ESRS-Professional ESRS Professional Certification Exam Questions and Answers

Step A in thedouble materiality assessment processis theinitial stagewhere an organization establishes a foundational understanding of itsbusiness context, activities, and stakeholder relationships. This step is critical in identifying how the entity interacts with environmental, social, and governance (ESG) matters and lays the groundwork for further impact and financial materiality assessments.

Thedouble materiality conceptin the ESRS framework requires organizations to evaluate both:

Impact materiality– How an organization’s activities impact people and the environment.

Financial materiality– How sustainability matters influence the organization's financial position, performance, and cash flows.

Identifying the business environment:Understanding industry-specific sustainability challenges, regulatory requirements, and stakeholder expectations.

Recognizing affected stakeholders:Engaging internal and external stakeholders to determine which sustainability matters are relevant.

Defining dependencies and risks:Evaluating the organization’s dependencies on natural, social, and human capital, and how these can influence business outcomes.

Understanding sector and geographical relevance:Assessing which sustainability issues are most significant based on where the company operates.

Key Aspects of Step A in Double Materiality Assessment:Step A does not yet involve selecting specific disclosure requirements (Step B) or conducting a financial materiality assessment (Step C). Instead, it provides thecontextual frameworknecessary for subsequent steps in the materiality process​.

Commission Delegated Regulation (EU) 2023/2772, ESRS 1, Section 3.1– Defines stakeholders' role in materiality assessment​.

EFRAG Compilation Explanations January - November 2024– Provides guidance on applying double materiality and the importance of Step A​.

EFRAG IG 1 Materiality Assessment, Chapter 2.2– Outlines Step A as the process of understanding business activities, stakeholders, and sustainability context​.

Official References:Thus, the correct answer isC. Understand the organization's context, activities, and stakeholders.

Nature is indeed recognized as a "silent stakeholder" in the European Sustainability Reporting Standards (ESRS). This term implies that, although nature cannot actively voice its concerns, it remains a critical component of sustainability reporting due to its fundamental role in sustaining life and economic activity. ESRS emphasizes that organizations must consider their impacts on nature, ecosystems, and biodiversity as part of their sustainability disclosures.

This recognition aligns with the concept ofdouble materialityembedded in the ESRS framework, which considers both the financial impact on an organization and the organization's impact on environmental and social matters. The ESRS explicitly integratesbiodiversity and ecosystems (ESRS E4)as a key topic, reflecting the need to account for the effects of business activities on nature, even if nature itself cannot actively advocate for protection.

Thesilent stakeholderconcept reinforces theduty of carethat organizations hold in assessing and mitigating their impacts on biodiversity, land use, pollution, and natural resources. This aligns with theUnited Nations Sustainable Development Goals (SDGs)and theEU Biodiversity Strategy for 2030, both of which emphasize the protection and restoration of natural ecosystems​.

Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023(ESRS E4 - Biodiversity and Ecosystems)​.

EFRAG Guidance on Stakeholder Engagement– Highlights nature as an affected stakeholder in sustainability matters​.

EU Biodiversity Strategy for 2030– Emphasizes that economic activities must integrate ecosystem preservation and restoration​.

Official References:This confirms that the statement istrueunder ESRS standards.

Inline XBRL (iXBRL)is the digital reporting format required under theCorporate Sustainability Reporting Directive (CSRD)to ensure standardized and machine-readable sustainability reporting.

It is required under CSRD for sustainability reporting

TheCSRD mandates the use of Inline XBRLfor sustainability reports, ensuring digital tagging for structured data submission, making informationeasier to analyze by regulators and investors​.

✅(A) is correct

It only applies to narrative disclosures, not numerical data

Incorrect.Inline XBRL applies to both numerical data (KPIs, metrics) and narrative disclosures, allowingstructured reporting across qualitative and quantitative sustainability information​.

❌(B) is incorrect

It makes reports both human-readable and machine-readable

True. Inline XBRL embeds machine-readable tags into a human-readable document, ensuringboth usability and compliance with digital reporting requirements​.

✅(C) is correct

It ensures that tags are embedded within a visually clear format

Correct. TheInline XBRL standard ensures that the digital tags do not alter the visual presentation of the report, maintaining clarity for human readers while allowing structured data extraction​.

✅(D) is correct

Conclusion:Inline XBRLis required under CSRD (A), makes reports both human-readable and machine-readable (C), and ensures a visually clear format (D). However, it applies to both narrative and numerical data, making (B) incorrect.

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:

EcoFurniture Inc. is performingStep B of its double materiality assessmentunder ESRS, which involves identifying and assessingimpacts, risks, and opportunities (IROs)from both animpact materialityandfinancial materialityperspective​.

During Step B, the organization must:

Compare entity-specific sustainability matters to ESRS 1 AR 16

Screening sustainability matters listed in ESRS 1 AR 16ensures that EcoFurniture Inc. identifies allpotential material topicsand aligns them with itsspecific sustainability context​.

Action:✅(A) is correct

Engage with affected stakeholders

Stakeholder engagementis a key requirement in the ESRSdouble materiality process, especially for industries with environmental and social impacts, such as deforestation risks in EcoFurniture's timber sourcing.

ESRS 2 IRO-1 explicitly states that stakeholder engagement is necessary tovalidate materiality assessments​.

Action:✅(B) is correct

Consider downstream impacts

ESRS mandates assessingboth upstream and downstreamsustainability impacts.Ignoring potential risks in the downstream value chain is not aligned with ESRS requirements.

Action:❌(C) is incorrect

Use scientific research to validate sustainability trends and risks

Theuse of scientific evidenceis an essential part of assessing sustainability matters.ESRS encourages leveraging research and external data to confirm industry-specific sustainability risks​.

