Get ready for

European
Sustainability
Reporting Standards
Understanding the first set of ESRSs

November 2023
 Who is in scope? What will the ESRSs require you to report? How can you get ready? Abbreviations and key terms Keeping in touch

Get ready for European Sustainability Reporting Standards

What’s the issue? What’s the impact? What’s next?

Under the CSRD, many more companies in the EU will The ESRSs are ambitious and will have a significant • Make yourself familiar with the reporting
need to prepare extensive sustainability reports as part impact on the scope, volume and granularity of requirements under the ESRSs.
of their management reports. sustainability-related information to be collected and
• Identify what you will be required to report.
disclosed by companies.
ESRSs will be applied by:
• Understand the practical implications for your
They introduce the concept of double materiality (the
• all large and most listed EU companies; company’s people, processes and systems.
multi-stakeholder approach) and expand a company’s
• large subsidiaries of non-EU parents (group reporting boundary to cover material information • Prepare: based on a phased timeline, adoption
exemptions apply); and across its value chain. will start for the first tranche of companies for
years beginning on or after 1 January 2024.
• non-EU companies with a turnover in the EU of A company will need to report on how its activities and
more than EUR 150 million. value chain affect the environment and people, as well
as how sustainability-related matters affect its cash
In July 2023, the EC published the final text of its first
flows, financial position and financial performance.
set of ESRSs. For the first wave of companies,
disclosures will be required as early as the 2024
reporting period.

Abbreviations and key terms

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 Who is in scope? What will ESRSs require you to report? How can you get ready? Abbreviations and key terms Keeping in touch

Key questions to get ready

Who is in scope? How can you get ready?
01 02 03 04 05 16
What is the impact on
people, processes and
controls, systems and data?
What is the legal When and to whom Is reporting required Which non-EU-based Which reporting
basis for applying will ESRSs apply? at an individual or companies will need exemptions are
ESRSs? consolidated level? to report? available?
17 What about assurance?

What will ESRSs require you to report?

06 07 08 09 10 18 What do you need to do
now?

What has been What will companies What type of content What reporting What is double
released? need to disclose? will need to be boundary do you materiality?
disclosed? need to consider?

11 12 13 14 15
How do you How will companies What phase-in What about EU What if you have already
determine material present their reliefs will apply? Taxonomy adopted other
topics? sustainability reports? reporting? frameworks?

© 2023 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. 3
 Who is in Is reporting required at an individual or Which non-EU-based companies will need to
What is the legal basis for applying ESRSs? When and to whom will ESRSs apply? Which reporting exemptions are available?
scope? consolidated level? report?

01 What is the legal basis for applying ESRSs?

Corporate Sustainability Reporting Directive (CSRD) EU Taxonomy
• The CSRD sets out which companies need to report • The EU Taxonomy is a classification
sustainability-related information and when. The ESRSs support system that defines activities deemed to
this with detailed reporting requirements.
EU be aligned with a net-zero trajectory by
• It is a key component of the EU's sustainable finance action plan1
– which also includes reporting under the EU Taxonomy and
CSRD Taxonomy
2050. It aims to help direct investment
towards activities that will support the
SFDR. transition to a greener economy.
• It requires companies to report on their sustainability-related • As part of the CSRD, in addition to
information with the aim of: ESRS requirements, companies in
scope are also required to report under
- providing investors and stakeholders access to necessary the EU Taxonomy regulation. This
information for assessing investment risks related to climate
change and other sustainability-related matters; and ESRSs regulation sets out specific KPIs about
the extent of a company’s sustainable
- establishing greater transparency about a company's impact activities.
on people and the environment.

Sustainable Finance Disclosure Regulation

(SFDR)

SFDR • This regulation requires asset managers and other

institutional investors to disclose information about how
sustainability is integrated into their investment
decision-making process. To report this information,
asset managers and others captured by the SFDR
require data from the companies they invest in.
The CSRD does not apply solely for EU-based companies.
Its scoping requirements capture a range of companies, • ESRSs are designed to provide this information, where
including non-EU companies with significant operations in the material.
EU and non-EU-based companies listed in the EU. 1 The EU’s sustainable finance action plan is part of the European Green Deal – a major package of policy
initiatives designed to support the EU to achieve climate neutrality by 2050.

