GRI ESRS-Professional - ESRS Professional Certification Exam

Thedouble materiality assessment processconsists of multiple steps, withStep A: Understanding the Contextfocusing on setting the groundwork for identifying material impacts, risks, and opportunities (IROs).

Step A includes:

Mapping the organization's value chain (Option A)

This step involves identifying all elements of the organization's value chain, including suppliers, distributors, and business partners, to understand where sustainability impacts occur.

It helps in pinpointing potential sustainability matters, risks, and opportunities related to both impact and financial materiality​.

Engaging with affected stakeholders to gather input (Option B)

Stakeholder engagement is a critical part of the materiality assessment as it informs the organization about direct and indirect sustainability impacts.

The ESRS guidance stresses that businesses must engage with affected stakeholders (e.g., employees, communities, consumers) and sustainability experts as part of the due diligence process​.

Analyzing the legal and regulatory landscape (Option C)

Organizations must review applicable laws, regulatory frameworks, and international sustainability commitments that may affect their sustainability reporting obligations.

This ensures compliance withEU regulations (CSRD, ESRS, Taxonomy Regulation, SFDR)and other relevant legal requirements​.

D. Developing a list of material risks and opportunities

This step belongs toStep B: Identifying Material Sustainability Matters, where the organization formally identifies and assesses material IROs. Step A is only about gathering contextual information to inform this process​.

Commission Delegated Regulation (EU) 2023/2772, Section 3.3- Double materiality and materiality assessment process​.

EFRAG IG 1: Materiality Assessment, Chapter 2.2- Understanding the context and engagement with affected stakeholders​.

EFRAG Compilation of Explanations January–November 2024- Provides clarifications on stakeholder engagement and legal context review in Step A​.

Incorrect Answer:Official References:

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.

Across-departmental taskforceis crucial forCorporate Sustainability Reporting Directive (CSRD) complianceas it enables an organization tocoordinate sustainability reporting efforts effectively.

Key responsibilities of the taskforce include:

Ensuring alignment across departments(e.g., Finance, Compliance, Legal, ESG, and Operations) togather accurate sustainability data.

Meeting reporting timelinesrequired underESRS and CSRD regulations.

Managing responsibilities across teamsto ensure sustainability disclosures are consistent with financial reporting controls.

Enhancing cross-functional collaborationfordouble materiality assessmentand ensuring compliance withassurance and audit requirements​.

Not all EU Member States have decided that only statutory financial auditors are allowed to conduct the assurance of the sustainability statement. TheCorporate Sustainability ReportingDirective (CSRD)mandates that sustainability reports beassuredby an external party, but it allows Member States to decide whether assurance engagements can be performed by firms other than statutory financial auditors.

Limited Assurance Requirement:

TheCSRD introduces a phased approachtoassurance, starting withlimited assuranceand transitioning toreasonable assuranceover time (expected by 2028).

Initially,limited assuranceis required across all Member States.

Flexibility for Member States:

EU Member Stateshave discretionto allowother independent assurance service providersto conduct the sustainability assurance, in addition to statutory auditors.

Some countries mayrestrictsustainability assurance to statutory auditors, butthis is not an EU-wide rule​.

Upcoming EU Assurance Standards:

TheEuropean Commissionis working on developing acommon EU assurance standardfor sustainability reporting.

TheCommittee of European Auditing Oversight Bodies (CEAOB)has issued non-bindingguidelinesonlimited assurancefor sustainability reporting​.

Key Provisions:Thus,the statement is falsebecausenot all EU Member States have restricted sustainability assurance to statutory financial auditors. Some allowother independent assurance providersto conduct the engagements.

Official References:

CSRD (Directive (EU) 2022/2464) Assurance Provisions​.

EU Platform on Sustainable Finance Report (February 2025) – Assurance Standards and Guidelines​.

CEAOB Guidelines on Limited Assurance for Sustainability Reporting (September 2024)​.

Organizations should report on sustainability for several reasons, includingtransparency, stakeholder expectations, and competitive advantage. Below is the evaluation of each option:

A. True– Reporting on sustainabilitydemonstrates transparency and accountability, allowing companies to disclose theirenvironmental, social, and governance (ESG) impacts​.

B. True–Stakeholders, including investors, customers, and regulators,increasingly demand sustainability reportingto assess the long-term viability of a company​.

C. False– While sustainability reporting may contribute tolong-term financial gains, it doesnot guarantee immediate financial benefits​.

D. True– Companies withstrong sustainability performanceoften enjoyenhanced brand value and competitive advantage, attracting investors and customers who prefer sustainable businesses​.

Why Sustainability Reporting MattersBenefit

Impact on Organization

Transparency & Accountability

Builds trust with investors, regulators, and the public

Stakeholder Expectations

Meets regulatory and customer expectations for ESG disclosures

Brand & Competitive Advantage

Companies with strong ESG performance are more attractive to investors

Regulatory Compliance

Helps meet CSRD and ESRS disclosure obligations

CSRD & ESRS Guidance (2024)– Key Sustainability Reporting Benefits​.

EU Platform on Sustainable Finance Report (2025)– Stakeholder Expectations & Competitive Advantage​.

Official References:

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:

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:

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.

TheCorporate Sustainability Reporting Directive (CSRD)replaced theNon-Financial Reporting Directive (NFRD)to address itslimitationsin scope and reporting requirements. Below are the explanations for each option:

A. False– The NFRDdid notrequire all companies in the EU to include a non-financial statement. Instead, itapplied only to large public-interest entitieswith 500 or more employees.

B. True– The NFRD applied tolarge public-interest entities, includinglisted companies, banks, and insurance firms with more than 500 employees​.

C. False– The NFRDdid not mandate external assurancefor sustainability information. TheCSRD introduced mandatory assuranceat the EU level​.

D. False– The CSRDdid not replace the NFRD; rather, itexpanded and strengthened reporting requirements. TheNFRD was replaced by the CSRD, but not the other way around​.

E. True– TheCSRD was introduced to improve the scope and depth of sustainability reportingcompared to the NFRD. Itexpanded the number of entities required to report, standardized disclosures via ESRS, and introduced third-party assurance requirements​.

Key Differences Between CSRD and NFRDFeature

NFRD (Old Directive)

CSRD (New Directive)

Scope

Large public-interest entities (500+ employees)

All large companies + listed SMEs

Assurance

Not required

Mandatory external assurance

Disclosure Requirements

Limited sustainability disclosures

Comprehensive ESRS-based reporting

Reporting Standards

No standardized framework

ESRS-based mandatory framework

Application Date

In force since 2018

Applies from 2024 onwards

CSRD Directive (EU) 2022/2464– Assurance & Reporting Provisions​.

ESRS Compilation Explanations January - November 2024​.

Official References: