliance​.

ESRS Reference:

Commission Delegated Regulation (EU) 2023/2772, GOV-5: Risk management and internal controls

over sustainability reporting, highlighting the necessity of internal control mechanisms​.

EFRAG Assurance Guidelines: Stipulating that documented controls must be verifiable and tested for

external assurance​.

The double materiality assessment process consists of multiple steps, with Step A: Understanding the

Context focusing on setting the groundwork for identifying material impacts, risks, and opportunities

(IROs).

Step A includes:

Mapping the organization's value chain (Option A)

This step involves identifying all elements of the organization's value chain, including suppliers,

distributors, and business partners, to understand where sustainability impacts occur.

It helps in pinpointing potential sustainability matters, risks, and opportunities related to both

impact and financial materiality​.

Engaging with affected stakeholders to gather input (Option B)

Stakeholder engagement is a critical part of the materiality assessment as it informs the organization

about direct and indirect sustainability impacts.

The ESRS guidance stresses that businesses must engage with affected stakeholders (e.g., employees,

communities, consumers) and sustainability experts as part of the due diligence process​.

Analyzing the legal and regulatory landscape (Option C)

Organizations must review applicable laws, regulatory frameworks, and international sustainability

commitments that may affect their sustainability reporting obligations.

This ensures compliance with EU regulations (CSRD, ESRS, Taxonomy Regulation, SFDR) and other

relevant legal requirements​.

Incorrect Answer:

D. Developing a list of material risks and opportunities

This step belongs to Step B: Identifying Material Sustainability Matters, where the organization

formally identifies and assesses material IROs. Step A is only about gathering contextual information

to inform this process​.

Official Reference:

Commission Delegated Regulation (EU) 2023/2772, Section 3.3 - Double materiality and materiality

assessment process​.

EFRAG IG 1: Materiality Assessment, Chapter 2.2 - Understanding the context and engagement with

affected stakeholders​.

EFRAG Compilation of Explanations January–November 2024 - Provides clarifications on stakeholder

engagement and legal context review in Step A​.

The Corporate Sustainability Reporting Directive (CSRD) includes specific reporting mandates that

organizations must comply with. Below is an evaluation of each option:

A . True – The CSRD requires organizations to conduct a double materiality assessment, considering

both financial materiality (impact on the company’s financial position) and impact materiality (the

company’s impact on the environment and society)​.

B . True – Organizations reporting under the CSRD must follow a specific reporting format, which

includes structured disclosures using European Sustainability Reporting Standards (ESRS)​.

C . False – The CSRD applies to both EU and non-EU companies that have operations in the EU and

meet the reporting threshold criteria. Non-EU companies generating more than €150 million in

annual turnover in the EU and having at least one EU-based subsidiary or branch are subject to CSRD

requirements​.

D . True – The CSRD is interlinked with other EU legislation, including the EU Taxonomy Regulation

and the Sustainable Finance Disclosure Regulation (SFDR), ensuring companies align with broader EU

sustainability goals​.

E . False – Organizations must report on value chain information as part of the impact, risk, and

opportunity (IRO) management process within the ESRS framework​.

F . False – The CSRD mandates external assurance for sustainability reports, starting with limited

assurance and progressing toward reasonable assurance in the coming years​.

Official Reference:

Commission Delegated Regulation (EU) 2023/2772, Sections on Double Materiality, Reporting

Format, and Value Chain Information​.

EU Taxonomy Regulation & SFDR – Linkages with CSRD​.

Impact materiality is indeed considered the starting point for the double materiality assessment in

the ESRS. The reason is that material impacts on sustainability matters can generate financial risks

and opportunities in the future. The ESRS framework follows this structure because:

Interrelation Between Impact and Financial Materiality

Double materiality includes two dimensions:

a) Impact materiality (how the company affects people and the environment).

b) Financial materiality (how sustainability matters affect the company’s financial performance).

Impact materiality assessments often precede financial materiality because many sustainability

issues initially manifest as external environmental and social impacts before affecting the company’s

financial results​.

Regulatory Confirmation of Impact as the Starting Point

According to ESRS 1, section 3.3, impact materiality is typically assessed first, unless a financial risk or

opportunity exists independently of an impact​.

A sustainability matter may become financially material over time due to regulatory changes,

evolving market expectations, or direct financial consequences.

Illustration of the Double Materiality Process

Example: A company engaged in high carbon emissions might initially consider this an impact

materiality issue (environmental harm). However, increased carbon pricing, regulatory changes, and

shifting investor p

can later transform this into a financial materiality issue.

Conclusion:

Since impact materiality serves as a precursor to financial materiality in most cases, the statement is

true.

