Changes to the ESRS Set 1 XBRL Taxonomy

EFRAG is responsible to deliver the technical ESRS digital taxonomy to ESMA (the European Securities and Markets Authority) and the EC (European Commission).

It will be adopted via an “RTS” (Regulatory Technical Standards), drafted by ESMA – who will also conduct a cost-benefit analysis.

It will amend the ESEF Delegated Regulation and will be directly applicable in all Member States.

During yesterday’s meeting (16/7), EFRAG presented the changes implemented to the ESRS Set 1 XBRL Taxonomy following the public consultation feedback.

A total of 49 responses were provided in the course of the public consultation, with a wide support for the draft XBRL Taxonomy: 85% of the respondents thought that it appropriately reflected the ESRS.

EFRAG SRB confirmed the implementation of many technical improvements (see the link in the comments to access the details).

It rejected most of the proposal for aggregation, as not compatible with the agreed methodology based on the fundamental principle of reflecting the granularity in ESRS, as well as users’ needs and interoperability with ISSB who has adopted a similar approach.

⭕ EFRAG remarked that when companies draft their report closely to the ESRS, the costs of the tagging process are reasonable and lower than if the disclosures are not well structured and scattered around the report.

On July 5, ESMA, also issued a document stressing:

⭕that it will be particularly important to carefully assess whether the company’s historical approach to the presentation of sustainability information is consistent with the CSRD and ESRS and, if not, to make adjustments accordingly.

⭕the importance that, from the first application of the ESRS, the reporting process is conceived in a way that caters for digitisation of the sustainability statement in a way that is aligned with the granularity of the ESRS requirements – following the structure of the ESRS makes digital tagging easier.

In addition, it was pointed out that,

➡ the burden of digital tagging that preparers face, will be justified by benefits to users of sustainability data,

➡ granular digital tagging will bring cost reductions both for companies and for financial institutions since if standardized and structured digital reporting is not done, the data will be provided by data providers at a high cost,

➡ the number of elements in the GRI taxonomy, which covers impact materiality, plus the number of the ISSB S1 and S2 elements which covers financial materiality is close to the number of ESRS elements, which covers double materiality.

EFRAG has scheduled its publication of the final taxonomy for the second half of August.

In the meantime, only editorial or technical changes will be implemented in the XBRL taxonomy, no XBRL elements will be added or removed.

✅ Book a demo to adopt a taxonomy-centric ESRS report preparation with Cleerit ESG >>>

Public statement from ESMA on the 1st application of the ESRS

On July 5 the European Securities and Markets Authority, ESMA, issued a document on the first application of the ESRS.

Here are some key extracts:

✅ In ESMA’s view, the sustainability statements that will be published in 2025 will constitute an important milestone in the learning curve of all stakeholders in the sustainability reporting ecosystem.

✅ Acknowledging this learning curve does not relieve issuers from the responsibility to ensure compliance with ESRS.

⭕ ESMA notes that for undertakings with experience in sustainability reporting under previous requirements, it is necessary to carefully assess whether the existing processes, systems and controls are still fit-for-purpose.

⭕ ESMA stresses that it will be particularly important to carefully assess whether their historical approach to the presentation of sustainability information is consistent with the CSRD and ESRS and, if not, to make adjustments accordingly.

⭕ ESMA stresses the importance that, from the first application of the ESRS, the reporting process is conceived in a way that caters for digitisation of the sustainability statement in a way that is aligned with the granularity of the ESRS requirements.

⭕ ESMA notes that following the structure of the ESRS would make digital tagging easier in the future.

✅ ESMA notes that, as a general rule, the ESRS do not envisage cases in which the lack of data justifies the omission of disclosure of material information.

