ESRS - European Sustainability Reporting Standards: Everything you need to know

The European Sustainability Reporting Standards (ESRS) define how companies must report on sustainability under the EU’s Corporate Sustainability Reporting Directive (CSRD). They transform Environment, Social and Governance (ESG) reporting from a voluntary practice into a structured, comparable, and enforceable reporting framework across the EU.

ESRS are a set of mandatory sustainability reporting standards developed by EFRAG (European Financial Reporting Advisory Group) for companies in scope of the CSRD. They specify what information must be disclosed across four categories: general, environmental, social, and governance. This includes metrics, targets, policies, and transition plans. Unlike voluntary frameworks, ESRS is legally binding and subject to external assurance.

Currently, the standards are sector-agnostic, meaning they can be applied by companies across all industries. While primarily designed for EU-based businesses, some non-EU companies with operations in the EU will also need to comply as CSRD implementation progresses, giving ESRS a broad geographic and organizational reach.

The primary purpose of ESRS is to improve the consistency, comparability, and reliability of sustainability information. By introducing standardized disclosures and a double materiality approach, ESRS enables investors, regulators, and other stakeholders to better assess both a company’s impacts on society and the environment, and the financial risks and opportunities arising from sustainability issues.

ESRS plays a central role in supporting the EU Green Deal’s objective of achieving a climate-neutral economy by 2050. By requiring companies to disclose how sustainability considerations are embedded in strategy, governance, and operations, ESRS helps align corporate behavior with EU climate and environmental goals and directs capital toward activities that support the green transition.

CSRD and ESRS are closely linked but serve different roles within the EU’s sustainability reporting framework. Understanding how they work together helps companies navigate their legal obligations and reporting requirements more efficiently.

The Corporate Sustainability Reporting Directive (CSRD) is the EU law that defines who must report sustainability information, when they must report, and under what legal obligations. It significantly expands the scope of mandatory sustainability reporting and introduces assurance requirements. Companies can leverage practical tools and guidance to implement CSRD effectively, including solutions for managing data and preparing audit-ready disclosures.

ESRS compliance applies to a growing number of companies under the Corporate Sustainability Reporting Directive (CSRD). Understanding which organizations fall under the scope is crucial for planning reporting processes, collecting relevant data, and ensuring timely compliance.

All large EU companies that meet at least two of the following criteria: over 250 employees, more than €50 million in net turnover, or more than €25 million in total assets are required to comply with ESRS. This includes listed companies and public-interest entities, which must report detailed sustainability information across environmental, social, and governance dimensions.

Non-EU companies with significant operations in the EU, such as subsidiaries generating over €150 million in net turnover within the bloc, will also need to follow ESRS standards as from financial year 2028. These organizations must assess their EU activities against the reporting requirements, ensuring consistency with EU sustainability expectations as CSRD phases in for international businesses.

As of January 2026, ESRS reporting for large companies is already in effect. Listed SMEs and other small entities impacted by the CSRD have to start off their reporting obligations. The first financial year for listed SMEs to report under ESRS begins in 2026, with disclosures due in 2027. However, they may still opt to postpone reporting until 2028.

Meanwhile, sector-specific ESRS for industries with high carbon footprints such as mining, oil and gas, transportation, and finance are under development. These were originally delayed and are now expected to be finalized around mid-2026. Until then, all companies continue to follow the sector-agnostic ESRS, which applies broadly across industries.

In addition, EFRAG has introduced a voluntary ESRS framework for SMEs not covered under CSRD. This allows smaller companies to adopt early reporting practices, align with partner or investor expectations, and prepare for eventual mandatory compliance.

These are the 12 standards that comprise the ESRS:

General

ESRS 1: General Requirements — Sets out the general principles for preparing and presenting sustainability statements under the CSRD. This standard forms the base on which the other standards are built.

ESRS 2: General Disclosures — Specifies general disclosure requirements that apply across all sustainability matters and provides a structure for how companies should disclose general information.

Environmental

ESRS E1: Climate Change — Defines requirements for reporting on climate change mitigation and adaptation, including greenhouse emissions, targets, and transition plans.