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 Who is in Is reporting required at an individual or Which non-EU-based companies will need to
What is the legal basis for applying ESRSs? When and to whom will ESRSs apply? Which reporting exemptions are available?
scope? consolidated level? report?

02 When and to whom will ESRSs apply?

When: ESRSs will apply for years beginning on or after 1 January 2024 (reporting
in 2025). Phased introduction will start with Public Interest Entities (PIEs) and
FY24 FY25 FY26 FY27 FY28
companies with listed securities on EU-regulated markets which are large and have Reporting Reporting Reporting Reporting Reporting
more than 500 employees (e.g. those already subject to reporting requirements under in 2025 in 2026 in 2027 in 2028 in 2029
the NFRD).

Who: Ultimately, ESRSs will be applied by (group exemptions may apply): Certain large companies
(large1 PIEs > 500 employees)
• large EU companies1;
Other large1 companies
• most companies with listed securities on EU-regulated markets (irrespective of
whether they are based in the EU or not2); and Option to opt out for two years
• ultimate non-EU parent companies4 with a combined group turnover in the EU of
Listed SMEs3, 4
more than EUR 150 million.
(except micro-undertakings2)

Non-EU parents3

1 Large companies are those that, on the balance sheet date, exceed two of the following three
criteria (including EU and non-EU subsidiaries): 250 employees, net revenue of EUR 50mn
(formerly EUR 40m) or total assets of EUR 25m (formerly EUR 20m). The new thresholds take
effect from FY 2024. EU member states can choose to adopt them early from FY 2023.
2 Exemptions apply, for example, for micro-undertakings (companies that do not exceed two of the
following three criteria (including EU and non-EU subsidiaries): 10 employees, net revenue of EUR
900,000 (formerly EUR 700,000) or total assets of EUR 450,000 (formerly EUR 350,000) and for
certain debt listings. The new thresholds take effect from FY 2024. EU member states can choose EFRAG will develop and publish additional sets of ESRSs in due
to adopt them early from FY 2023. course. These will include sector-specific standards, standards for
3 Separate standards will be developed for SMEs and non-EU parent companies. SMEs and a standard on non-EU parent companies.
4 Small and non-complex institutions and captive insurers are treated like listed SMEs (the option to
opt out until 2028 does not apply unless they also meet the definition of an SME).

© 2023 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. 5
 Who is in Is reporting required at an individual or Which non-EU-based companies will need to
What is the legal basis for applying ESRSs? When and to whom will ESRSs apply? Which reporting exemptions are available?
scope? consolidated level? report?

03 Is reporting required at an individual or consolidated level?

Individual reporting Consolidated reporting
• Companies (including parent companies and subsidiaries) will be required to report on a
standalone basis if they meet the scoping thresholds, unless they are exempt (e.g. via being Groups with an EU-based parent
included in a consolidated report).

• Large listed PIEs are required to report on an individual basis regardless of whether they are
• EU-based parent companies of a large group will report for their consolidated group but can
included in a consolidated report.
claim an exemption from preparing separate sustainability reporting at the parent company
level unless they are also a large PIE.
• A group with a non-EU-based parent and multiple subsidiaries that each individually meet the
scoping thresholds may use the temporary ultimate non-EU parent exemption to reduce the
• Many EU subsidiary companies will be able to rely on this consolidated parent’s report rather
number of individual reports required.
than reporting in their own right. This also allows intermediate parent companies to be
exempt from preparing a sustainability statement for their subgroup.

Groups with a non-EU-based parent

• Non-EU-based companies may be required to report on a standalone or consolidated basis if

they have listed securities on EU-regulated markets.

• EU subsidiary companies may be able to apply the group exemption by relying on a

consolidated parent’s report that is made available voluntarily.

• From 2028, for an ultimate non-EU parent company that has substantial activity and a
presence in the EU, reporting is required to cover the entire global group – i.e. from the
perspective of the ultimate parent. This reporting would follow separate non-EU parent
standards, yet to be published.

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 Who is in Is reporting required at an individual or Which non-EU-based companies will need to
What is the legal basis for applying ESRSs? When and to whom will ESRSs apply? Which reporting exemptions are available?
scope? consolidated level? report?