✅ In acknowledgement of the considerable changes for the sustainability reporting practices entailed by these new requirements and with a view to supporting their implementation, ESMA wishes to:

➡ point to elements of guidance by the European Commission and EFRAG

➡ highlight the following key areas of attention which, in ESMA’s view, are of particular relevance in the preparation of ESRS sustainability statements:

✔ establishing governance arrangements and internal controls that can promote high-quality sustainability reporting

✔ properly designing and conducting the double materiality assessment and being transparent about it

✔ being transparent about the use of transitional reliefs

✔ preparing a clearly structured and digitisation-ready sustainability statement

✔ creating connectivity between financial and sustainability information.

✅ ESMA underlines, in particular, the responsibility of top management and supervisory bodies of issuers, as well as the importance of the oversight role of the audit committee and other relevant committees, to:

➡ ensure the overall internal consistency of the sustainability statement and its consistency with the other parts of the annual financial report;

➡ implement and supervise internal controls; and ultimately

➡ contribute to a high-quality sustainability statement.

The full document is available here: >>>

Links between ESRS 1 AR 16 and Disclosure Requirements

EFRAG has prepared an early-stage paper on the link between the sustainability matters listed in ESRS 1 AR 16 and the Disclosure Requirements (DRs), including Application Requirements (ARs), in the topical standards.

It can be helpful to identify the DRs and datapoints (DPs) that are linked to the matters (topics, sub-topics and sub-sub-topics) assessed as being material.

The list of matters in ESRS 1 AR16 shall be considered during materiality assessment for completeness.

Judgment is required to determine the information to be included in the reporting. The general criteria applied for this judgment are relevance and decision usefulness.

⭕ AR 16 topics are often interrelated. Based on the facts and circumstances of an undertaking, the materiality of a specific AR 16 topic of a topical ESRS can trigger reporting requirements in other topical ESRS.

➡ Since the sub-topics of energy and climate change mitigation are closely linked, it is expected that if one of both is material, the other is as well.

➡ DR E1-9 Anticipated financial effects is not expected to be disclosed if the matter is assessed as material only due to its impacts (and not also due to its risks or opportunities).

➡ For S1, Own Workforce, a holistic view is important as some of the AR 16 topics interrelate. This is the case for instance for working conditions and equal treatment which are issues that often interrelate. A fragmented approach to selecting some disclosure requirements and not others should be avoided.

For metrics, there is no systematic “one-to-one” relationship between a sub-topic or sub-sub-topic, as captured by AR16 (AR16 topic), and a topical disclosure requirement.

⭕ This means that, in general, all DRs in a topical standard are applicable to all AR16 topics covered by the topical standards, with a few exceptions to this rule.

⭕ Some metrics are likely to be relevant when any of the related AR16 topics in a topical standard are assessed to be material.

This is the case when there is evidence of such a direct link when the AR topic is directly mentioned in a datapoint (and not in the title of the DR).

This is the case for instance for microplastics in ESRS E2, for water withdrawals and water discharges in ESRS E3 or for waste in ESRS E5.

⭕When this direct link does not exist, the general rule applies.

➡ An appendix in this paper links each AR16 topic to the relevant DRs:

Burning CSRD questions for companies entering audit mode

How many sustainability topics are we expected to assess as material, and how many IROs are we expected to disclose in ESRS 2 SBM-3?

ESRS 1 and EFRAG IG 1 and 2 provide guidance and instructions.

First – the AR 16 table in ESRS 1

We are expected to analyze our IROs (impacts, risks & opportunities) for all topics and sub-topics listed in the AR 16 table in ESRS 1.

There are 92 granular, carefully selected, sector-agnostic topics listed as a starting point – often also covering other EU regulations and/or human rights issues.

To these, we have to add our own material sustainability topics if they are not already covered – just as we need to adapt the chart of accounts in financial reporting to fit our specific business.

This pre-defined topic structure will help ensure stakeholder understanding and comparability – just as the accounts do in financial reporting.

Second – the business context and value chain

We need to know and describe our specific business context and value chain (VC).

The person receiving our CSRD report is expecting to find the information necessary to understand our material IROs, connected to relevant sustainability topics as defined above.

IROs arise, or may arise, in the context of our business relationships in our upstream and downstream VC – which is not limited to direct contractual relationships.