ESRS E2: Pollution — Covers disclosures related to air, water, and soil pollution, as well as measures taken to prevent and control pollution.

ESRS E3: Water and marine resources — Addresses reporting on water-related impacts including water consumption, discharges, and impacts on marine ecosystems.

ESRS E4: Biodiversity and ecosystems — Specifies requirements for reporting on biodiversity and ecosystem impacts, including measures to conserve and restore biodiversity.

ESRS E5: Resource use and circular economy — Focuses on reporting on resource use, circular economy practices, and waste management.

Social

ESRS S1: Own workforce — Covers reporting on the company’s own workforce, including working conditions, human rights, and equal opportunities.

ESRS S2: Workers in the value chain — Addresses disclosures related to workers in the company’s value chain (e.g., suppliers and business partners).

ESRS S3: Affected communities — Specifies requirements for reporting on impacts on affected communities, including indigenous peoples and local communities.

ESRS S4: Consumers and end-users — Covers disclosures related to the impact of products and services on consumers and end-users, including health and safety.

Governance

ESRS G1: Business conduct — Focuses on reporting on governance and business conduct, including ethical behavior, anti-corruption, and responsible lobbying.

ESRS standards cover a wide range of topics across environmental, social, and governance (ESG) areas. 

• Environmental standards address climate change mitigation and adaptation, resource use, pollution prevention, circular economy practices, and biodiversity protection. 
• Social standards focus on human rights, labor practices, diversity and inclusion, health and safety, and community impacts.
• Governance standards require disclosure on corporate structure, business ethics, anti-corruption measures, risk management, and sustainability-related policies and targets.

Together, these standards ensure that companies report a comprehensive view of their sustainability performance, impacts, and strategies, providing stakeholders with transparent and comparable information.

Double materiality is at the heart of the European Sustainability Reporting Standards (ESRS), reflecting the need for companies to consider both financial materiality and impact materiality.

Double materiality recognizes that sustainability reporting must go beyond traditional financial metrics. It combines:

• Financial materiality: assessing risks and opportunities that sustainability factors, like climate change or labor practices, pose to the company’s business model and financial performance.
• Impact materiality: examining the organization’s effects on the environment, society, and stakeholders.

This approach ensures that companies capture the full spectrum of their sustainability footprint and provide a holistic view to investors, regulators, and the public.

Performing a double materiality assessment involves several steps: identifying potential environmental, social, and governance (ESG) issues relevant to the company; analyzing their impacts on the business and on stakeholders; engaging with internal and external stakeholders; and prioritizing issues based on significance. The process often combines quantitative data, qualitative insights, and scenario analysis to ensure a robust, evidence-based evaluation that supports strategic decision-making and ESRS compliance.

EFRAG provides extensive guidance and practical tools to help companies implement double materiality in line with ESRS. This includes technical advice, templates, and sector-specific guidance, enabling organizations to assess material issues effectively and align their reporting with regulatory expectations. These resources help ensure that sustainability disclosures are consistent, comparable, and credible, supporting transparent and robust reporting for stakeholders

Reporting under the European Sustainability Reporting Standards (ESRS) can seem complex, but breaking it down into clear steps makes the process manageable. The following guide walks you through the essential stages to ensure compliance and create a comprehensive sustainability report.

Start with a double materiality assessment following EFRAG’s IG 1. This identifies which topical standards apply to your report.

Engage stakeholders and review operations, products, and relationships. Identify impacts, risks, and opportunities (IROs) - both how sustainability affects your business and how your business affects the environment and society.

Evaluate your upstream and downstream value chain using EFRAG’s IG 2. Understand how each part impacts your reporting. For example, if suppliers affect biodiversity, report under ESRS E4.

Based on your double materiality and value chain assessments, identify the material topics that are most relevant to your organization. For each material topic, review the corresponding guidance to understand which specific data points and disclosures are required. While EFRAG lists over 1,100 data points across all standards, you only need to collect and report on the general disclosures and those related to the topics that are material to your business. This ensures your reporting is both targeted and compliant without unnecessary data collection.