04 Which non-EU-based companies will need to report?

Non-EU-based companies with listed securities1 on a regulated Other non-EU companies
market in the EU Certain non-EU-based companies with substantial activity and a presence in the EU will
These companies will need to report at the same time as EU companies in the be required to report at a global level from 2028.
comparable group as follows.
• Large companies2 with more than 500 employees in FY24. Will (consolidated) reporting4 from a global
perspective be required from FY28?
• Other large2 companies in FY25.
• Small or medium-sized companies3 (except micro companies) in FY26 (with a
possibility to opt out for two years). Did the company or consolidated group generate No Ultimate
net turnover greater than EUR 150m in the EU for parent
Reporting might be required on an individual or consolidated basis5. not in
each of the last two consecutive years?
CSRD
Yes scope

Ultimate Does the ultimate parent have at least one EU

non-EU subsidiary that meets the general scoping criteria?
parent in Yes
CSRD
scope No

Does the ultimate parent have at least one EU

branch that generated net revenue greater than
Yes EUR 40m in the preceding year? No

1 Companies with securities listed on EU-regulated markets that comprise only debt with a denomination per unit of at least
EUR 100,000 are exempt. For debt issued prior to 31 December 2010, this threshold is EUR 50,000.
2 The scoping criteria for large companies and micro companies also apply here.
3 Small and non-complex institutions and captive insurers as specified in Article 5 of the CSRD are treated like listed SMEs (the
opt-out option until 2028 does not apply for those entities, unless they also meet the definition of an SME).
4 Separate standards will be developed for non-EU companies. The EU proposed to move the deadline for adoption from 30 June
2024 to 30 June 2026.
5 See KPMG’s US Hot Topic publication for more information about how the CSRD will impact non-EU-based companies.

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 Who is in Is reporting required at an individual or Which non-EU-based companies will need to
What is the legal basis for applying ESRSs? When and to whom will ESRSs apply? Which reporting exemptions are available?
scope? consolidated level? report?

05 Which reporting exemptions are available?

Group exemption – N/A for large listed PIEs Example of the group exemption in practice
If an EU parent makes available sustainability reporting (under the first set of ESRSs) that
includes the entire group, then all in-scope subsidiaries are exempt from preparing their own Consolidated sustainability report
sustainability reporting. Note that this exemption does not apply for large listed PIEs that are
required to prepare their own report.
Large
Ultimate non-EU parent exemption parent2
Subgroup
If a non-EU parent has multiple in-scope subsidiaries in the EU, then one of the largest EU
subsidiaries may prepare consolidated sustainability reporting that includes only those in-scope
SME
EU subsidiaries (in their own right and under the general scoping requirements). This exemption
HoldCo
is available until 6 January 2030.

Equivalency exemption
Large Large
The EC can designate individual sustainability reporting frameworks or reporting regimes as Non-EU company
listed PIE Sub B
‘equivalent’ to reporting under the CSRD. It has not yet determined what it would consider to be
an equivalent sustainability reporting framework1.

Reporting Consolidated Separate

exemption (group) report report

If an ultimate non-EU parent makes available sustainability reporting

1 The equivalency exemption is only relevant for applying the group exemption by subsidiaries with non-EU in accordance with full ESRSs that includes the entire group, then a
parents, or for reporting by non-EU companies, and not for reporting by EU companies themselves.
2
consolidated EU subsidiary can apply the group exemption3 (unless it
In this illustration, the large EU parent company is able to claim an exemption from preparing a separate report
because it prepares a consolidated report. is a large listed PIE).
3 This applies for reporting that is compliant with a full set of ESRSs or an equivalent framework.

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 What will ESRSs How will companies
What type of content What reporting How do you present their What about EU What if you have
What has been What will companies What is double What phase-in
require you to released? need to disclose?
will need to be boundary do you
materiality?
determine material
sustainability reliefs will apply?
Taxonomy already adopted
report? disclosed? need to consider? topics? reports? reporting? other frameworks?

06 What has been released?

Ten topic-specific ESRSs
• Provide topic-specific disclosure requirements on:
General requirements (ESRS 1)
- governance;
- strategy; and
- impact, risk and opportunity management.