Therefore, we need to identify material IROs throughout the entire the VC, with a focus on where in the VC they are likely to materialize, including strategically important “hotspots” for VC IROs.

Identifying potential “hotspots” can be done by cross-referencing countries where materials and services are produced, transformed, sold or disposed, to social, environmental and geopolitical risk databases.

VC is defined as the full range of activities, resources and relationships related to the company’s business model and the external environment in which it operates.

In other words, the activities, resources and relationships that we use and rely on to create our products or services – from conception to delivery, consumption and end-of-life, such as

  • human resources and assets in our own operations
  • materials and service sourcing in our supply chain
  • product & service sale and delivery in our marketing & distribution channels
  • the financing, geographical, geopolitical and regulatory environments in which we operate.

Upstream actors (e.g., suppliers) provide products or services that are used in the development of our own products or services.

Downstream actors (e.g., distributors, customers, waste management) receive or use our products or services, or waste stream generated by our customers or end-users.

The reporting group in our own operations is a good starting point, meaning the parent company and ALL its subsidiaries.

For certain environmental matters, this also includes operations where we have the ability to direct the operational activities and relationships of an entity, site, operation or asset – meaning that we have actual “operational control”.

Third – material IRO = material topic

If we identify material IROs in our own operations and/or upstream and downstream value chain, connected to a sustainability topic as defined by CSRD, then that topic is material.

This means that we need to report on how we monitor and manage the connected IROs.

However, CSRD does not mandate us to actually MANAGE the IROs – CSRD is an obligation to publish, not an obligation to act – the core objective being accuracy and transparency.

Fourth – material information needs to be disclosed reflecting gross values

Material IRO information has to be published under disclosure requirement SBM-3 in ESRS 2, mandatory for all companies subject to CSRD.

The information has to include a description of each material IRO – or group of IROs, if aggregation of information does not obscure the understanding of specific circumstances.

This includes where in the VC it is concentrated, what impacts on people and environment, and/or financial effects, it generates in the short, medium and long term.

It is also preferable to include a brief description of if and how we manage the IRO – even though this is not mandatory.

And it is not about what we WANT to publish, it’s about what we are EXPECTED to publish. In mandatory reporting, materiality is a user-driven concept.

Information about IROs is material when it may make a difference in a stakeholder decision, regardless if the person chooses not to take advantage of the information, or is already aware of it from other sources – and even if the information only provides feedback about (confirms or changes) previous evaluations.

In financial reporting we cannot omit to publish the required details of our liabilities, in addition to our assets. We are not allowed to choose what to account for in our balance sheet.

The same is now true for sustainability-related information – which could also be labelled “pre-financial” information.

Negative impacts & risks can be expected to become liabilities and positive impacts & opportunities to become assets.

And this is very important: information about IROs shall not be netted or compensated, it has to be neutral and reflect gross values (ESRS 1 QC 8).

This means that IROs need to be assessed and described as if they were not (yet) managed by the company.

We are allowed to present net information, in addition to gross values, if such presentation does not obscure relevant information and includes a clear explanation about the effects of the netting and the reasons for the netting.

Given this, it’s easy to conclude that SBM-3 in ESRS 2 is a key disclosure.

It allows the readers of our report to get an overview of if and how our company is connected to material impacts, risks and opportunities – and if and how we manage, or intend to manage, these IROs.

Which is the underlying purpose of CSRD.

Still wondering about numbers?

If you are still wondering how many sustainability topics we are expected to assess as material and how many IROs we are expected to publish, there are of course no specific numbers to answer this question. It depends on your business.

But, if we go through the different steps required, as described above, chances are that many (if not most) topics in the sector agnostic ESRS will be material – at least for producing companies.

It’s a bit different for pure service providers – depending on who your customers are, of course, as they are part of your VC.

And chances are that you will list numerous IROs (as the starting point is 92 granular sustainability topics).

If you do, this may show your stakeholders that you are aware of, and preferably, master your business context and operations, and have taken, or are planning to take, the necessary steps to future-proof your business.