Action:✅(D) is correct

Conclusion:EcoFurniture Inc. must integratestakeholder engagement, scientific research, and systematic comparison of sustainability matters to ESRS requirementsto ensure a robust Step B materiality assessment.Ignoring the downstream value chain is not permissibleunder ESRS.

Commission Delegated Regulation (EU) 2023/2772​

Compilation Explanations January - November 2024​

Official References:

The ESRS (European Sustainability Reporting Standards) framework consists of three primary categories of standards:

ESRS 1 (General Requirements):

ESRS 1 sets out thefundamental principlesand requirements for sustainability reporting.

It provides an overview of the structure and drafting conventions of the ESRS framework, defining the categories of ESRS standards: cross-cutting, topical, and sector-specific.

It also establishes thedouble materiality principleas the basis for sustainability disclosures.

ESRS 2 (General Disclosures):

ESRS 2 outlines thecore disclosure requirementsapplicable to all sustainability topics, ensuring comparability and completeness.

It includes general governance, strategy, impact, risk, and opportunity management disclosures applicable to all sustainability topics.

These disclosure requirements apply to all undertakingsregardless of the specific sustainability topics being reported.

Topical Standards:

The ESRS framework includes tentopical standardscovering the three key dimensions of sustainability:

Environmental (E): ESRS E1 (Climate Change), ESRS E2 (Pollution), ESRS E3 (Water & Marine Resources), ESRS E4 (Biodiversity & Ecosystems), and ESRS E5 (Resource Use & Circular Economy).

Social (S): ESRS S1 (Own Workforce), ESRS S2 (Workers in the Value Chain), ESRS S3 (Affected Communities), and ESRS S4 (Consumers & End-users).

Governance (G): ESRS G1 (Business Conduct).

These standards providespecific requirementson sustainability matters, complementing the general disclosure requirements in ESRS 2.

Sector-Specific Standards:

Sector-specific ESRS arecurrently under development.

These will address sustainability mattersspecific to different industries, ensuring that sectoral nuances are properly considered.

They aim tofill gaps not sufficiently coveredby the topical standards by defining industry-specific impacts, risks, and opportunities.

ESRS 1 (General Requirements) comes first, setting the foundation.

ESRS 2 (General Disclosures) follows, providing cross-cutting disclosure requirements.

Topical standards are next, covering specific sustainability topics.

Sector-specific standards are the final category, though they are still in development.

Why is C. ESRS 1; ESRS 2; topical standards; sector-specific standards the correct answer?Thus, the correct order aligns with theofficial structureof the ESRS framework as mandated inCommission Delegated Regulation (EU) 2023/2772​.

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

Commission Delegated Regulation (EU) 2023/2772, Annex I: Structure of the ESRS framework​.

EFRAG Compilation of Explanations (January - November 2024): Explanation of ESRS categories​.

EFRAG Mapping of Sustainability Matters to Topical Disclosures (Q&A ID 177): Confirmation of ESRS 1, ESRS 2, and the ten topical standards​.

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.

TheCorporate Sustainability Reporting Directive (CSRD)includes specificreporting mandatesthat organizations must comply with. Below is an evaluation of each option:

A. True– The CSRD requires organizations to conduct adouble materiality assessment, considering bothfinancial materiality(impact on the company’s financial position) andimpact materiality(the company’s impact on the environment and society)​.

B. True– Organizations reporting under the CSRD mustfollow a specific reporting format, which includes structured disclosures usingEuropean Sustainability Reporting Standards (ESRS)​.

C. False– The CSRDapplies to both EU and non-EU companiesthat have operations in the EU and meet the reporting threshold criteria. Non-EU companies generatingmore than €150 millionin annual turnover in the EU and having at leastone EU-based subsidiary or branchare subject to CSRD requirements​.

D. True– The CSRD isinterlinked with other EU legislation, including theEU Taxonomy Regulationand theSustainable Finance Disclosure Regulation (SFDR), ensuring companies align with broader EU sustainability goals​.

E. False– Organizations must report onvalue chain informationas part of theimpact, risk, and opportunity (IRO) management processwithin the ESRS framework​.

F. False– The CSRD mandatesexternal assurancefor sustainability reports, starting withlimited assuranceand progressing towardreasonable assurancein the coming years​.

Commission Delegated Regulation (EU) 2023/2772, Sections onDouble Materiality, Reporting Format, and Value Chain Information​.

EU Taxonomy Regulation & SFDR– Linkages with CSRD​.

Official References:

2023/2772, various EFRAG guidance documents, and reports related to CSRD, ESRS, stakeholder engagement, double materiality, external assurance, and digital reporting Study guide References at the end of each question

Under the ESRS framework,employee-related datasuch asheadcount, turnover, and health and safety statisticsare typically the responsibility of theHuman Resources (HR) department. HR is responsible for managing workforce metrics, diversity, inclusion, hiring, terminations, and employee well-being, including health and safety programs.

WhileHealth and Safety (H&S) teamsmay contribute data related to occupational safety and health incidents, the responsibility foraggregating and reportingon overall workforce statistics lies with HR. TheCompliance departmentensures legal and regulatory adherence but does not maintain core employee records, whileMarketinghas no role in employee-related data reporting.

ESRS S1-6:Characteristics of the undertaking’s employees, requiring disclosure of total headcount and workforce breakdown​.

ESRS S1-14:Health and Safety Metrics, detailing occupational safety measures, incidents, and employee well-being programs​.

EFRAG Implementation Guidance on Workforce Reporting, which confirms HR as the responsible entity for employee data aggregation​.

ESRS References: