The European Sustainability Reporting Standards (ESRS) are the mandatory reporting standards under CSRD. Developed by EFRAG and adopted by the European Commission, they define what companies must disclose, how disclosures should be structured, and how to apply materiality. This article explains each standard and its core requirements.
The ESRS Architecture
ESRS consists of:
- 2 cross-cutting standards (ESRS 1 and ESRS 2) — mandatory for all reporting entities
- 10 topical standards — subject to materiality; companies report on the topics found material in their double materiality assessment
The topical standards are organised across three pillars: Environmental (E), Social (S), and Governance (G).
Cross-Cutting Standards
ESRS 1 — General Requirements
ESRS 1 is not a disclosure standard — it sets the foundational requirements and principles that apply to all ESRS reporting. Key elements:
Double materiality: The methodology and process requirements for the materiality assessment that determines which topical standards apply.
Value chain scope: How far upstream and downstream sustainability reporting must extend — and how companies gather value chain information.
Time horizons: Short (up to 1 year), medium (1–5 years), and long-term (more than 5 years) horizons for risk and opportunity assessment.
Integration with financial reporting: How sustainability information connects to the management report and financial statements.
ESRS 2 — General Disclosures
ESRS 2 is mandatory for all CSRD-reporting companies regardless of materiality assessment outcomes. It requires disclosures in four governance and strategy areas:
Governance (GOV): The governance bodies responsible for sustainability oversight; how management integrates sustainability into strategy; incentives and disincentives related to sustainability.
Strategy (SBM): Business model description; sustainability strategy and objectives; how material sustainability topics are reflected in strategy and business model.
IRO Management (IRO): How the company identifies and manages its impacts, risks, and opportunities — processes, policies, and targets.
Metrics and Targets (MDR): Policies and actions for material sustainability topics; quantitative targets and performance against them.
Environmental Standards
ESRS E1 — Climate Change
The most developed and widely applied environmental standard. Covers:
Transition plan: How the company plans to transition to a climate-neutral economy; alignment with Paris Agreement (1.5°C pathway); climate targets with specific base years.
GHG emissions: Scope 1 (direct), Scope 2 (energy), and Scope 3 (value chain) greenhouse gas emissions — in metric tonnes CO₂e. Scope 3 requires 15 categories of value chain emissions.
Energy consumption: Total energy consumed; percentage renewable; energy intensity metrics.
Climate-related financial risks and opportunities: Physical risks (acute and chronic) and transition risks; climate scenarios used (IPCC-aligned scenarios required).
GHG removals: For companies with removal activities — LULUCF, CCUS.
ESRS E1 aligns closely with TCFD and IFRS S2 — making it the most internationally interoperable climate disclosure standard.
ESRS E2 — Pollution
Covers air, water, and soil pollution from company operations. Key disclosures:
- Substances of concern and substances of very high concern (SVHC)
- Pollutant emissions to air, water, and soil
- Microplastics
- Pollution-related incidents and remediation
ESRS E3 — Water and Marine Resources
Covers the company's water use and impacts on water systems:
- Water consumption by source
- Operations in water-stressed areas
- Water recycling and reuse
- Impacts on marine ecosystems
ESRS E4 — Biodiversity and Ecosystems
Covers impacts on biodiversity:
- Operations in/adjacent to biodiversity-sensitive areas
- Species affected
- Habitat change, land use, and degradation
- Policy and targets for biodiversity protection
ESRS E5 — Resource Use and Circular Economy
Covers resource inputs and waste:
- Material inputs (renewable, non-renewable)
- Waste generated by type and treatment method
- Products and components designed for reuse, recycling
- Circular economy strategy and targets
Social Standards
ESRS S1 — Own Workforce
The most broadly applicable social standard. Covers:
- Headcount, by type, gender, geography
- Working conditions: pay, working time, social protection
- Equal treatment and opportunities: gender pay gap, pay ratio (CEO vs. median employee)
- Health and safety: TRIR (total recordable incident rate), work-related fatalities
- Training and skills development
- Work-life balance
- Trade union representation and collective bargaining coverage
ESRS S2 — Workers in the Value Chain
Covers workers in upstream supply chains and downstream distribution:
- Identification of supply chain workers exposed to human rights risks
- Policies and due diligence processes for supply chain labour standards
- Serious incidents involving supply chain workers
ESRS S3 — Affected Communities
Covers impacts on communities where the company operates:
- Land rights and indigenous peoples' rights
- Community engagement and impact assessment
- Security practices
ESRS S4 — Consumers and End-Users
Covers impacts on customers:
- Product safety and quality incidents
- Data privacy (in connection with GDPR obligations)
- Responsible marketing
- Accessibility for vulnerable consumers
Governance Standards
ESRS G1 — Business Conduct
Covers governance and ethics:
- Anti-corruption and anti-bribery policies and procedures
- Political lobbying disclosures
- Payment practices (payment terms to suppliers)
- Animal welfare (where relevant)
- Legal proceedings related to business conduct violations
Which ESRS Apply to You?
All CSRD-reporting companies must apply ESRS 2. For the topical standards:
- Complete the double materiality assessment (ESRS 1)
- Identify which topics are material on impact or financial materiality grounds
- Apply the topical standard for each material topic
- For topics assessed as not material: a brief statement explaining the conclusion
For a typical SaaS company: ESRS E1 (climate, for energy use and Scope 3 emissions from the value chain) and ESRS S1 (own workforce) are the most likely to be material. E2-E5 and S2-S4 depend on the specific business model.