If you don’t, chances are that you will learn this from your stakeholders and peers, once you’ve published your first CSRD report, that will likely be less detailed than the sustainability leaders on your market.

So, when push comes to shove, it’s really a question of if you want to be (perceived as) a sustainability leader or laggard.

#getCSRDready, #CSRD, #ESRS, #SustainabilityReporting

Finalized EFRAG ESRS Implementation Guidance Documents

Finalization of 3 EFRAG ESRS Implementation Guidance Documents, related to the sector-agnostic ESRS as adopted by the European Commission on 31 July 2023:

✅ EFRAG IG Materiality Assessment >>> Download here

✅ EFRAG IG 2 Value Chain >>> Download here

✅ EFRAG IG 3 ESRS Datapoints >>> Download here  with Explanatory Note >>> Download here

With these documents, EFRAG aims to support undertakings and other stakeholders in the implementation of the ESRS.

Regarding EFRAG IG 3 ESRS Datapoints

This list cannot be used as a basis for the preparation of the machine-readable sustainability reporting – it does not represent the digital ESRS XBRL taxonomy.

EFRAG IG 3 contains the line items only for tables as a whole, which will be used to further disaggregate datapoints in the machine-readable format.

EFRAG IG 3 may be considered an intermediate step on the way to delivering the ESRS XBRL Taxonomy with a human-readable reports that will be easier to digitalise.

A datapoint encompasses a clearly separable and specific piece of information required by the ESRS Disclosure Requirements (DRs), generally at the level of each paragraph, subparagraph and sub-subparagraph.

In this Excel list (IG 3)

  • 161 datapoints are mandatory irrespective of the materiality assessment
  • 622 datapoints are subject to the materiality assessment
  • 269 are voluntary datapoints marked as ‘may disclose’

In the Draft ESRS XBRL Taxonomy issued in Q1, the number of datapoints are more than the double.

Cleerit ESG – Friend of EFRAG – provides a digitized ESRS Taxonomy centric report template that helps you prepare your report in a both human-readable and machine-readable format.

DMA – is the focus on stakeholder opinions or on objective evidence?

In EFRAG’s last release of technical Explanations from the ESRS Q&A Platform there is a lot of useful information for various datapoint disclosures.

An example of explanations include additional guidance on stakeholder engagement in double materiality assessment:

When assessing the materiality of a sustainability matter, is the focus on stakeholder opinions or on objective evidence?

There is no conflict between consideration of views of affected stakeholders and objective evidence.

The purpose of both is to get an understanding of the severity (and likelihood) of impacts to present them faithfully in the sustainability statement.

Depending on the circumstances, this may or may not require engagement with affected stakeholders.

The materiality analysis should be driven as much as possible by objective data and evidence.

Scientific evidence is the focus in some cases depending on the type of topic and availability of such evidence.

Quantitative/scientific data on the impact may or may not also be available.

Widespread/systemic impacts often tend to be well documented, and there is often a consensus on their severity.

In other cases, depending on the topic the views of affected (❗) stakeholders are a source of supporting evidence for impact materiality.

However, not all stakeholder opinions are equally relevant for the materiality analysis.

Relevance depends on how much the stakeholders are affected (severity – and likelihood – of impacts).

Understanding entity-specific impacts and/or the manifestation of widespread/systemic impacts in particular contexts and situations requires more careful consideration of specific circumstances, including whether and how people or the environment are affected.

Elements useful to address this question can be found in IG 1 Materiality assessment chapters 3.5 Role and approach to stakeholders in the materiality assessment process and 5.4 FAQ on stakeholder engagement – impact materiality.

⭕It is also reminded that:

The ESRS require disclosure on the materiality assessment and its outcomes but do not mandate specific behaviour on stakeholder engagement or the due diligence process.

The assessment of IROs should rely on quantitative information where possible, as quantitative measures of IROs are objective evidence of their materiality.

The emphasis on objective and quantitative information does not mean to imply that the information from affected stakeholders should be disregarded.