Environmental (E1–E5)
• Establish metrics and explain how to disclose related targets for each topic.
Governance

Governance (G1)
Social (S1–S4)
Strategy

ESRS 2
Two cross-cutting ESRSs
• Explain fundamental concepts from the CSRD.
Impact, risk and opportunity
• Set cross-cutting disclosure requirements applicable to all topics for:
management
- governance;
- strategy;
Metrics and targets
- impact, risk and opportunity management; and
- metrics and targets.
• Provide principles of disclosure and presentation structure.
• Establish transition options, including phasing-in.
Sector-specific ESRSs (to be drafted)

For future release: Sector-specific ESRSs

• Additional standards to address sector-specific requirements are yet to be developed
for later adoption.The EU proposed to move the deadline for adoption from 30 June
2024 to 30 June 2026.

© 2023 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. 9
 What will ESRSs How will companies
What type of content What reporting How do you present their What about EU What if you have
What has been What will companies What is double What phase-in
require you to released? need to disclose?
will need to be boundary do you
materiality?
determine material
sustainability reliefs will apply?
Taxonomy already adopted
report? disclosed? need to consider? topics? reports? reporting? other frameworks?

07 What will companies need to disclose?

Four reporting areas
• Governance – disclosures relating to the governance of
sustainability topics will apply to all companies. Three topics
• Strategy – disclosure requirements in this area will • Environmental:
apply to all companies and topics.
- Climate change
• Impact, risk and opportunity management – - Pollution
disclosures on impacts, risks and opportunities will need - Water and marine resources
to be provided for topics that are assessed as material. - Biodiversity and ecosystems
- Resource use and circular economy
• Metrics and targets – specific sets of sector-agnostic
metrics and targets will need to be disclosed for material

Four reporting areas

topics by a company, regardless of its industry. • Social:
- Own workforce
- Workers in the value chain
- Affected communities
- Consumers and end users

Three reporting layers • Governance:

• Sector-agnostic disclosures – disclosure requirements - Business conduct

applying to all companies (for maximum comparability).
• Sector-specific disclosures (standards under
development) – disclosure requirements applying to
companies of a specific sector (for maximum relevance).
• Company-specific disclosures – additional disclosure
requirements on material impacts, risks and
opportunities not covered by topical standards.

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 What will ESRSs How will companies
What type of content What reporting How do you present their What about EU What if you have
What has been What will companies What is double What phase-in
require you to released? need to disclose?
will need to be boundary do you
materiality?
determine material
sustainability reliefs will apply?
Taxonomy already adopted
report? disclosed? need to consider? topics? reports? reporting? other frameworks?

08 What type of content will need to be disclosed?

Content disclosed will comprise:
• mandatory information for all companies, as set out in ESRS 2
General disclosures; and
Mandatory Information subject to
• information that a company considers material, from a financial
perspective or an impact perspective. This is known as double
information materiality
materiality. • Basis for preparation – e.g. how the Disclosure requirements relating to impacts,
company has prepared its sustainability risks and opportunities covering the
statement following.
• Governance – e.g. information about the • Policies
composition of management and the
board, roles and responsibilities and • Actions
diversity of members • Metrics
• Strategy – e.g. the key elements of the • Targets
general strategy that relate to or affect
sustainability matters For this information, companies can decide
what is material at a topical standard level,
• Impact, risk and opportunity (IRO) or based on individual disclosure
Earlier versions of the ESRSs included a list of management – e.g. a description of the requirements and datapoints. It is possible
mandatory datapoints that companies were required process to identify IROs and information to omit information and datapoints, if
to disclose to support financial institutions in fulfilling about topics that have been omitted from considered not material.
their reporting obligations. the report as a result of the materiality
assessment If a sustainability-related matter that is
In the final version, it is not mandatory to disclose all assessed as material is not covered by the
of the datapoints on this list. However, companies are ESRS topical standards, then the company
This is supplemented by additional minimum
required to present a table listing where all datapoints needs to disclose company-specific
disclosures for topics assessed as material.
can be found in the sustainability statement or disclosures related to that matter.
explicitly stating that they are not material.

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 What will ESRSs How will companies
What type of content What reporting How do you present their What about EU What if you have
What has been What will companies What is double What phase-in
require you to released? need to disclose?
will need to be boundary do you
materiality?
determine material
sustainability reliefs will apply?
Taxonomy already adopted
report? disclosed? need to consider? topics? reports? reporting? other frameworks?

