Reporting structure is an important detail in the European Sustainability Reporting Standards. According to the standards, there are requirements for how a company’s sustainability statement is to be presented. This is unlike the GRI Sustainability Standards, which does not prescribe a particular format. Here is what GRI says in GRI 1 Foundation 2021:
“The organization can publish or make information accessible in a range of formats (e.g., electronic, paper-based) across one or more locations (e.g., a standalone sustainability report, web pages, an annual report). The terms ‘report’ and ‘reported information’ in the GRI Standards both refer to information reported across all locations.”
GRI Standards source
For your GRI report, you may be limited only by your imagination, but that is not the case for ESRS.
In ESRS 1 General Requirements, there are specific requirements for the “Structure of the sustainability statement.” This includes general presentation and content and structure of the sustainability statement requirements. You can download the standards here.
To locate this requirement, you need to go to Chapter 8 of ESRS 1. It provides the basis for presentation of the information about sustainability matters. The report needs to be prepared in compliance with Articles 19a and 29a of Directive 2013/34/EU within the company’s management report.
What is Directive 2013/34/EU?
It is an accounting directive of the European Parliament and of Council that entered into force on 26 June 2013. It has been adopted by EU member states with their own country-specific legislation. As a result, specific requirements governing management reports vary across countries. In short:
“The management report shall include a fair review of the development and performance of the undertaking’s business and of its position, together with a description of the principal risks and uncertainties that it faces.”
In Appendix F of ESRS 1, there is a nonbinding illustration of the structure of the report presentation. See my representation in the graphic below.
General presentation requirement
As you can see in the graphic, the sustainability information must be presented:
“(a) in a way that allows a distinction between information required by disclosures in ESRS and other information included in the management report; and
(b) 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 company must structure its sustainability statement in four parts in the following order: general information, environmental information, social information, and governance information. General information refers to ESRS 2 General Disclosures, which are required of all companies. The environmental, social, and governance information disclosures are based on a company’s materiality assessment. Companies would only need to disclose on topics that they have determined to be material. For ESRS, this means using double materiality. See my earlier posts discussing double materiality, which includes impact materiality and financial materiality.
It is worth noting that ESRS E1 Climate Change is the only topical disclosure that companies must all address in one form or other. If climate change has been determined to be a material topic, companies must report on ESRS E1. If it is not material, companies must report that and why.
My next post will cover how climate risk information or lack thereof is used by report readers.