(IG 1 Materiality assessment – FAQ 10, 180-183)

You will find more useful explanations on the ESRS Q&Q Platform >>

Screen assets and business activities to assess if they are exposed to climate-related hazards

CSRD requires companies to share how they are assessing their climate-related risks and how these risks could affect financial performance.

It will be a key area of scrutiny for the financial market and insurers, as there has been a sevenfold increase in reported losses from climate disasters since the 1970s.

Resent research has found that the economic damage brought by climate change is “six times worse than previously thought, with global heating set to shrink wealth at a rate consistent with the level of financial losses of a continuing permanent war”.

Rising temperatures, heavier rainfall and more frequent and intense extreme weather are projected to cause $38tn of destruction each year by mid-century.

In improving disclosures, critical information will be available for boards, management, investors and stakeholders, informing strategy development, financial planning and allocation of capital.

It can also provide an opportunity to attract investors by demonstrating climate-related opportunities and the resilience of the company.

Under CSRD the company will have to reply Yes or No to these two questions (ESRS E1 AR 11):

⭕The company has screened whether assets and business activities may be exposed to climate-related hazards.

⭕ The company has assessed the extent to which assets and business activities may be exposed and are sensitive to identified climate-related hazards.

In addition, the company will need to learn to disclose (ESRS E1-9):

  • the monetary value of assets at material physical risk before considering climate change adaptation actions, divided into acute and chronic risk
  • net revenue from business activities at material physical risk
  • estimated amount of potentially stranded assets.

Extreme weather is causing loss of property, destruction of assets and business interruptions, with financial effects hitting our businesses.

To get your climate-related physical risks under control:

  1. Create a register with all your physical assets (offices, factories, warehouses, etc.) and the GPS coordinates for each location.
  2. Purchase reliable science-based climate hazard scores for each location.
  3. Assess, prioritize and manage your risk exposure.

There are easy-to-use tools and science-based data available to help you assess, manage and disclose on your climate-related physical risk exposure.

You are welcome to contact us: Book a demo


Economic damage from climate change six times worse than thought – report | Climate crisis | The Guardian

Climate-related Financial Impact Guide (

Cleerit ESG has officially been approved as Friend of EFRAG – Sustainability Reporting

We are proud to announce that Cleerit ESG has officially been approved as Friend of EFRAG – Sustainability Reporting, demonstrating our commitment to sustainability reporting and supporting EFRAG’s mission.

Cleerit recognizes the importance of contributing to the development of the European Sustainability Reporting Standards (ESRS) and supporting EFRAG’s activities.

By joining as Friends of EFRAG – Sustainability Reporting, we are committed to providing our support to further EFRAG’s initiatives in this field.

We are convinced that the ESRS will help companies advance both corporate sustainability and performance, and future-proof their business.


EFRAG’s mission is to serve the European public interest in both financial and sustainability reporting by developing and promoting European views in the field of corporate reporting. EFRAG builds on and contributes to the progress in corporate reporting.

In its sustainability reporting activities, EFRAG provides technical advice to the European Commission in the form of draft European Sustainability Reporting Standards (ESRS) elaborated under a robust due process and supports the effective implementation of ESRS.


Cleerit’s mission is connecting people, planet and profit at the heart of business strategy and decisions – to reach higher goals.

We are committed to sustainability and passionate about closing the strategy to execution gap – with extensive experience and comprehensive research recognized by French Ministry for Higher Education, Research and Innovation.

The Cleerit ESG solution is at the core of our corporate strategy. The unique capabilities embedded in our holistic and inclusive governance model are a perfect fit to the IRO management model built in the ESRS framework, and make a real difference in advancing both corporate sustainability and performance.

It’s the beginning of a new era, and we are determined to being a key contributor in advancing sustainable corporate strategies, for our and future generations.