09 What reporting boundary do you need to consider?

Reporting boundary for sustainability reporting Sustainability reporting boundary
The reporting boundary will be based on the financial statements – but expanded to
cover material impacts, risks and opportunities related to the upstream and Upstream value chain –
downstream value chain.
e.g. suppliers
If information from the value chain is not available, then a company will use
estimated data using all reasonable and supportable information. In the first three
years of application, the ESRSs will allow transitional measures if information
cannot be obtained. Financial reporting boundary
(control concept)
The ability to obtain the necessary data depends on various factors – e.g. the
contractual arrangements in place and the level of control over the value chain.
Reporting company

Associate1 Subsidiary Joint venture1

Particular care is needed when determining the Downstream value chain –

information to include from associates, joint ventures and e.g. customers
joint operations.
1 Associates and joint ventures may form part of the upstream or downstream value chain.

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 What will ESRSs How will companies
What type of content What reporting How do you present their What about EU What if you have
What has been What will companies What is double What phase-in
require you to released? need to disclose?
will need to be boundary do you
materiality?
determine material
sustainability reliefs will apply?
Taxonomy already adopted
report? disclosed? need to consider? topics? reports? reporting? other frameworks?

10 What is double materiality?

Company-specific materiality assessments
Compared with the draft ESRSs developed by EFRAG, the
Double materiality refers to two dimensions of materiality – ‘financial’ and
‘impact’. EC has reduced the number of disclosure requirements that
are always mandatory independently from the company-
Companies will need to perform materiality assessments for both dimensions specific materiality assessment. The only remaining
and report matters that are material in either dimension.
disclosure requirements that are always mandatory are
Companies will be able to conclude that information is immaterial on the level of those required by ESRS 2.
a topical standard, an individual disclosure requirement or even a single
datapoint.

Disclosures with a multi-stakeholder focus

Impact materiality
Under the ESRSs, impact materiality will require disclosure
of sustainability-related matters that relate to a company’s
material actual or potential, positive or negative, impacts on Sustainability-related financial disclosures
people or the environment over the short, medium or long Financial materiality
term. Under the ESRSs, financial materiality will require disclosure of
Application requirements in ESRS 1 General requirements sustainability-related matters that (may) trigger material
specify the steps that a company needs to consider to financial effects on a company’s development – e.g. cash
Financial statements
assess impact materiality. flows, financial position or financial performance – in the short,
medium or long term.
This assessment includes impacts in a company’s upstream
and downstream value chain. This assessment will not be limited to matters within the
company’s control.
Materiality will be assessed based on severity and likelihood
of the impact. Materiality will be assessed based on likelihood and (potential)
size of the financial effect.

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 What will ESRSs How will companies
What type of content What reporting How do you present their What about EU What if you have
What has been What will companies What is double What phase-in
require you to released? need to disclose?
will need to be boundary do you
materiality?
determine material
sustainability reliefs will apply?
Taxonomy already adopted
report? disclosed? need to consider? topics? reports? reporting? other frameworks?

11 How do you determine material topics?

Companies need to perform a materiality
Engagement with affected stakeholders is an important part
assessment to determine which topics to of the company’s ongoing due diligence process that
report on. informs the materiality assessment.
ESRS 1 includes a process that companies are
required to follow when assessing materiality.
Considering disaggregation
When assessing materiality, it is important to
Identify impacts, Assess
consider the appropriate level of disaggregation.
Matters that are disclosed at group level may
01 Map context
• Value chain 03 risks and 05 financial
need to be disaggregated for a proper
• Business activities
opportunities materiality
understanding of their material impacts, risks
and opportunities. • Geographies
• Stakeholders
Disaggregation may be required, for example
when there are significant variations of material Assess Consider
impacts, risks and opportunities and presenting
Determine 04 impact 06 validating the
the information at a higher level of aggregation
would obscure material information. 02 definitions
thresholds
and materiality findings with
stakeholders

Document the process and outcomes

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 What will ESRSs How will companies
What type of content What reporting How do you present their What about EU What if you have
What has been What will companies What is double What phase-in
require you to released? need to disclose?
will need to be boundary do you
materiality?
determine material
sustainability reliefs will apply?
Taxonomy already adopted
report? disclosed? need to consider? topics? reports? reporting? other frameworks?