Gather relevant data from across departments and systems, ensuring consistency and reliability. Organize it to align with ESRS reporting requirements and facilitate clear disclosure. Work with stakeholders, suppliers, and partners.

Create a dedicated section covering ESRS 1 and ESRS 2, which are cross-cutting standards applicable to all reporting entities. ESRS 1 establishes the general requirements, clarifying key concepts and principles that must be applied consistently throughout the report. ESRS 2 handles the majority of the reporting content, covering general disclosures across four main areas: impacts, risks, and opportunities (IROs), governance, strategy, and metrics & targets. This section ensures your report meets the foundational requirements of ESRS.

Review the draft. Ensure accuracy, compliance, and clarity before publishing.

Digital tools can simplify ESRS reporting, from data collection to validation. Carbmee EIS™ is one such platform, connecting products, sites, and supply chains to provide Scope 1, 2, and 3 emissions visibility, audit-ready compliance, and actionable decarbonization insights.

Its AI-powered system helps identify hotspots, streamline supplier collaboration, and turn environmental data into a strategic asset making reporting faster, more accurate, and more useful for business decisions.

While companies often face several common challenges when gathering and disclosing sustainability data, these obstacles can be overcome with the right tools, guidance, and processes, turning reporting into a strategic advantage.

Collecting accurate data across the entire value chain is often the biggest hurdle. Information may be missing, inconsistent, or siloed across departments and suppliers. Solutions include leveraging digital tools and ESG platforms to centralize data, automate collection, and fill gaps ensuring reliable and complete reporting.

Many organizations struggle with limited internal expertise in sustainability reporting. Teams may lack awareness of ESRS requirements or ESG concepts. Addressing this requires targeted training, cross-functional collaboration, and clear guidance to build internal capabilities and align all teams on reporting standards.

ESRS reporting can be resource-intensive, especially for large organizations with complex operations. Challenges include staff time, software investments, and data validation efforts. These can be mitigated by prioritizing material topics, using automated reporting tools, and leveraging existing systems to reduce manual effort.

Sustainability reporting standards and regulations are evolving rapidly. Organizations must stay informed on ESRS updates, sector-specific guidance, and related EU regulations like CSRD, CBAM, and EUDR. Keeping track of these changes and consulting experts will help ensure reporting remains compliant and accurate.

ESRS are mandatory sustainability reporting standards developed by EFRAG under the CSRD. They define what companies must disclose on environmental, social, and governance topics, including metrics, targets, policies, and transition plans.

Large EU companies within the scope of CSRD are required to comply, while certain non-EU companies with significant EU operations will also need to report starting in 2028. Selected SMEs are expected to begin reporting from 2026.

CSRD is the EU directive that sets who must report and when. ESRS are the technical standards that define what information must be disclosed to meet CSRD requirements.

Yes, but depending on which kind of SMEs. Listed SMEs start reporting for the 2026 financial year (disclosures due 2027), with an optional delay until 2028. Non-listed SMEs may adopt voluntary ESRS guidance.

Double materiality means companies must report on how sustainability issues affect their business (financial materiality) and how their operations impact the environment and society (impact materiality).

Yes. ESRS mandates reporting on Scope 1, 2, and relevant Scope 3 greenhouse gas emissions.

Preparing for ESRS compliance begins with understanding your material topics, value chain impacts, and data gaps, and collecting reliable sustainability data across your organization. Carbmee EIS™ can help streamline this process, making data collection and reporting more efficient and manageable.

When it comes to ESRS reporting, carbmee EIS™ is designed to be the all-in-one solution for enterprises of any size. From ingestion to insight to collaborative action, Carbmee helps organizations:

• Collect and centralize environmental data across operations and supply chains.
• Ensure audit-ready compliance with ESRS and related regulations.
• Identify emission hotspots and reduction opportunities with AI-powered analytics.
• Streamline supplier collaboration and data validation.
• Turn sustainability reporting into a strategic asset with real P&L impact.

Whether you’re a large enterprise or an SME preparing for your first ESRS report, Carbmee provides the tools, dashboards, and automation needed to simplify reporting and accelerate decarbonization.