ESRS (European Sustainability Reporting Standards): Complete Overview 2026

The ESRS (European Sustainability Reporting Standards) are the mandatory reporting framework under CSRD (Directive 2022/284/EU, officially Directive 2022/2464/EU). There are 12 ESRS standards: 2 cross-cutting (ESRS 1 General Requirements, ESRS 2 General Disclosures) and 10 topical standards covering environment (E1–E5), social (S1–S4) and governance (G1). Companies must report on all topics identified as material through the double materiality assessment — both financial materiality (impact of sustainability issues on the company) and impact materiality (company's impact on environment and society).

Legal Framework: CSRD and Commission Delegated Regulation 2023/2772

The CSRD (Corporate Sustainability Reporting Directive, 2022/2464/EU) replaces the previous NFRD (Non-Financial Reporting Directive, 2014/95/EU) and dramatically expands both the scope of companies required to report and the detail of information that must be disclosed. While the NFRD applied to approximately 11,700 large public-interest entities across the EU, the CSRD extends to an estimated 50,000 companies in the first instance, with further expansion to large non-EU companies operating in the EU market.

The ESRS themselves are contained in Commission Delegated Regulation (EU) 2023/2772, published in the Official Journal of the European Union on 22 December 2023 and applicable from 1 January 2024. The Delegated Regulation adopts the first set of ESRS — the sector-agnostic standards applicable to all companies in scope, regardless of industry. Sector-specific ESRS (covering high-impact sectors such as oil and gas, mining, financial services and agriculture) are being developed by EFRAG (European Financial Reporting Advisory Group) and are expected to be adopted by the Commission in subsequent delegated acts.

The phased implementation timeline under the CSRD is: (1) Large public-interest entities already subject to the NFRD (approximately 11,700 companies), with more than 500 employees — reporting for financial year 2024, first reports published in 2025; (2) Large companies not previously subject to NFRD, meeting two of three criteria: balance sheet total over €25m, net turnover over €50m, average number of employees over 250 — reporting for FY2025, first reports 2026; (3) Listed SMEs, small and non-complex credit institutions, captive insurance undertakings — reporting for FY2026 (with opt-out until 2028); (4) Non-EU companies with net turnover exceeding €150m in the EU and at least one subsidiary or branch in the EU — reporting for FY2028. The ESRS framework applies uniformly across all these categories, though reporting requirements vary based on the outcome of the materiality assessment.

A critical feature of the ESRS framework is its alignment with other major international sustainability reporting frameworks. ESRS E1 (Climate Change) is designed to be broadly compatible with TCFD (Task Force on Climate-related Financial Disclosures) recommendations, which have now been incorporated into IFRS S2 (issued by the ISSB in June 2023). ESRS E4 (Biodiversity and Ecosystems) aligns with TNFD (Taskforce on Nature-related Financial Disclosures). ESRS S1–S4 draw on GRI (Global Reporting Initiative) standards, particularly GRI 400 series. ESRS G1 aligns with OECD Guidelines for Multinational Enterprises and UN Guiding Principles on Business and Human Rights. These alignments reduce duplication for companies already reporting under GRI, TCFD or integrated reporting frameworks, but they do not eliminate the need for a full gap analysis against each ESRS requirement.

Assurance is mandatory under CSRD: limited assurance from the first year of reporting (FY2024 for wave 1 companies), escalating to reasonable assurance from FY2028. The assurance provider must be a statutory auditor or audit firm — unlike the NFRD, where companies could use a variety of verification providers. EFRAG is developing ISSA 5000 (International Standard on Sustainability Assurance) in coordination with the IAASB, which will form the basis for CSRD assurance engagements from 2026.