12 How will companies present their sustainability reports?

Present in a clearly identified single section of the management
report titled ‘Sustainability statement’ Management report
Analysis of company’s development and Description of the principal risks and
• A sustainability statement needs to be presented in a specific order – i.e. general
performance and its position uncertainties
information, environmental, social and governance information – as set out in the
diagram.
The company’s likely future
Corporate governance statement
• Any other information that a company includes in its sustainability statement – e.g. developments
based on other legislation or guidance – is presented separately and distinctly. The
reporting needs to clarify that this information refers to other requirements and provide
a suitable reference.
Sustainability statement
General information (ESRS 2) • List of disclosure requirements
• Sector-specific disclosures to be grouped by cross-cutting reporting area and topic. applied
• Specific topical disclosures
• Company-specific disclosures to be reported alongside the most relevant reporting • Table of all datapoints deriving
• Sector-specific disclosures
areas. from other EU legislation

• Sustainability-related information needs to be presented in a format that is both human- Topical standards
and machine-readable using the European Single Electronic Format (ESEF).
• IRO and Metrics and Targets

Environmental

Governance
• Sector-specific disclosures

Social
• Company-specific disclosures
• Disclosures in line with Article 8 of the EU
Taxonomy regulation (under Environment only)

Source: ESRS 1 Appendix F: Example of structure of ESRS sustainability statement

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 What will ESRSs How will companies
What type of content What reporting How do you present their What about EU What if you have
What has been What will companies What is double What phase-in
require you to released? need to disclose?
will need to be boundary do you
materiality?
determine material
sustainability reliefs will apply?
Taxonomy already adopted
report? disclosed? need to consider? topics? reports? reporting? other frameworks?

13 What phase-in reliefs will apply?

The ESRSs include specific reliefs that companies could apply in the early years of adoption to support
them in transitioning from existing methodologies or reporting frameworks. Some phase-in measures are available to
all companies; others are only available to
companies with fewer than 750 employees
– e.g. the relief from applying disclosure
requirements in ESRS E4 Biodiversity and
ecosystems for the first two years of
Comparative information is Phasing-in
Year 1–2 reporting.
not required in year 11. Certain disclosure requirements
relief will only become effective in the
second or third year of reporting.

Other available frameworks Information on the value Company-specific

could be used to develop chain need not be estimated disclosures developed prior to
Year 1–3 relevant disclosures on material and could be omitted if initial application may continue
reliefs sustainability-related matters in information is not available2. to be used if they meet the
advance of sector-specific qualitative characteristics of
ESRSs. information in ESRS 1.

EU subsidiaries of non-EU parents could choose to

prepare only one combined report, including all those
Until 2030 subsidiaries that would be obliged to report independently
of the remaining group due to size or listing status.

1 This relief is not available for KPIs under the EU Taxonomy (see next slide).
2 This relief is not applicable when disclosing information on policies, actions and targets. However, in this case a company may limit information to available in-house data and
publicly available data. When disclosing metrics, the relief is not applicable for datapoints derived from other EU laws.

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 What will ESRSs How will companies
What type of content What reporting How do you present their What about EU What if you have
What has been What will companies What is double What phase-in
require you to released? need to disclose?
will need to be boundary do you
materiality?
determine material
sustainability reliefs will apply?
Taxonomy already adopted
report? disclosed? need to consider? topics? reports? reporting? other frameworks?

14 What about EU Taxonomy reporting?

Companies need to include disclosures required by the EU
Taxonomy regulation in their sustainability statement

Disclosure requirements in ESRSs require companies to report

on which of their economic activities are:
1. Select and screen
- Eligible – meaning that the activities are included in the list of company activities
activities defined by the EU Taxonomy regulation as having
the potential to be sustainable; and
- Aligned – meaning that the economic activity meets specific 2. Assess eligibility for 4. Report KPIs
criteria established by the EU Taxonomy regulation. Economic activity A environmental objectives

The EU Taxonomy regulation has six environmental objectives: Sustainable activity A Turnover %
Eligible
1. Climate change mitigation Economic activity B Eligible activity B A+B+D
CapEx %
2. Climate change adaptation Aligned
Non-eligible activity C
3. Water and marine resources A+D
Sustainable activity D OpEx %
4. Circular economy Economic activity C
5. Pollution prevention
6. Biodiversity and ecosystems Do No
Substantial Minimum
Significant
contribution safeguards
Harm (DNSH)
Economic activity D

3. Assess alignment with

environmental objectives

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 What will ESRSs How will companies
What type of content What reporting How do you present their What about EU What if you have
What has been What will companies What is double What phase-in
require you to released? need to disclose?
will need to be boundary do you
materiality?
determine material
sustainability reliefs will apply?
Taxonomy already adopted
report? disclosed? need to consider? topics? reports? reporting? other frameworks?

