The “Summer of CSRD” series – general presentation requirements

The EU’s Corporate Sustainability Reporting Directive will have broad impact. Approximately 50,000 undertakings are expected to have a reporting obligation. The recently finalized European Sustainability Reporting Standards specify the information required to be reported under CSRD.

As we recently posted, this summer’s ESG must-read is ESRS 1, which contains the general requirements applicable to CSRD reporting. The objective of ESRS 1 is to provide an understanding of the architecture of the ESRS, the drafting conventions and fundamental concepts used and the general requirements for preparing and presenting sustainability information in accordance with CSRD.

Understanding ESRS 1 is therefore critical to preparing for CSRD reporting. It will drive not only disclosure, but also the underlying processes and controls. As a threshold matter, understanding ESRS 1 also is important for developing the project plan for CSRD readiness.

Posts in this “Summer of CSRD” series discuss selected aspects of ESRS 1, in a bite-sized read, in more or less the order presented in ESRS 1.

In the last post, we discussed general requirements to be applied when preparing and presenting sustainability information.

In this post, we discuss the general presentation requirements in ESRS 1, chapter 8. Chapter 8 provides the basis for the presentation of sustainability information within the undertaking’s management report. This information is required to be presented in a dedicated section of the management report identified as the sustainability statement. Appendix F to ESRS 1 contains an illustrative example of the structure of the sustainability statement.

General presentation requirement

As a general matter, ESRS 1 requires sustainability information to be presented (1) in a way that allows a distinction between information required by disclosures in the ESRS and other information included in the management report and (2) under a structure that facilitates access to and understanding of the sustainability statement, in a format that is both human-readable and machine-readable.

Content and structure of the sustainability statement

The undertaking must report all of the applicable disclosures required by the ESRS within the sustainability statement, unless incorporated by reference in accordance with ESRS 1 (incorporation by reference will be discussed in our next post).

The undertaking also must include in its sustainability statement disclosures pursuant to Article 8 of the Taxonomy Regulation and related Commission Delegated Regulations (the Taxonomy Regulation provides for disclosures relating to the environmental performance of assets and economic activities). These disclosures must be separately identifiable within the sustainability statement and the disclosures relating to each of the environmental objectives defined in the Taxonomy Regulation must be presented together in a clearly identifiable part of the environmental section of the sustainability statement.

When the undertaking includes in its sustainability statement additional disclosures arising from (1) other legislation that requires the undertaking to disclose sustainability information or (2) generally accepted sustainability reporting standards and frameworks – including non-mandatory guidance and sector-specific guidance – published by other standard-setting bodies (such as technical material issued by the International Sustainability Standards Board or the Global Reporting Initiative), those disclosures must be clearly identified with an appropriate reference to the related legislation, standard or framework. They also are required to meet the requirements for qualitative characteristics of information specified in ESRS 1 (see our post).

The undertaking is required to structure its sustainability statement in four parts, in the following order:

• general information;
• environmental information (including disclosures pursuant to Article 8 of the Taxonomy Regulation);
• social information; and
• governance information.

When information provided in one of the parts of the sustainability statement contains information to be reported in another part, the undertaking may refer in one part to the information presented in another part to avoid duplication.

The disclosures required by sector-specific ESRS must be grouped by reporting area and, where applicable, by sustainability topic. These disclosures are required to be presented alongside the general disclosures required by ESRS 2 and the corresponding topical ESRS.

If the undertaking develops material entity-specific disclosures because it concludes that an impact, risk or opportunity is not covered (or not covered with sufficient granularity) by an ESRS, but is material due to its specific facts and circumstances, the undertaking is required to report those disclosures alongside the most relevant sector-agnostic and sector-specific disclosures.

Next up: Linkages with other parts of corporate reporting and connected information.

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