The 12 ESRS Standards: Step-by-Step Overview

1. ESRS 1 — General Requirements: ESRS 1 is not a disclosure standard but a framework standard that explains the architecture and principles of ESRS reporting. It defines key concepts: materiality (double materiality — impact materiality and financial materiality), value chain (upstream suppliers, own operations, downstream customers), time horizons (short: up to 1 year; medium: 1-5 years; long: over 5 years), and the relationship between ESRS and other frameworks. ESRS 1 also specifies that companies must report in their management report (not a separate sustainability report), integrate sustainability information with financial information, and ensure connectivity between the sustainability statement and the financial statements. ESRS 1 mandates the use of reasonable and supportable information available, including information obtained through engagement with stakeholders.
2. ESRS 2 — General Disclosures: ESRS 2 is the only ESRS standard that is mandatory regardless of the outcome of the materiality assessment — all companies in scope must report all disclosures in ESRS 2. It covers four areas: (a) Governance — description of the role of the administrative, management and supervisory bodies (AMSB) in sustainability, including how sustainability is integrated into board oversight, remuneration and strategy; (b) Strategy — description of the business model, value chain, sustainability strategy and targets; (c) Impact, Risk and Opportunity Management — description of the process for identifying and assessing material IROs (impacts, risks and opportunities), including the double materiality assessment process; (d) Metrics and Targets — the general metric disclosure policies applicable across all topical ESRS. ESRS 2 disclosures are extensive and require significant preparation: the governance disclosures alone can run to several pages for a large, complex company.
3. E1 — Climate Change: E1 is expected to be material for the vast majority of companies in scope and covers three sub-topics: climate change mitigation, climate change adaptation and energy. Key disclosures include: GHG emissions — Scope 1 (direct), Scope 2 (energy indirect) and Scope 3 (value chain) measured in CO2 equivalent tonnes using the GHG Protocol Corporate Standard; transition plan for decarbonisation aligned with the Paris Agreement (1.5°C scenario); physical and transition climate risks and opportunities; energy consumption and mix (renewable vs non-renewable); and GHG removal and storage activities. E1 is aligned with TCFD recommendations and IFRS S2, meaning companies already reporting under TCFD have significant pre-existing work to leverage. However, the Scope 3 disclosure requirements in E1 are more granular than most TCFD frameworks, covering all 15 categories of the GHG Protocol Scope 3 Standard.
4. E2 — Pollution: E2 covers pollution of air, water, soil and the generation of substances of concern and substances of very high concern (SVHCs under REACH Regulation 1907/2006). Key disclosures include emission levels to air (NOx, SOx, particulate matter, volatile organic compounds), water (nitrogen, phosphorus, heavy metals) and soil; generation and management of substances of concern; and engagement with affected communities near polluting facilities. E2 is particularly relevant for manufacturing, chemical, mining, agriculture and energy companies.
5. E3 — Water and Marine Resources: E3 covers water consumption, withdrawal and discharge across own operations and the value chain, as well as impacts on marine resources. Key disclosures include: total water consumption and withdrawal by source; water consumption in water-stressed areas (defined using WRI Aqueduct or similar tools); water discharge quality; and impacts on marine and freshwater biodiversity resulting from the company's activities. E3 is designed to align with the EU Water Framework Directive (2000/60/EC) and the Marine Strategy Framework Directive (2008/56/EC).
6. E4 — Biodiversity and Ecosystems: E4 is the most complex environmental standard and the one that most companies find hardest to assess for materiality. It aligns with TNFD and the Kunming-Montreal Global Biodiversity Framework (COP15, December 2022, which set the 30x30 target). Key disclosures include: direct drivers of biodiversity loss (land use change, pollution, overexploitation, climate change, invasive species); impacts and dependencies on biodiversity across the value chain; biodiversity targets; and contributions to ecosystem restoration. E4 requires site-level data for operations located in or near biodiversity-sensitive areas, which represents a significant data challenge for companies with geographically dispersed operations.
7. E5 — Resource Use and Circular Economy: E5 covers the inflows of materials (including critical raw materials), products and water; and the outflows as products, by-products and waste. Key disclosures include: material consumption (in tonnes), split by renewable and non-renewable; waste generated and sent to disposal (landfill, incineration), recycling and recovery; product design for circularity; and strategies to extend product lifetimes and reduce waste. E5 aligns with the EU Circular Economy Action Plan (2020) and the EU Waste Framework Directive (2008/98/EC).
8. S1 — Own Workforce: S1 covers the company's own employees and non-employee workers (contractors, agency workers, etc. who work under the company's control). It requires disclosure on: workforce characteristics (headcount, employment contracts, working hours, gender pay gap, diversity); working conditions (health and safety, work-life balance, remuneration, social dialogue); and equal treatment and opportunities (discrimination incidents, pay equity). S1 is the most data-intensive social standard for most companies, particularly the gender pay gap and diversity disclosures, which may need to comply with the EU Pay Transparency Directive (2023/970/EU) simultaneously.
9. S2 — Workers in the Value Chain: S2 covers workers in the upstream and downstream value chain who are not direct employees — factory workers at suppliers, logistics workers, distribution partners. Key disclosures include: material impacts on working conditions (wages, hours, health and safety) and human rights in the value chain; due diligence processes; and engagement with value chain workers. S2 requires companies to map their supply chain and conduct human rights due diligence, aligning with the EU Corporate Sustainability Due Diligence Directive (CS3D, 2024/1760/EU), which requires due diligence for companies meeting certain size thresholds from 2027.
10. S3 — Affected Communities: S3 covers communities in the vicinity of the company's own operations and value chain operations — indigenous peoples, local communities near extraction sites, communities affected by infrastructure projects. Key disclosures include: material impacts on community health, safety, cultural heritage and livelihoods; community engagement processes; and free, prior and informed consent (FPIC) processes where applicable. S3 is most relevant for extractive industries, construction, infrastructure and companies with significant land use.
11. S4 — Consumers and End-users: S4 covers the company's impacts on the health, safety, privacy and financial wellbeing of its customers and end-users. Key disclosures include: product safety incidents; data privacy breaches; responsible marketing practices; and access to products and services. S4 aligns with the EU General Product Safety Regulation (2023/988/EU), the EU AI Act (2024/1689/EU) for AI-enabled products and the GDPR (2016/679/EU).
12. G1 — Business Conduct: G1 covers the company's governance, corporate culture, anti-corruption, lobbying and payment practices. Key disclosures include: corporate culture and ethics policies; anti-corruption incidents and outcomes; political contributions and lobbying expenditure; payment practices (average payment period to suppliers, percentage of invoices paid beyond contractual terms); and whistleblowing mechanisms. G1 aligns with the OECD Guidelines for Multinational Enterprises, UN Guiding Principles on Business and Human Rights and the EU Anti-Money Laundering Directive.

