ESRS-PROFESSIONAL Practice Questions

2023/2772, various EFRAG guidance documents, and reports related to CSRD, ESRS, stakeholder

engagement, double materiality, external assurance, and digital reporting Study guide Reference at

the end of each question

Under the ESRS framework, effective internal controls for assurance purposes must meet key

characteristics to ensure reliability, traceability, and auditability.

Correct Options Explained:

(A) Documentation & Implementation: Internal controls must be formally documented,

implemented as per the designated schedule, and consistently applied​.

(C) Testability by External Assurance Providers: Assurance providers must be able to verify the

controls, test their effectiveness, and ensure compliance with CSRD assurance requirements​.

Incorrect Options Explained:

(B) Same Staff Performing & Assuring the Control: A fundamental principle of internal control is the

separation of duties to avoid conflicts of interest. The control must be performed by one team and

assured independently​.

(D) No Need for Documentation: Proper documentation is mandatory for internal controls to enable

traceability, testing, and regulatory compliance​.

ESRS Reference:

Commission Delegated Regulation (EU) 2023/2772, GOV-5: Risk management and internal controls

over sustainability reporting, highlighting the necessity of internal control mechanisms​.

EFRAG Assurance Guidelines: Stipulating that documented controls must be verifiable and tested for

external assurance​.

The European Sustainability Reporting Standards (ESRS) categorize stakeholders into two main

groups:

Affected Stakeholders:

These are individuals or groups whose interests are affected (positively or negatively) by the

undertaking’s activities and business relationships across its value chain.

Examples include workers (own workforce and those in the value chain), affected communities,

consumers, and end-users.

The identification of affected stakeholders plays a crucial role in an organization’s sustainability due

diligence and materiality assessment processes.

Users of Sustainability Statements:

These are primary users of sustainability disclosures, including investors, lenders, and other

creditors.

Additional users include business partners, trade unions, civil society organizations, non-

governmental organizations (NGOs), governments, analysts, and academics.

The ESRS framework emphasizes the importance of engagement with affected stakeholders as part

of an undertaking’s due diligence and materiality assessment process, ensuring that material

impacts, risks, and opportunities are adequately identified and reported​.

Official Reference:

Commission Delegated Regulation (EU) 2023/2772, ESRS 1, Section 3.1 - Defines the two main

groups of stakeholders​.

ESRS 2 SBM-2 (Interests and Views of Stakeholders) - Covers how affected stakeholders' views inform

an undertaking’s strategy​.

EFRAG Guidance on Stakeholder Engagement and Double Materiality - Reinforces the role of affected

stakeholders in sustainability assessments​.

The sustainability statement under ESRS is structured according to ESRS 1 and ESRS 2, outlining

specific disclosure requirements. The required disclosures include:

General Disclosure Requirements from ESRS 2

ESRS 2 outlines general 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 their alignment with the EU Taxonomy Regulation, particularly under

Article 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, while financial 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. The materiality assessment determines the necessary

governance disclosures based on entity-specific risks and opportunities​.

✅ (D) is correct

Conclusion:

The sustainability 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.

Official Reference:

Commission Delegated Regulation (EU) 2023/2772​

Compilation Explanations January - July 2024​

During Step B of the double materiality assessment process, organizations must identify actual and

potential impacts, risks, and opportunities (IROs). The ESRS framework recommends the following

methods:

A . The list of sustainability matters in ESRS 1 AR 16 ✅

ESRS 1 Application Requirement (AR) 16 provides a comprehensive reference list of sustainability

matters to consider when identifying IROs.

This list includes environmental, social, and governance topics aligned with EU sustainability

objectives​.

C . Due diligence processes ✅

ESRS requires organizations to use due diligence processes to identify negative sustainability impacts.

Due diligence aligns with frameworks such as the OECD Guidelines for Multinational Enterprises and

the UN Guiding Principles on Business and Human Rights​.

This ensures that potential risks and opportunities are assessed based on international sustainability

standards.

D . Feedback from stakeholders ✅

Stakeholders, including employees, suppliers, customers, and affected communities, provide crucial

insights into sustainability impacts.

ESRS mandates engagement with affected stakeholders as part of the IRO identification process​.

Why is B. Financial materiality thresholds ❌ incorrect?

Financial materiality thresholds apply later in the process (Step C) when evaluating the financial

impact of sustainability matters.

Step B focuses only on identifying IROs, making financial thresholds irrelevant at this stage​.

Conclusion:

Organizations should use the ESRS 1 AR 16 sustainability matters list, due diligence processes, and

stakeholder feedback to identify IROs in Step B of the double materiality assessment. Financial

materiality thresholds do not apply in this step.

Official Commission Delegated Regulation (EU) 2023/2772, various EFRAG guidance documents, and

CSRD-related

Commission Delegated Regulation (EU) 2023/2772, ESRS 1, AR 16: List of Sustainability Matters for

Identifying IROs​.

EFRAG Compilation of Explanations (January - July 2024): Confirmation that due diligence and

stakeholder input are part of IRO identification​.

Inline XBRL (iXBRL) is the digital reporting format required under the Corporate Sustainability

Reporting Directive (CSRD) to ensure standardized and machine-readable sustainability reporting.

It is required under CSRD for sustainability reporting

The CSRD mandates the use of Inline XBRL for sustainability reports, ensuring digital tagging for

structured data submission, making information easier 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,

allowing structured 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, ensuring both

usability and compliance with digital reporting requirements​.

✅ (C) is correct

It ensures that tags are embedded within a visually clear format

Correct. The Inline 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 XBRL is 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.

Official Reference:

Commission Delegated Regulation (EU) 2023/2772​

Compilation Explanations January - July 2024​

A cross-departmental taskforce is crucial for Corporate Sustainability Reporting Directive (CSRD)

compliance as it enables an organization to coordinate sustainability reporting efforts effectively.

