ESRS 1 general requirements

What does ESRS 1 cover?

ESRS 1 and ESRS 2 are the two cross-cutting standards: ESRS 1 sets the general requirements and ESRS 2 the general disclosures every company makes. The ten topical standards cover climate, pollution, water, biodiversity, resource use, own workforce, value chain workers, affected communities, consumers and business conduct. ESRS 1 explains how they fit together and the rules for applying them, in ten chapters, from fair presentation to transitional provisions. See the revised ESRS and ESRS 2 general disclosures.

What does fair presentation mean in ESRS 1?

The revised ESRS 1 adds a fair presentation principle: the statement must give relevant information about the company's material impacts, risks and opportunities that is faithfully represented, comparable, verifiable and understandable. It is judged for the statement as a whole rather than datapoint by datapoint, and it requires entity-specific disclosures where the topical standards are not detailed enough to explain a material matter.

How does ESRS 1 apply materiality?

Double materiality, impact and financial, decides which sustainability matters are reported, and the revised standard allows a top-down approach to the assessment. A second filter then applies to information: a company does not disclose information that is not material, except in limited cases, such as where another law requires it, and must label such information clearly so it does not obscure what matters. Material opportunities are reported only where the company is pursuing them or has built them into its strategy. See double materiality explained and running a double materiality assessment.

What is the reporting undertaking and value chain?

The sustainability statement covers the same reporting undertaking as the financial statements, normally the consolidated group. It is extended to the upstream and downstream value chain where that is needed to cover material impacts, risks and opportunities, including through investments, which count as business relationships. Companies may use estimates, sector averages, samples and other proxies for value chain information, and the obligation to make reasonable efforts to obtain information from every partner has been removed. There is relief for acquisitions and disposals during the year. See the value chain cap.

What time horizons does ESRS 1 use?

Short term is the length of the financial reporting period; medium term runs from the end of that period up to five years; long term is more than five years. A company can use different medium or long-term horizons where the standard ones would not give relevant information, for example longer horizons for climate or infrastructure, and explains why.

ESRS 1 in practice: a retailer's main choices

A listed European retailer prepares its first sustainability statement under the revised standards for 2027.

Its boundary matches its consolidated accounts, including franchised stores only through its value chain. It sets a long-term horizon to 2050 for climate, explains why, and uses supplier averages for working conditions in its apparel supply chain, disclosing that these are estimates. Datapoints on topics found not material are left out rather than reported as zero, and it gives comparatives for every metric. See impacts, risks and opportunities.

How should information be prepared and presented?

Companies give comparative information for all quantitative metrics and amounts, disclose significant judgements, estimates and measurement uncertainty, correct material prior-period errors, and use reasonable and supportable information available without undue cost or effort, reassessed each year. They may omit classified information and, in limited cases, information that would seriously prejudice their commercial position. The statement sits in the management report, in four parts in a set order, general, environmental, social and governance information, and can incorporate information by reference from elsewhere in the annual report, provided it is clearly identified.

How does ESRS 1 link to the financial statements?

A chapter on connected information requires companies to explain links between the sustainability statement and the financial statements, such as amounts that appear in both, and to keep data and assumptions consistent as far as possible. The transitional provisions list the phase-ins, such as later reporting of anticipated financial effects. See climate risk in the financial statements.

This guide is general information. It is not tax or legal advice for your situation.