Official Commission Delegated Regulation (EU) 2023/2772, various EFRAG guidance documents, and

CSRD-related references:

Commission Delegated Regulation (EU) 2023/2772, ESRS 1, Section 3.3: Double Materiality

Framework​.

EFRAG Compilation of Explanations (January - July 2024): Confirmation that impact materiality

assessment is the typical entry point​.

The European Sustainability Reporting Standards (ESRS) categorize stakeholders into two main

groups:

Affected Stakeholders:

These are individuals or groups whose interests are affected (positively or negatively) by the

undertaking’s activities and business relationships across its value chain.

Examples include workers (own workforce and those in the value chain), affected communities,

consumers, and end-users.

The identification of affected stakeholders plays a crucial role in an organization’s sustainability due

diligence and materiality assessment processes.

Users of Sustainability Statements:

These are primary users of sustainability disclosures, including investors, lenders, and other

creditors.

Additional users include business partners, trade unions, civil society organizations, non-

governmental organizations (NGOs), governments, analysts, and academics.

The ESRS framework emphasizes the importance of engagement with affected stakeholders as part

of an undertaking’s due diligence and materiality assessment process, ensuring that material

impacts, risks, and opportunities are adequately identified and reported​.

Official Reference:

Commission Delegated Regulation (EU) 2023/2772, ESRS 1, Section 3.1 - Defines the two main

groups of stakeholders​.

ESRS 2 SBM-2 (Interests and Views of Stakeholders) - Covers how affected stakeholders' views inform

an undertaking’s strategy​.

EFRAG Guidance on Stakeholder Engagement and Double Materiality - Reinforces the role of affected

stakeholders in sustainability assessments​.

The goal of assurance in sustainability reporting is to confirm the reliability of sustainability

disclosures, ensuring that reported information on risks, management strategies, and performance

data is accurate and verifiable.

Key aspects of sustainability assurance include:

Evaluating the credibility of reported sustainability risks and how organizations manage them.

Assessing compliance with CSRD and ESRS assurance requirements.

Ensuring data integrity and alignment with financial and sustainability disclosures.

Enhancing investor confidence in an organization’s sustainability reporting​.

Official Reference:

CSRD and ESRS Assurance Requirements (Commission Delegated Regulation (EU) 2023/2772, Section

5.2) - Specifies assurance requirements for sustainability reporting​.

EU Sustainable Finance Platform Report (2025) - Confirms assurance processes are necessary to

enhance trust in sustainability data​.

Under the ESRS framework, financial materiality is assessed based on a combination of:

Likelihood of occurrence – The probability that a sustainability matter will have a financial impact.

Potential magnitude of financial effects – The scale of the impact on financial position, performance,

cash flows, access to finance, or cost of capital over short-, medium-, or long-term periods​.

This is outlined in ESRS 1, which states that a sustainability matter is financially material if it could

reasonably be expected to trigger material financial effects on an undertaking. Financial materiality

is not limited to issues under the direct control of the company; it includes dependencies on natural,

human, and social resources that could create risks or opportunities​.

Why the other options are incorrect:

Option A: The ESRS framework allows for both qualitative and quantitative thresholds, not just

monetary ones (e.g., revenue or costs)​.

Option C: Reputational risks can be financially material, as they may affect access to finance, cost of

capital, or customer trust, ultimately influencing the company’s financial performance​.

Option D: The financial materiality assessment is conducted for the short-, medium-, and long-term,

not just the short term​.

Reference:

Commission Delegated Regulation (EU) 2023/2772​

Compilation Explanations January - July 2024, ESRS 1 on Financial Materiality​

EFRAG Guidance on Double Materiality and Risk Assessments​

Understanding Impact and Financial Materiality under ESRS

The ESRS framework is based on double materiality, which comprises:

Impact Materiality – This relates to the organization’s potential positive or negative impacts on

people or the environment, irrespective of whether these impacts translate into financial effects​.

Financial Materiality – This refers to sustainability matters that affect the company's financial

position, including risks and opportunities that influence financial outcomes over the short, medium,

or long term​.

Why the other options are incorrect:

(A) False: A sustainability topic can be material even if it does not directly affect financial

performance; it may still be impact material​.

(D) False: Impact and financial materiality are equally important under ESRS. Neither is prioritized

over the other​.

(E) False: The ESRS process generally begins with impact materiality, not financial materiality​.

Reference:

Commission Delegated Regulation (EU) 2023/2772, Section 3.3 on Double Materiality​

EFRAG Materiality Guidance on ESRS, which provides methodologies for assessing impact and

financial materiality​