Required Documentation for ESRS Reporting

• Double Materiality Assessment (DMA) documentation: The process, methodology, stakeholder engagement conducted, list of material topics with justification, and list of non-material topics with justification. This is the foundational document — it determines which topical ESRS apply and what the company must report. EFRAG has published guidance on how to conduct a DMA (EFRAG IG 1, May 2023).
• Value chain mapping: Documentation of the company's upstream (supply chain) and downstream (distribution, use, end-of-life) value chain, identifying key actors, geographies and sustainability risks at each stage. Required for ESRS 1 (value chain definition), S2 (value chain workers) and E4 (biodiversity in value chain).
• GHG inventory (Scope 1, 2 and 3): A complete greenhouse gas inventory following the GHG Protocol Corporate Standard, including base year data, methodology, calculation tools and Scope 3 category breakdown. Required for E1 and increasingly expected by investors and customers even for companies not yet in scope for CSRD.
• Policies, targets and action plans for each material topic: For each ESRS identified as material, the company must document its policy (what it commits to), its targets (measurable objectives with timelines) and its action plans (how it will achieve the targets). These must be reviewed and approved at board level.
• Data collection systems and controls: Evidence that the data used in the sustainability statement is collected through reliable systems with appropriate controls, consistent with the requirements for limited or reasonable assurance. The assurance provider will test these systems as part of their engagement.
• Stakeholder engagement records: Documentation of engagement with employees, workers in the value chain, communities, customers and investors — required by ESRS 2 (materiality process) and individual topical ESRS. Includes records of consultation, dialogue and the outcomes of engagement in terms of revised assessments or policies.

CSRD Phased Implementation Timeline

Common Mistakes in ESRS Implementation

• Mistake 1 — Starting with data collection before completing the DMA: Many companies rush to start collecting sustainability data before completing a robust double materiality assessment. This leads to collecting data on non-material topics while missing data on material ones. The DMA must come first — it determines exactly what data you need to collect. EFRAG's Implementation Guidance 1 (IG 1) provides a step-by-step methodology for the DMA.
• Mistake 2 — Treating ESRS 2 as optional: ESRS 2 General Disclosures is mandatory for all companies in CSRD scope, regardless of the outcome of the DMA. Unlike the topical ESRS (E1-E5, S1-S4, G1), which only apply to material topics, ESRS 2 must be reported in full. Many companies mistakenly assume they can limit their reporting based on materiality — but ESRS 2 is always required.
• Mistake 3 — Confusing ESRS with GRI — they are not the same: While ESRS and GRI have significant overlaps (EFRAG worked with GRI to align them), they are not equivalent. A GRI-compliant report does not automatically satisfy ESRS requirements. Key differences: ESRS requires double materiality (GRI uses impact materiality only); ESRS mandates specific quantitative metrics that GRI leaves more flexible; ESRS requires third-party assurance (GRI does not). A full gap analysis between existing GRI reports and ESRS is essential.
• Mistake 4 — Underestimating Scope 3 data challenges: E1 requires disclosure of Scope 3 GHG emissions across all 15 categories of the GHG Protocol Scope 3 Standard. Collecting reliable Scope 3 data — particularly for categories 1 (purchased goods and services), 11 (use of sold products) and 15 (investments) — is one of the biggest practical challenges of CSRD compliance. Companies that have not started their Scope 3 data collection by FY2024 (wave 1) or FY2025 (wave 2) will face significant last-minute challenges.

For more information and a reference guide about this vertical, visit our Igera pillar page.

Frequently Asked Questions

Are all 12 ESRS mandatory?

Not all 12 ESRS are mandatory for every company. ESRS 1 (General Requirements) applies as a framework to all companies. ESRS 2 (General Disclosures) is the only standard that is mandatory in full for all in-scope companies, regardless of the outcome of the materiality assessment. The 10 topical ESRS (E1-E5, S1-S4, G1) only apply to companies that identify them as material through the double materiality assessment — a company in a low-pollution service industry might reasonably conclude that E2 (Pollution) is not material, in which case they do not need to report against E2 (but must document their reasoning in the DMA).

