ESRS-Professional ESRS Professional Certification Exam Questions and Answers

The European Sustainability Reporting Standards (ESRS) categorize stakeholders intotwo main groups:

Affected Stakeholders:

These are individuals or groups whose interests are affected (positively or negatively) by the undertaking’s activities and business relationships across its value chain.

Examples include workers (own workforce and those in the value chain), affected communities, consumers, and end-users.

The identification of affected stakeholders plays a crucial role in an organization’s sustainability due diligence and materiality assessment processes.

Users of Sustainability Statements:

These are primary users of sustainability disclosures, including investors, lenders, and other creditors.

Additional users include business partners, trade unions, civil society organizations, non-governmental organizations (NGOs), governments, analysts, and academics.

The ESRS framework emphasizes the importance ofengagement with affected stakeholdersas part of an undertaking’s due diligence and materiality assessment process, ensuring that material impacts, risks, and opportunities are adequately identified and reported​.

Official References:

Commission Delegated Regulation (EU) 2023/2772, ESRS 1, Section 3.1- Defines the two main groups of stakeholders​.

ESRS 2 SBM-2 (Interests and Views of Stakeholders)- Covers how affected stakeholders' views inform an undertaking’s strategy​.

EFRAG Guidance on Stakeholder Engagement and Double Materiality- Reinforces the role of affected stakeholders in sustainability assessments​.

Preparing anESRS reportinvolves multiple key steps to ensure compliance with CSRD requirements. Below is an evaluation of each option:

A. True–Internal controlsandstakeholder engagementare critical for ensuring accurate sustainability reporting. Stakeholders play a role inmateriality assessmentsand governance structures​.

B. True–Materiality assessmentis essential to determinewhich sustainability matters are most relevantfor disclosure. The ESRS framework requires organizations to report only onmaterialsustainability topics​.

C. False–Stakeholder opinions are crucialin sustainability reporting. Organizations must engage withemployees, customers, investors, and affected communitiesto identify material sustainability matters​.

D. True–Benchmarking and gap analysishelp companies compare their sustainability performance againstESRS requirements, industry best practices, and peer organizations​.

E. False–Sustainability reporting goes beyond financial data collection.The ESRS requiresenvironmental, social, and governance (ESG) disclosures, which include qualitative and quantitative indicators​.

F. True–Planning for external assuranceis critical under the CSRD mandate, aslimited assurance is required initially, progressing toreasonable assurance by 2028​.

Key Steps in ESRS Report PreparationStep

Purpose

Internal Controls & Stakeholder Engagement

Ensure accuracy and transparency in reporting

Materiality Assessment

Identify key sustainability topics for disclosure

Benchmarking & Gap Analysis

Compare with industry standards and ESRS requirements

External Assurance Planning

Prepare for third-party validation of sustainability data

Commission Delegated Regulation (EU) 2023/2772, Sections onMateriality Assessment, Internal Controls, and Assurance​.

Official References:

DuringStep Bof thedouble materiality assessment process, organizations mustidentify actual and potential impacts, risks, and opportunities (IROs). The ESRS framework recommends the following methods:

A. The list of sustainability matters in ESRS 1 AR 16✅

ESRS 1 Application Requirement (AR) 16provides acomprehensive reference listof sustainability matters to consider when identifying IROs.

This list includesenvironmental, social, and governance topicsaligned withEU sustainability objectives​.

C. Due diligence processes✅

ESRS requires organizations touse due diligence processesto identifynegative sustainability impacts.

Due diligence aligns with frameworks such as theOECD Guidelines for Multinational Enterprisesand theUN Guiding Principles on Business and Human Rights​.

This ensures that potentialrisks and opportunitiesare assessed based oninternational sustainability standards.

D. Feedback from stakeholders✅

Stakeholders, includingemployees, suppliers, customers, and affected communities, providecrucial insightsinto sustainability impacts.

ESRSmandates engagement with affected stakeholdersas part of theIRO identification process​.

Financial materiality thresholds apply later in the process (Step C)when evaluating thefinancial impact of sustainability matters.

Step Bfocuses only on identifying IROs, makingfinancial thresholds irrelevant at this stage​.

Why is B. Financial materiality thresholds❌incorrect?Conclusion:Organizations should usethe ESRS 1 AR 16 sustainability matters list, due diligence processes, and stakeholder feedbacktoidentify IROsin Step B of the double materiality assessment.Financial materiality thresholds do not apply in this step.