15 What if you have already adopted other frameworks?

Build and adapt
Existing sustainability-related information set
• Identify conceptual differences from existing frameworks by comparing definitions,
guiding principles and the basis of preparation, as well as the principles of cross-cutting
requirements.
• Assess the scope of the ESRSs. Because they may be significantly broader than any
Refocus and supplement as necessary
existing sustainability reporting framework, companies that adopt other frameworks will
need to identify any gaps and assess how to fill them.
Align definitions and methodologies Reassess materiality
• Map how specific disclosure requirements in the ESRSs differ from those in the existing
frameworks.
Identify and assess gaps Expand the reporting boundary
• Identify where additional data will be needed and whether frameworks will allow
collaborative reporting or require the company to issue two separate reports.

Items to consider if previously adopted TCFD Items to consider if previously adopted GRI Standards
• The scope of ESRSs is broader than the TCFD recommendations because they apply • Disclosure requirements are partly based on GRI Standards and EFRAG has
the double materiality concept; the TCFD applies a materiality concept focused on cooperated with the GRI to aim for alignment.
investors. The TCFD focuses on climate only, so companies will need to significantly
expand their disclosures on other environmental topics as well as social- and • Under the ESRSs, companies could include disclosures based on GRI Standards
governance-related disclosures. when developing their company-specific disclosures.

© 2023 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. 18
 How can you
What is the impact on people, processes and controls, systems and data? What about assurance? What do you need to do now?
get ready?

16 What is the impact on people, processes and controls, systems and data?
One of the core objectives of the CSRD is to ensure that sustainability and financial reporting
become of equal importance. Using the ESRSs, companies need to disclose a greater scope,
volume and granularity of sustainability-related information than under previous EU
requirements.
Sustainability
The information needs to be collected and ready to disclose at the same time as the financial reporting
statements. To achieve this, companies need effective processes and controls to gather ESG
data, evaluate sustainability performance, and report according to the ESRSs in an appropriate,
assurable way.
The transparency driven by the new requirements may drive companies to revisit or develop
policies and targets, as well as integrate sustainability into corporate strategy and operations.

People Processes and controls Systems/Solutions Data

• Maturity of current state • Central KPIs navigation • Technical system • Sourcing raw data from
and ambition level (setting priorities, architecture, configuration different functions,
• Organisation and definitions, units, scopes) and functionality subsidiaries, suppliers
governance model (roles, • Sustainability reporting • Data/KPI governance • Ensuring secure data
ownership responsibilities) workflow (manuals, (instructions, access handling
• Communication and protocols) management, compliance, • Data identification
change management • Sustainability management quality control)
(culture, literacy) workflow (setting, tracking) • Embedded specialist
solutions
• Tailored analytics

Source: EFRAG’s Cover Letter and Cost-benefit analysis of the First Set of draft ESRSs

© 2023 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. 19
 How can you
What is the impact on people, processes and controls, systems and data? What about assurance? What do you need to do now?
get ready?

17 What about assurance?

The CSRD requires assurance across all topics.
• Limited assurance from the date of initial FY 24 FY 25 FY 26 FY 27 FY 28 FY 29
reporting. Reporting Reporting Reporting Reporting Reporting Reporting
in 2025 in 2026 in 2027 in 2028 in 2029 in 2030
• Ambition to move to reasonable assurance at a
future date.
R?
Member states may choose to allow assurance over Certain large companies L
sustainability reporting to be separate from the
financial statement audit – i.e. by a separate auditor or Other large companies L R?
independent assurance provider.
Listed SMEs L R?

