ESRS 1 and 2: Materiality, reporting structure and disclosure requirements


published on 15 august 2023 | reading time approx. 3 minutes
ESRS 1 and 2 serve as a guideline for the general sustainability reporting according. The cross-cutting standards define the information to be disclosed about material impacts, risks and opportunities related to sustainability aspects. An understanding of the structure, concepts and general requirements for the preparation and presentation of sustainability information is to be conveyed. 

Structure of the cross-cutting standards 

The basic structure of Set 1 consists of two cross-cutting standards (ESRS 1 and ESRS 2) and ten topic-specific standards for the topics of environment, social and governance. The topic-specific ESRS specify and expand the cross-cutting reporting requirements according to the sustainability topics that are material for the company.


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The two overall standards ESRS 1 (General Requirements) and ESRS 2 (General Disclosures) contain the general principles and disclosures that must be considered when preparing sustainability reports. ESRS 1 describes the general requirements for the content of sustainability reporting, while ESRS 2 provides information on which specific disclosure requirements apply to the respective companies, regardless of their sector and for all sustainability topics. 

ESRS 1 lists the areas and minimum requirements that must be disclosed in the course of reporting so that it is possible to understand the impacts, risks and opportunities of the company with regard to environmental, social or governance aspects. For example, information is required on governance, the strategy or business model, the management of risks and opportunities, and the company's objectives. In addition, the standard provides information on what other information is required about a company and its organization, what information is not yet mandatory for reporting in the first few years, to what extent references are permitted, and what is meant by the reporting principle of double materiality, which must be used to assess the disclosure requirements.  
It is clear from the annexes to the standard that the requirements from ESRS 2 and reporting requirements from other EU regulations, if applicable for the company, must be reported by all companies, irrespective of the materiality assessment. 

ESRS 2 explains the disclosure requirements for the preparation of a sustainability statement and applies to all companies, regardless of their activities and sustainability relevance. Information must also be provided on the extent to which the value chain (upstream and downstream) is covered in the statement. In addition, explanations are required on the topics of governance (role of administrative/management/supervisory bodies, incentive systems, due diligence, risk management), strategy (business model, stakeholders, risks and opportunities), materiality assessment, and key performance indicators and targets. 
The annexes to the standard also list the mandatory data points arising from the following other EU legislation: Sustainable Finance Disclosure Regulation (SFDR), Pillar 3, Benchmark Regulation and EU Climate Law. 

The most important content at a glance 

Sustainability reports according to ESRS must be divided into four parts in the following order: General information, environmental information, social information and governance information. The following graphic can serve as a structure, but is not mandatory to implement:

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Double materiality is used to assess impacts, risks and opportunities in relation to sustainability topics in the company. Accordingly, all topics that are defined as material by the assessment generally have to be reported. The assessment of the materiality of impacts covers positive and negative sustainability-related impacts in connection with the company's business activities. Accordingly, all topics whose impacts are either materially related to the environment or society (impact materiality, inside-out) or which have a short-, medium- or long-term financial impact on the company and can thus significantly influence the company's development and performance (financial materiality, outside-in) have to be reported. The assessment of financial materiality is used to identify sustainability-related financial risks and opportunities for the company, including those arising from dependencies on natural, human and social resources. In principle, all topics are to be assessed by materiality. Only in the case of the exclusion of climate change (ESRS E1), in contrast to the remaining topics, must the conclusion of non-materiality be explained by the company. 

Across the cross-cutting and topical standards, various transitional provisions have been established to allow for a phased introduction of disclosure requirements. The phasing-in period is usually between 1 and 3 years, with some disclosure requirements being temporarily omitted only by companies that do not exceed an average of 750 employees. 


In the ESRS, the materiality assessment is a key instrument for classifying the topics to be reported. A structured and comprehensible implementation of this assessment is the basic framework for the sustainability report and its contents.  
Despite the possible use of transitional provisions for specific disclosure requirements of the standards, it is advisable to address the required disclosures at an early stage, as they will become mandatory for all companies sooner or later. 
In addition to the cross-cutting and topic-specific standards already published, further sector-specific reporting standards are already being planned. 
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