Key responsibilities of the taskforce include:

Ensuring alignment across departments (e.g., Finance, Compliance, Legal, ESG, and Operations) to

gather accurate sustainability data.

Meeting reporting timelines required under ESRS and CSRD regulations.

Managing responsibilities across teams to ensure sustainability disclosures are consistent with

financial reporting controls.

Enhancing cross-functional collaboration for double materiality assessment and ensuring compliance

with assurance and audit requirements​.

Incorrect Answers:

A . Creating a hierarchical structure that limits communication between departments → Incorrect

because the goal is to enhance, not restrict, collaboration.

C . Reducing the workload by assigning all tasks to a single department → Incorrect because

sustainability reporting requires input from multiple business areas.

D . Minimizing interaction between different departments → Incorrect because effective ESRS

reporting requires broad stakeholder engagement.

Official Reference:

Commission Delegated Regulation (EU) 2023/2772, ESRS 2 GOV-1 - Defines governance structures for

sustainability reporting​.

EFRAG Compilation of Explanations (January–July 2024) - Explains the need for cross-functional

coordination in CSRD compliance​.

Under the ESRS, engagement with affected stakeholders is a core element of due diligence. The

outcome of the due diligence process informs the materiality assessment. The ESRS encourage

further engagement with stakeholders to collect their input and feedback on the organization's

conclusions regarding the material impacts, risks, and opportunities.

This sequence is supported by the official text of Commission Delegated Regulation (EU) 2023/2772

and various ESRS-related documents. The standard emphasizes due diligence as a starting point for

the materiality assessment process. The assessment then determines the organization's material

impacts, risks, and opportunities, which is crucial for effective stakeholder engagement.

Due Diligence: The ESRS process starts with due diligence, as outlined in the Commission Delegated

Regulation (EU) 2023/2772, to identify relevant sustainability matters and affected stakeholders.

Materiality Assessment: The findings from the due diligence process are then used to inform the

materiality assessment, as discussed in EFRAG's guidance documents.

Material Impacts, Risks, and Opportunities: Finally, the organization engages with stakeholders to

review and refine its conclusions about material impacts, risks, and opportunities, as per the ESRS

requirements.

Reference:

Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive

2013/34/EU​

EFRAG Guidance on Materiality Assessment in ESRS​​

ESRS Due Diligence Framework, as outlined in Compilation Explanations and Mapping Sustainability

Matters with Disclosure Requirements​​

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A digital reporting platform under ESRS is designed to enhance the efficiency and accuracy of

sustainability disclosures. It must enable seamless reporting and compliance monitoring through

advanced digital features. The defining elements include:

(A) Structured data formats

Digital platforms must support structured formats like XBRL (eXtensible Business Reporting

Language), ensuring machine-readability and interoperability with financial reporting standards​.

(C) Interactive dashboards

Platforms often provide visualization tools and dashboards to facilitate analysis and comparison of

sustainability data across different periods and entities​.

(D) Real-time updates and compliance tools

Digital reporting solutions should offer real-time data integration to enable ongoing compliance

tracking and alignment with evolving regulatory requirements​.

Incorrect Option:

(B) Manual data entry processes

Manual entry is not a characteristic of a digital reporting platform. Instead, digital platforms prioritize

automation, integration, and structured data processing to improve efficiency and reduce errors​.

Official Reference:

Commission Delegated Regulation (EU) 2023/2772, ESRS 1, Section 8.1 & 9.2 – Establishes

digitalization and connectivity requirements for sustainability reporting​.

EFRAG Digital Reporting Guidelines (2024) – Defines structured data standards and compliance

automation in ESRS reporting​.

The Environmental Section of the topical ESRS includes disclosure requirements covering

environmental sustainability matters. This section specifically relates to environmental objectives as

defined in the EU Taxonomy, ensuring alignment with broader European sustainability goals.

The topical 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 standards align with the environmental objectives of the EU Taxonomy Regulation (Regulation

(EU) 2020/852) and require organizations to report on their material environmental impacts, risks,

and opportunities (IROs)​.

Why Other Options Are Incorrect:

A . Social impact and labor rights: → Incorrect, as this belongs to the Social (S) section (ESRS S1 - S4).

B . Financial performance information: → Incorrect, as this is part of financial reporting, not ESRS

environmental disclosures.

D . Corporate governance and board diversity: → Incorrect, as governance matters are covered under

ESRS G1 Business Conduct​.

Official Reference:

Commission Delegated Regulation (EU) 2023/2772​

Compilation Explanations January - November 2024​

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

categories of standards:

ESRS 1 (General Requirements):

ESRS 1 sets out the fundamental principles and 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 the double materiality principle as the basis for sustainability disclosures.

ESRS 2 (General Disclosures):

ESRS 2 outlines the core disclosure requirements applicable 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 undertakings regardless of the specific sustainability

topics being reported.

Topical Standards:

The ESRS framework includes ten topical standards covering 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 provide specific requirements on sustainability matters, complementing the general

disclosure requirements in ESRS 2.

Sector-Specific Standards:

Sector-specific ESRS are currently under development.

These will address sustainability matters specific to different industries, ensuring that sectoral

nuances are properly considered.

They aim to fill gaps not sufficiently covered by the topical standards by defining industry-specific

impacts, risks, and opportunities.

Why is C. ESRS 1; ESRS 2; topical standards; sector-specific standards the correct answer?

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.

Thus, the correct order aligns with the official structure of the ESRS framework as mandated in

Commission Delegated Regulation (EU) 2023/2772​.

Official Commission Delegated Regulation (EU) 2023/2772, various EFRAG guidance documents, and

CSRD-related

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​.