What is the difference between ESRS 1 and ESRS 2?

ESRS 1 (General Requirements) is a framework standard — it does not contain specific disclosure requirements but sets out the overall architecture, principles and definitions of ESRS reporting: what double materiality means, how the value chain is defined, what time horizons apply, how ESRS relates to other frameworks (GRI, TCFD, ISSB), and the general presentation requirements. ESRS 2 (General Disclosures) is a disclosure standard containing specific data points that all in-scope companies must report: governance disclosures (board oversight of sustainability), strategy disclosures (business model, value chain, sustainability risks and opportunities), IRO management disclosures (materiality assessment process), and general metric disclosures (applicable to all topical ESRS).

How does ESRS align with GRI?

EFRAG and GRI collaborated to maximise alignment between ESRS and GRI Standards to minimise reporting burden for companies already using GRI. Many ESRS disclosure requirements map directly to GRI disclosures: ESRS E1 aligns closely with GRI 302 (Energy) and GRI 305 (Emissions); ESRS S1 aligns with GRI 401-407 (Employment, Labour Management Relations, Occupational Health and Safety, Training, Diversity); ESRS G1 aligns with GRI 205 (Anti-corruption) and GRI 415 (Public Policy). However, the alignment is not complete: ESRS adds financial materiality (impact on company) to GRI's impact materiality framework, and ESRS has specific quantitative metrics that GRI standards do not always require. Companies using GRI can reduce their ESRS implementation effort significantly, but a gap analysis is always necessary.

When does assurance become mandatory?

Limited assurance on the sustainability statement is mandatory from the first year of CSRD reporting — FY2024 for wave 1 companies (former NFRD scope), FY2025 for wave 2, FY2026 for wave 3 (listed SMEs). Reasonable assurance (a higher standard, equivalent to the assurance on financial statements) is expected to be mandated from FY2028, subject to a review by the European Commission. The IAASB's ISSA 5000 standard (International Standard on Sustainability Assurance) is designed to be the basis for CSRD assurance engagements from 2026 onwards.

Can SMEs use a simplified standard?

Yes. Listed SMEs in scope for CSRD (wave 3, from FY2026) may use the VSME (Voluntary Sustainability Reporting Standard for SMEs), developed by EFRAG at the request of the European Commission. The VSME is significantly simpler than the full ESRS, with fewer and less granular disclosure requirements. Non-listed SMEs are not directly in scope for CSRD but are increasingly required to provide sustainability data to their large corporate customers, who need it for their own Scope 3 and value chain disclosures (ESRS E1, S2).

What is the relationship between ESRS and IFRS S1/S2?

ESRS and IFRS S1/S2 (the ISSB Sustainability Disclosure Standards, issued June 2023) serve different purposes and have different scopes. IFRS S1 and S2 focus primarily on financial materiality — the impact of sustainability issues on the company's financial position — and are adopted voluntarily by capital markets regulators worldwide (IOSCO recommends adoption). ESRS uses double materiality (both financial and impact materiality) and is mandated by EU law for all large companies in the EU. EFRAG and ISSB worked to align ESRS E1 with IFRS S2 (both covering climate), so that companies reporting ESRS E1 can satisfy much of their IFRS S2 requirement. However, the reverse is not true: IFRS S2 alone does not satisfy ESRS E1 due to ESRS's additional impact materiality disclosures.

Conclusion

The ESRS framework represents the most ambitious mandatory corporate sustainability reporting regime in the world. By extending mandatory sustainability reporting to approximately 50,000 EU companies — compared to the 11,700 previously covered by the NFRD — and requiring double materiality assessment, third-party assurance and connectivity with financial statements, the EU has set a global benchmark that other jurisdictions are beginning to follow. Companies in the UK (with its future ISSB-aligned reporting requirements), Australia, Japan, Singapore and the US (SEC climate disclosure rules) are all moving in the same direction, though typically with a narrower focus on financial materiality.

For wave 2 companies (FY2025 first reporting, published in 2026), the window for preparation is now very tight. The double materiality assessment, Scope 3 data collection, value chain mapping, policy development and assurance readiness must all be addressed simultaneously. Companies that have not yet started their ESRS implementation should prioritise: (1) conducting a DMA to identify material topics; (2) starting with ESRS 2 (always mandatory) and E1 (almost always material); (3) engaging their external auditor early to understand assurance requirements.

The complexity and breadth of ESRS requirements make RegTech solutions — tools that automate compliance monitoring, answer internal queries about specific ESRS data points and track regulatory updates — an increasingly valuable part of the sustainability reporting infrastructure for any company in scope.