Official Commission Delegated Regulation (EU) 2023/2772, various EFRAG guidance documents, and CSRD-related references:

Commission Delegated Regulation (EU) 2023/2772, ESRS 1, AR 16:List of Sustainability Matters for Identifying IROs​.

EFRAG Compilation of Explanations (January - July 2024): Confirmation thatdue diligence and stakeholder inputare part ofIRO identification​.

Under the ESRS, engagement with affected stakeholders is a core element of due diligence. The outcome of the due diligence process informs the materiality assessment. The ESRS encourage further engagement with stakeholders to collect their input and feedback on the organization's conclusions regarding the material impacts, risks, and opportunities.

This sequence is supported by the official text of Commission Delegated Regulation (EU) 2023/2772 and various ESRS-related documents. The standard emphasizes due diligence as astarting point for the materiality assessment process. The assessment then determines the organization's material impacts, risks, and opportunities, which is crucial for effective stakeholder engagement.

Due Diligence:The ESRS process starts with due diligence, as outlined in the Commission Delegated Regulation (EU) 2023/2772, to identify relevant sustainability matters and affected stakeholders.

Materiality Assessment:The findings from the due diligence process are then used to inform the materiality assessment, as discussed in EFRAG's guidance documents.

Material Impacts, Risks, and Opportunities:Finally, the organization engages with stakeholders to review and refine its conclusions about material impacts, risks, and opportunities, as per the ESRS requirements.

References:

Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive 2013/34/EU​

EFRAG Guidance on Materiality Assessment in ESRS​​

ESRS Due Diligence Framework, as outlined in Compilation Explanations and Mapping Sustainability Matters with Disclosure Requirements​​

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TheEnvironmental Sectionof the topical ESRS includes disclosure requirements covering environmental sustainability matters. This section specifically relates toenvironmental objectives as defined in the EU Taxonomy, ensuring alignment with broader European sustainability goals.

Thetopical ESRS environmental standards (ESRS E1 - E5)cover:

ESRS E1– Climate Change (Mitigation & Adaptation)

ESRS E2– Pollution

ESRS E3– Water and Marine Resources

ESRS E4– Biodiversity and Ecosystems

ESRS E5– Resource Use and Circular Economy

These standardsalign with the environmental objectives of the EU Taxonomy Regulation(Regulation (EU) 2020/852) andrequire organizations to report on their material environmental impacts, risks, and opportunities (IROs)​.

A. Social impact and labor rights:→Incorrect, as this belongs to theSocial (S) section(ESRS S1 - S4).

B. Financial performance information:→Incorrect, as this is part offinancial reporting, not ESRS environmental disclosures.

D. Corporate governance and board diversity:→Incorrect, as governance matters are covered underESRS G1 Business Conduct​.

Commission Delegated Regulation (EU) 2023/2772​

Compilation Explanations January - November 2024​

Why Other Options Are Incorrect:Official References:

UnderESRS 2 (Appendix F of ESRS 1), sustainability statements must follow astructured disclosure approach. The appendix provides guidance on the recommended format and elements to be included in the sustainability statement to ensureconsistency, comparability, and transparency.

(C) A list of Disclosure Requirements that have been complied with:

Organizations must provide aclear list of all ESRS disclosure requirementsthat they have reported on. This ensures that stakeholders can assess whether the company has complied with itsmateriality-based reporting obligations​.

The list must includepage numbers or referencesto the exact location of disclosures within the report.

(A) A specific structure prescribed by the ESRS:

While ESRS 1 provides arecommended structure, it isnot mandatory. Instead, companies are given flexibility to adapt the format to their reporting needs​.

(B) Only sector-specific Disclosure Requirements:

The sustainability statement should coverboth general ESRS disclosures and sector-specific disclosures, not just sector-specific ones​.

(D) A table summarizing financial performance:

Financial performance isnota core requirement of thesustainability statement. Instead, ESRS focuses onsustainability-related disclosuresthat impact financial performance but does not mandate a direct financial summary within the sustainability statement​.

Commission Delegated Regulation (EU) 2023/2772, ESRS 2 (Appendix F of ESRS 1)– Outlines the format and elements of the sustainability statement​.

EFRAG Compilation Explanations (January – November 2024)– Provides insights into structuring sustainability statements under ESRS​.

