ESRS 1 and 2: the general reporting standards everyone needs to know

#CSRD  •  15/06/2023  •  Ana Katarina Avila De Langhe and Katelijne Norga

This summer, the European Sustainability Reporting Standards (ESRS) will receive final approval. Those standards will determine how large European companies must report on E (environment), S (social issues) and G (governance) from 2025 onwards. In this article, we comment on the cross-cutting reporting standards ESRS 1 and ESRS 2, which set the general requirements for sustainability reporting and introduce double materiality as a new concept.


This is the second of a series of articles to help you navigate the changes and complexities of the CSRD and the accompanying ESRS (European Sustainability Reporting Standards).

The Corporate Sustainability Reporting Directive (CSRD), which came into force in early 2023, introduces mandatory sustainability reporting for all large European companies. In its role as technical advisory body, the European Financial Reporting Advisory Group (EFRAG) was mandated by the European Commission to develop standards that translate the directive into concrete reporting requirements. With the reporting standards, Europe wants to ensure an efficient and structured implementation of the directive and guarantee quality, comparable and relevant sustainability information.


The reporting standards are currently still in the draft phase. This summer, delegated acts will be published that will make the standards legally binding across Europe. The main principles of the ESRS are expected to remain unchanged.

Timeline of the European Sustainability Reporting Standards

  • 30 April to 8 August 2022: EFRAG Project Task Force on European Sustainability Reporting Standards (EFRAG PTF-ESRS) subjects the ESRS Exposure Drafts (EDs) to public consultation
  • 15 November 2022: EFRAG hands over the amended draft standards to the European Commission
  • Summer 2023: adoption of the final standards as delegated acts
  • Scope and timing: reporting requirements will be phased in:  
    • financial year 2024: reporting requirement for large listed companies and public interest companies such as banks and insurance companies
    • financial year 2025: reporting requirement for all large companies
    • financial year 2026: reporting requirement for listed SMEs with an option to defer until 2028 and reporting according to separate proportional standards (to be developed by EFRAG)
    • financieel jaar 2028: rapporteringsverplichting voor niet-Europese moederbedrijven van ondernemingen die in Europa actief zijn

What are the cross-cutting standards ESRS 1 and 2 and what does the full set of standards look like?

The draft ESRS are all general standards, which are not specific to a particular sector, but applicable to all sectors. They cover the full spectrum of ESG topics and introduce the principle of double materiality to determine whether or not a company should follow a thematic standard. The standards can be divided into four groups:


  • Two cross-cutting standards that describe general specifications that a sustainability report must meet (ESRS 1) and describe requirements that apply across ESG topics (ESRS 2)
  • Five environmental standards regarding climate change, pollution, biodiversity and ecosystems, water and marine resources, and resource use and circular economy (ESRS E1 to E5)
  • Four social standards regarding own workforce, workers in the value chain, affected communities and consumers and end-users (ESRS S1 to S4)
  • One standard on business conduct (ESRS G)

We also call the last three groups the topical standards. In this article, we discuss ESRS 1 and ESRS 2.

What general reporting requirements do you need to follow to comply with ESRS 1?

The first standard defines the concepts that companies should apply when preparing a sustainability report in line with the ESRS. You can think of this standard as a conceptual framework with several chapters that introduce a range of new concepts and ideas concerning reporting.


These are the main concepts that ESRS 1 establishes:

  • The materiality assessment: the materiality approach is one of the key concepts of the new standards and helps companies examine which information they should include in their report and which they should not. In a materiality assessment, companies should explore with their stakeholders whether a particular topic, for example climate change or human rights violations, is material to their operations. In essence, a topic is material if it is relevant to both the company itself and its stakeholders. A topic may be relevant because the company itself has an impact on it or because it poses a risk or opportunity for the company in question (or may pose one in the future). The draft version removes certain standards from the materiality assessment - the ESRS 2, the climate standard and certain parts of the standard regarding own workforce for companies with more than 250 employees. As a result, the corresponding data points would become mandatory for all companies.
  • Time horizon: : companies reporting according to the CSRD must observe several requirements associated with the timing of their report:
    • The sustainability report must coincide with the reporting period of the annual financial report.
    • In their sustainability report, companies should not limit themselves to a review of their performance in the past year. They should also include forward-looking information, in the form of targets, transition plans and roadmaps.
    • Companies should consider the short, medium and long term.
    • Companies should demonstrate their progress by comparing the information and data they report with a base year.
  • Structure of the sustainability report: the sustainability report should be integrated into the company's annual financial report and should follow this structure:
    • general information
    • environmental information
    • social information
    • good governance information

This environmental, social and governance information must always include the indicators that emerged from the materiality assessment as well as a number of KPIs that are mandated by the EU taxonomy.


The structure of the report should ensure that the information is accessible and understandable to stakeholders. In addition, the report must be machine-readable. That is, it must be formatted in an XHTML format and provided with digital tags.


ESRS 1 also introduces the concept of sustainability due diligence. A clear definition is included in the standard and it clarifies how due diligence is embedded in the ESRS as a whole. The ESRS do not include requirements on how companies should change their business practices in the context of due diligence. For that, the European Commission is currently developing the Corporate Sustainability Due Diligence Directive. That aims to centrally address the negative impacts that companies exert on human rights and the environment through their value chain. What companies have to report on will be addressed in the ESRS, though.

What general information do you need to disclose to comply with ESRS 2?

The second cross-cutting standard, ESRS 2, sets out the general information that companies must include in their sustainability report. This standard, at least according to the draft version, applies to all companies and thus will not be subject to the materiality assessment.


ESRS 2 is structured around four pillars:

  • Good governance: the first pillar includes information on the management and board of directors that companies must report. How diverse is their composition? What is their role and what are their responsibilities for the company's ESG impacts, risks and opportunities? How do they monitor progress? How is expertise around ESG ensured in these bodies or how do management and board have access to such expertise? What do the ESG reporting lines look like? How is ESG performance integrated into the bonus system? How does the company's ESG risk management work? How does the company organise internal controls over the reporting process?
  • Strategy: companies are asked to describe their strategy, business model and value chain in their sustainability report. All elements of the strategy that relate to or have an impact on the various sustainability topics should be mentioned. The report should also make clear how the company's strategy and business model take into account stakeholders' interests and perspectives and the outcome of the materiality assessment.
  • Managing impacts, risks and opportunities (IROs): as cited above, materiality assessment is a key element of future sustainability reporting. Companies will not only have to describe their material IROs, they will also have to indicate how they proceeded to identify the material topics. In the general section, companies must state which ESRS have been included in their report; in addition, they must explain which ESRS or information they have omitted and why. Companies must of course also describe in their report what policies and action plans they are developing in response to the material IROs. The topical standards therefore also refer to these general reporting requirements in ESRS 2 each time.
  • Targets and KPIs: finally, companies must also disclose in their sustainability report which targets and KPIs they have set to monitor the effectiveness of the above policies and action plans.


It is obvious that companies are facing a lot of new reporting requirements. Don't wait too long to get your business and processes ready for this, because 2025 is not a long way off. Are you overwhelmed by the multitude of new provisions? Pantarein helps you every step of the way towards CSRD compliance. Need help to get started? Then get in touch at

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