⭕ You are welcome to contact us if you need a solution and support to implement ESRS reporting in your organization >>>

Let us pave together the way for a successful implementation of the sustainability reporting standards and a green transition🌱🌍!

getCSRDready, CSRD, ESRS, CSDDD, ESG, Strategy, Governance, SustainabilityReporting, Digitalisation, Cleerit, EFRAG

CapEx available from ESRS disclosures will help monitor the flow of private capital

Your ESRS-reporting will help monitor the flow of private capital to fill the investment gap needed to achieve the objectives of the European Green Deal.

This requires investments in new technologies and business models.

Overall, the EU will need to scale up its investments by two-thirds (about EUR 620 billion more each year until 2030), relative to average levels over the 2011-2020 period, to pave the way for climate neutrality and a resilient economy by 2050.

The bulk of funding is to be mobilised by private entities.

When assessing the overall investment needs, albeit significant, they should be compared with the cost of inaction which is of much greater magnitude.

The EU Platform on Sustainable Finance (PSF), an advisory body to the European Commission, has been tasked with developing a methodological framework to monitor the flow of private capital into sustainable investments.

The Platform has recently released an intermediate report with a proposed methodology mainly resting on two types of capital flows:

✔ capital expenditures in real economy entities, which shed light on progress towards filling the investment gap;

✔ flows in and from financial markets, as this represents an important source of capital in support of real economy investments.

⭕Investments dedicated to companies in transition – and under CSRD scope – are at the heart of the monitoring framework.

ESRS indicators will be used to identify such companies.

Taxonomy eligible and aligned CapEx data will be complemented with other reported data on CapEx relevant for transition and reported under the ESRS.

CapEx allocated to a transition plan and available from ESRS disclosures is proposed to become the principal source of data.

Such data will be audited, thus increasing the reliability of the results.

The proposed architecture will provide a first bottom-up estimate of CapEx contributing to filling the Green Deal investment gap.

⭕Examples of ESRS CapEx datapoints:

➡ E1.16.c CapEx Financial resources allocated to action plan, E1-1 – Transition plan for climate change mitigation

➡ ESRS2.69.b CapEx Financial resources allocated to actions in relation to material sustainability matters (MDR-A)

Assessing Adequate Wages S1 & S2

Under ESRS S1 and S2, companies need to include Adequate Wages in their Double Materiality Assessment.

DP 69 in DR S1-10 requires companies to disclose whether all own workforce employees are paid an adequate wage, in line with applicable benchmarks.

If so, stating this is sufficient and no further information is needed. (Information regarding non-employees in own workforce is optional.)

If not, the company needs to disclose the countries where employees earn below the applicable adequate wage benchmark and the percentage of employees for each of these countries.

ESRS defines an Adequate wage as follows:

“A wage that provides for the satisfaction of the needs of the worker and his / her family in the light of national economic and social conditions” (based on a full-time employment relationship).

The lowest wage shall be considered separately for each country in which the company operates, except outside the EEA when the adequate wage is defined at a sub national level.

The adequate wage benchmark used for comparison with the lowest wage shall not be lower than:

In the EEA

The minimum wage set in accordance with Directive (EU) 2022/2041 of the European Parliament and of the Council on adequate minimum wages in the EU.

It references both indicative reference values commonly used at international level such as 60 % of the gross median wage and 50 % of the gross average wage, and/or indicative reference values used at national level.

Data can be obtained from the European Labour Force Survey.

Outside of the EEA (b.i)

The wage level established in any existing international, national or sub-national legislation, official norms or collective agreements, based on an assessment of a wage level needed for a decent standard of living.

Computing living wage estimates is data-intensive, requiring information on needs and prices that is timely and context-specific.

There are a number of international initiatives, such as the Fair Wage Network, the Global Living Wage Coalition and the WageIndicator Foundation, specialized in this.

Paying legal minimum wages, such as the SMIC in France, is not always a guarantee.

As an example, French tire-maker Michelin has recently established its own global living wage.

“The minimum wage in France is not sufficient in Michelin’s eyes to meet what we consider to be a decent wage,” Florent Ménégaux, president of the Michelin group, told Le Figaro.

Read more about Michelin here >>

⭕ You are welcome to contact us if you need a solution and support to implement ESRS reporting in your organization.