Key Requirements for ESRS 2 Sustainability StatementIncorrect OptionsOfficial References:Thus, the correct answer isC. A list of Disclosure Requirements that have been complied with.

Thesustainability statementunder ESRS is structured according toESRS 1 and ESRS 2, outlining specific disclosure requirements. The required disclosures include:

General Disclosure Requirements from ESRS 2

ESRS 2 outlinesgeneral disclosure requirements, including governance, strategy, and impact, risk, and opportunity management (IROs). These disclosures are mandatory for all undertakings, providing the foundation of the sustainability statement​.

✅(A) is correct

Environmental Objectives under the EU Taxonomy Regulation

Companies must disclose theiralignment with the EU Taxonomy Regulation, particularly underArticle 8 of Regulation (EU) 2020/852, which includes financial and non-financial companies' obligations regarding taxonomy-aligned activities​.

✅(B) is correct

Financial Performance Metrics from IFRS Reports

Financial metrics from IFRS are NOT a required disclosure under ESRS. The sustainability statement focuses on non-financial reporting, whilefinancial performance remains under IFRS standards in financial statements.

❌(C) is incorrect

Governance-Related Information Determined by the Materiality Assessment

Governance disclosures (ESRS G1 Business Conduct)include transparency about policies, risk management, and ethical business practices. Themateriality assessment determines the necessary governance disclosuresbased on entity-specific risks and opportunities​.

✅(D) is correct

Conclusion:Thesustainability statement must include general disclosure requirements (A), environmental objectives under the EU Taxonomy (B), and governance-related information based on materiality (D). Financial performance metrics from IFRS reports (C) are not required.

Commission Delegated Regulation (EU) 2023/2772​

Compilation Explanations January - July 2024​

Official References:

TheFacilities Management (FM) departmentis primarily responsible for providing information on building energy use and the environmental performance of physical infrastructure.

Key responsibilities include:

Energy management: Tracking energy consumption and implementing efficiency measures.

Sustainability initiatives: Managing green building certifications, renewable energy installations, and environmental compliance.

Infrastructure monitoring: Overseeing heating, ventilation, and air conditioning (HVAC) systems, lighting efficiency, and water usage.

While theOperationsdepartment may use energy-related data for broader business functions, Facilities Management specializes inmonitoring and improving building performancefrom an environmental perspective​.

ESRS E1 – Climate Change, Disclosure Requirement E1-5- Specifies requirements for energy consumption and environmental impacts of buildings​.

EFRAG Guidance on Environmental Performance and Building Energy Use- Confirms that FM is responsible for infrastructure sustainability monitoring​.

Official References:

The statement that "Policymakers and regulators worldwide are increasingly mandating limited assurance for sustainability reporting in Europe and mandatory assurance in all Asian and African countries" isfalsefor the following reasons:

Limited Assurance in Europe

Under theCorporate Sustainability Reporting Directive (CSRD), theEuropean Union (EU) is progressively implementing mandatory assurance for sustainability reporting, but it isstarting with limited assurancebefore transitioning toreasonable assuranceby 2028​.

TheCommittee of European Auditing Oversight Bodies (CEAOB)has issuednon-binding guidelines on limited assuranceto harmonize the approach across EU member states​.

No Universal Mandatory Assurance in Asia and Africa

Sustainability assurancevaries by countryinAsia and Africa, with some jurisdictions adoptingvoluntaryorlimitedrequirements rather thanmandatory assurance.

TheEU approachis influencing global discussions, butthere is no blanket requirementfor full mandatory assurance acrossallAsian and African countries​.

While certainAsian countries (e.g., Japan, Singapore, China, and India)are enhancing their sustainability reporting frameworks, assurance requirements remaindiverse and sector-dependent.

InAfrica, sustainability reporting is growing, especially in South Africa underKing IV principles, but assurance isnot uniformly mandatoryacross the continent​.

Limited assurance is currently being phased in across the EU, but not yet fully mandated at the reasonable assurance level.

There is no global requirement for mandatory assurance across all Asian and African countries.

Therefore, the statement isfalse.

Conclusion:Official Commission Delegated Regulation (EU) 2023/2772, various EFRAG guidance documents, and CSRD-related references:

EU CSRD Recital 60: Roadmap for assurance from limited to reasonable​.

CEAOB Limited Assurance Guidelines (September 2024)​.