Ultimate non-EU parent ?2

European Commission to European Commission to

adopt limited assurance adopt reasonable
standards assurance standards
Limited assurance1 following feasibility
L assessment
required
Limited assurance is a level of assurance at an acceptable level
that, based on professional judgement, is meaningful Reasonable
for the intended users. It results in a negative conclusion R? assurance1 subject to
feasibility assessment
(i.e. ‘nothing has come to our attention to indicate that the
information is materially misstated’).
Expressing reasonable assurance requires the assurance
provider to obtain sufficient appropriate evidence to conclude that 1 Read more about ESG Assurance in Audit. The assurance requirements will have no bearing on a company’s
the sustainability-related information is prepared, in all material responsibility to report accurate information from the first reporting year – e.g. limited assurance does not mean limited
reporting.
respects, in accordance with the applicable reporting criteria
2 Assurance will be based on jurisdictional requirements of the third country parent or that of a member state. In the
(positive conclusion). absence of an assurance opinion, the company would need to issue a statement indicating this.

© 2023 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. 20
How can you
What is the impact on people, processes and controls, systems and data? What about assurance? What do you need to do now?
get ready?

18 What do you need to do now?

1 Understand the impact
• Understand when, where and how the CSRD scoping requirements will impact your company
and wider group.
Impact
• Understand how the ESRS requirements differ from your current reporting.
assessment
2 Determine what is material 1 2
• Understand the scope and breadth of your value chain.

• Undertake a double materiality assessment to determine which topics are relevant to report on, Assurance Double
following the processes set out in the ESRSs. readiness materiality
Get ready assessment
• Decide what information is material about those topics from an impact and financial perspective.
for ESRS
3 Assess maturity compliance
• Assess the maturity of processes, the control environment, data model and policies. 5 3
• Understand the current distribution of roles, available knowledge and capacity.
Reporting
4 Transform reporting transformation
Maturity
assessment
• Design the future state of your reporting – including designing the most efficient reporting
structure to meet group and individual company needs. 4
• Develop and deploy your target operating model, including training as well as support for change
management.

5 Get ready for assurance

• Assess the control environment, data quality and availability of sufficient documentation to
support assurance.

• Rectify issues ahead of the formal assurance process.

© 2023 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. 21
 Who is in scope? What will ESRSs require you to report? How can you get ready? Abbreviations and key terms Keeping in touch

Abbreviations and key terms

CSRD GRI
The EU’s adopted Corporate Sustainability Reporting Directive, amending and significantly Global Reporting Initiative
expanding the existing requirements for sustainability reporting in the EU under the NFRD

EC ISSB
European Commission International Sustainability Standards Board

EFRAG NFRD
European Financial Reporting Advisory Group, which is mandated by the European The EU’s Non-Financial Reporting Directive (Directive 2014/95/EU)
Commission responsible for developing ESRSs

ESRS SFDR
European Sustainability Reporting Standards as published by the EC as of 31 July 2023 The EU’s Sustainable Finance Disclosure Regulation (Regulation (EU) 2019/2088)

EU Taxonomy TCFD
The EU’s framework to facilitate sustainable investment (Regulation (EU) 2020/852) Task Force on Climate-related Financial Disclosures

© 2023 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. 22
 Who is in scope? What will ESRSs require you to report? How can you get ready? Abbreviations and key terms Keeping in touch

Keeping in touch
Whether you are new to sustainability reporting or a current user, you can
Jan-Hendrik Gnändiger find digestible summaries of recent developments and more detailed
guidance on the current requirements.
Global ESG Reporting Leader
KPMG International
ESRSs | Sustainability
jgnaendiger@kpmg.com Ready for ESG reporting?
reporting resource centre
Insights, high-level guidance
Practical guidance on the
and detailed analysis
ESRSs

Mark Vaessen
Chair, Global Corporate and ISSB | Sustainability
Sustainability Reporting Topic Team ESG reporting
reporting resource centre
US resources for
KPMG in the Netherlands Tracking the development of
financial reporting
IFRS® Sustainability
Vaessen.Mark@kpmg.nl Disclosure Standards
professionals

Jan Alexander Müller

ESG Department of Professional ISSB priorities ESG reporting
Practice Understanding the Impact of EU ESG
KPMG in Germany future focus reporting on US companies

janmueller@kpmg.de
With thanks to our additional contributors
from across the KPMG network
First Impressions – Comparing sustainability
IFRS S1 and IFRS S2 reporting requirements
Insights and illustrative Comparing requirements from
examples the ISSB, EU and US
Read the global KPMG Impact Plan

© 2023 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. 23
kpmg.com/ifrs

Publication name: Get ready for European Sustainability Reporting Standards

Publication number: 137823
Publication date: November 2023

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