ESRS (original version)

ESRS 1, paragraph 28 — materiality

A sustainability matter is “material” when it meets the criteria defined for impact materiality (see section 3.4 of this Standard) or financial materiality (see section 3.5 of this Standard), or both.

ESRS 1, paragraph 37 — double materiality

Double materiality has two dimensions, namely: impact materiality and financial materiality. Unless specified otherwise, the terms “material” and “materiality” are used throughout ESRS to refer to double materiality.

ESRS 1, paragraph 38 — inter-related assessments

Impact materiality and financial materiality assessments are inter-related and the interdependencies between these two dimensions shall be considered. In general, the starting point is the assessment of impacts, although there may also be material risks and opportunities that are not related to the undertaking’s impacts.

Double materiality — impact and financial materiality

The materiality assessment under the ESRS applies the concept of double materiality: a sustainability matter is material if it meets either the impact materiality criterion (actual or potential material impacts on people or the environment, connected with the undertaking's own operations and upstream and downstream value chain) or the financial materiality criterion (material financial effects arising from sustainability matters). The assessment must cover the undertaking's own operations and its upstream and downstream value chain. — Reference: EFRAG IG 1, section 2.1.

ESRS 2 disclosures are required irrespective of the materiality outcome

The ESRS 2 cross-cutting disclosure requirements, including IRO-1, SBM-1 and SBM-3, must be reported irrespective of the outcome of the materiality assessment. Where the undertaking has no policies, actions or targets in relation to a material matter, it must state that this is the case; metrics remain subject to the materiality assessment. — Reference: EFRAG IG 1, sections 2.4 and 3.4.

Thresholds and steps for the materiality assessment

For impact materiality, thresholds are set with reference to the severity of the impact, determined by its scale, scope and irremediable character, together with its likelihood (likelihood is not relevant for potential negative impacts on people). For financial materiality, thresholds are set with reference to the magnitude and likelihood of expected financial effects. The guidance illustrates a process of four steps: (a) understanding the context, (b) identification of IROs, (c) assessment and determination of material IROs, and (d) reporting. — Reference: EFRAG IG 1, sections 3.2-3.4 and 3.6.

Key point 1 — value chain information and business relationships

The undertaking's sustainability statement must include information about all material impacts, risks and opportunities, including those that arise or may arise in the context of its business relationships in the upstream and downstream value chain. Business relationships are not limited to direct contractual relationships. — Reference: EFRAG IG 2, Summary in seven key points, point 1.

Key point 2 — value chain information only where material and required

The undertaking is not required to include value chain information in all disclosures, but only when it is connected to material IROs beyond its own operations, due to its business relationships, and when specifically required by the relevant disclosure requirement. — Reference: EFRAG IG 2, Summary in seven key points, point 2.

Key point 6 — estimation of missing value chain information

When, after making reasonable efforts, the undertaking cannot collect primary value chain information, it must estimate the missing information using all reasonable and supportable information available without undue cost and effort, including proxies and sector data and other information from indirect sources. It must describe in the basis for preparation the metrics reported using value chain estimation and the resulting level of accuracy. — Reference: EFRAG IG 2, Summary in seven key points, point 6.

Key point 7 — value chain information does not affect reporting boundaries

The inclusion of value chain information in the sustainability statement does not affect the reporting boundaries, which correspond to the boundaries of the entities included in the perimeter of the consolidated financial statements. Associates and other investees that are not consolidated in the financial statements are treated as other business relationships, i.e. as actors in the value chain. — Reference: EFRAG IG 2, Summary in seven key points, point 7.

Mandatory versus materiality-assessed datapoints

The explanatory note lists all datapoints derived from the ESRS disclosure requirements (excluding ESRS 1). Of these, 161 datapoints are not subject to the materiality assessment and must always be reported, while a further 622 datapoints are subject to the materiality assessment. — Reference: EFRAG IG 3, ESRS Datapoints Explanatory Note.

First sustainability statement and phase-in

The note covers large listed and non-listed undertakings within the scope of the CSRD; the first sustainability statement applies for financial years beginning on or after 1 January 2024 for certain undertakings and on or after 1 January 2025 for others. Phase-in reliefs follow ESRS 1 Appendix C and ESRS 2 BP-2 paragraph 17 (for example for undertakings with up to 750 employees). — Reference: EFRAG IG 3.

Status of the guidance

IG 3 is non-authoritative implementation guidance; the ESRS prevail in the event of any discrepancy. It does not include entity-specific disclosures, and Appendix A addresses differences with the ESRS XBRL taxonomy while Appendix B provides statistics by type and by standard. — Reference: EFRAG IG 3, disclaimer and appendices.